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Daily Candlestick Chart for ABBY
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$VDSC BarChart Trader's Cheat Sheet
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Daily Candlestick Chart for DEWM
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Focus on Price
If the objective is to predict the future price, then it makes sense to focus on price movements. Price movements usually precede fundamental developments. By focusing on price action, technicians are automatically focusing on the future. The market is thought of as a leading indicator and generally leads the economy by 6 to 9 months. To keep pace with the market, it makes sense to look directly at the price movements. More often than not, change is a subtle beast. Even though the market is prone to sudden knee-jerk reactions, hints usually develop before significant moves. A technician will refer to periods of accumulation as evidence of an impending advance and periods of distribution as evidence of an impending decline.
$BLSP BarChart Trader's Cheat Sheet
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Daily Candlestick Chart for XCHO
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Random Versus Non-Random
The great debate continues to rage between random walkers and non-random walkers. Two competing books best represent these theories. Originally written by Burton Malkiel in 1973, A Random Walk Down Wall Street has become a classic in investment literature. The book has been revised numerous times with new editions as recently as 2007. Malkiel, a Princeton Economist, argues that price movements are largely random and investors cannot outperform the major indices.
Written by Andrew W. Lo and A. Craig MacKinlay in 2001, the appropriately entitled A Non-Random Walk Down Wall Street provides the counter argument. Lo, an MIT Finance professor and MacKinlay, a Wharton Finance professor, argue that price movements are not all that random and that predictable components do indeed exist. Let the battle begin!
$FROG BarChart Trader's Cheat Sheet
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Daily Candlestick Chart for CALVF
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Daily Candlestick Chart for MRVKF
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$NHVCF BarChart Trader's Cheat Sheet
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Price Objections based on a vertical count, horizontal count or any other count should be taken with a grain of salt. Consider these targets as broad guidelines. Securities will not always reach their targets. Some will even reverse course and trigger conflicting P
Daily Candlestick Chart for MEEC
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$USPR BarChart Trader's Cheat Sheet
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Where Is Resistance Established?
Resistance levels are usually above the current price, but it is not uncommon for a security to trade at or near resistance. In addition, price movements can be volatile and rise above resistance briefly. Sometimes it does not seem logical to consider a resistance level broken if the price closes 1/8 above the established resistance level. For this reason, some traders and investors establish resistance zones.
Daily Candlestick Chart for CLKTF
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$CBIS BarChart Trader's Cheat Sheet
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Validation of Trend Lines
It takes two or more points to draw a trend line. The more points used to draw the trend line, the more validity attached to the support or resistance level represented by the trend line. It can sometimes be difficult to find more than 2 points from which to construct a trend line. Even though trend lines are an important aspect of technical analysis, it is not always possible to draw trend lines on every price chart. Sometimes the lows or highs just don't match up, and it is best not to force the issue. The general rule in technical analysis is that it takes two points to draw a trend line and the third point confirms the validity.
The chart of Microsoft (MSFT) shows an uptrend line that has been touched 4 times. After the third touch in Nov-99, the trend line was considered a valid line of support. Now that the stock has bounced off of this level a fourth time, the soundness of the support level is enhanced even more. As long as the stock remains above the trend line (support), the trend will remain in control of the bulls. A break below would signal that net-supply was increasing and that a change in trend could be imminent.
$WCYN BarChart Trader's Cheat Sheet
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Visual Evidence of Trends
Anyone who has followed the stock market for any length of time realizes that trends can and will take hold. To be fair, not all stocks trend and trends do not last forever. However, there are enough asset classes, major indices, sectors, industry groups or stocks out there to insure that something is trending at some point. The challenge, as always, is to find that trend and ride it. The next three charts show some individual stocks with clear signals and trends. Identifying a simple double top and getting out of Citigroup (C) would have avoided a whole lot of pain. The same can be said for Enron, Worldcom and the few other debacles.
ExxonMobil (XOM) was choppy in 2009, down the first half of 2010 and then up sharply from July 2010 to February 2011. Catching this one big trend would have made up for quite a few losses.
Pfizer (PFE) shows an example of three sizable trends emerging over a two year period. The stock was up over 50% in 2009, down around 25% in the first half of 2010 and up around 50% from July 2010 to March 2011.
$VUZI BarChart Trader's Cheat Sheet
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Too Late ~ Weaknesses of Technical Analysis
Technical analysis has been criticized for being too late. By the time the trend is identified, a substantial portion of the move has already taken place. After such a large move, the reward to risk ratio is not great. Lateness is a particular criticism of Dow Theory.
What Is Support?
Support is the price level at which demand is thought to be strong enough to prevent the price from declining further. The logic dictates that as the price declines towards support and gets cheaper, buyers become more inclined to buy and sellers become less inclined to sell. By the time the price reaches the support level, it is believed that demand will overcome supply and prevent the price from falling below support.
Support does not always hold and a break below support signals that the bears have won out over the bulls. A decline below support indicates a new willingness to sell and/or a lack of incentive to buy. Support breaks and new lows signal that sellers have reduced their expectations and are willing sell at even lower prices. In addition, buyers could not be coerced into buying until prices declined below support or below the previous low. Once support is broken, another support level will have to be established at a lower level.
$CGMX BarChart Trader's Cheat Sheet
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Daily Candlestick Chart for MMTIF
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$HCBP BarChart Trader's Cheat Sheet
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Daily Candlestick Chart for TNEN
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$GELYF BarChart Trader's Cheat Sheet
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Elder Impulse System ~ Timeframe
The Elder Impulse System can be used across different timeframes, but trading should be in harmony with the bigger trend. Elder recommends setting your trading timeframe and then calling it intermediate. Multiply this intermediate timeframe by five to get your long-term timeframe. Traders using daily charts for an intermediate timeframe can simply move to weekly charts for a long-term timeframe. The choice is not as clear cut for smaller or longer timeframes. A little judgment is required. Traders using 10-minute charts to chart their "intermediate" timeframe can use 60-minute charts for their "long-term" timeframe. Investors using weekly charts can base the bigger picture on monthly charts. Once the trading timeframe is decided, chartists can then use the longer timeframe to identify the bigger trend. This can even be accomplished using one chart. Chart 2 shows daily bars with the Elder Impulse System and the 65-day exponential moving average, which is five times the 13-day EMA. The long-term trend is considered up when SPY is above the 65 day EMA or when MACD (1,65,1) is positive.
Again, other methods for determining the weekly trend can be used instead of using the MACD(1,65,1) zero crossover on the daily chart. We will use that technique in this article to simplify the charts and discussion.
Daily Candlestick Chart for STVF
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$EMWW BarChart Trader's Cheat Sheet
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Analyst Bias As A Weaknesses of Fundamental Analysis
The majority of the information that goes into the analysis comes from the company itself. Companies employ investor relations managers specifically to handle the analyst community and release information. As Mark Twain said, "there are lies, damn lies, and statistics." When it comes to massaging the data or spinning the announcement, CFOs and investor relations managers are professionals. Only buy-side analysts tend to venture past the company statistics. Buy-side analysts work for mutual funds and money managers. They read the reports written by the sell-side analysts who work for the big brokers (CIBC, Merrill Lynch, Robertson Stephens, CS First Boston, Paine Weber, DLJ to name a few). These brokers are also involved in underwriting and investment banking for the companies. Even though there are restrictions in place to prevent a conflict of interest, brokers have an ongoing relationship with the company under analysis. When reading these reports, it is important to take into consideration any biases a sell-side analyst may have. The buy-side analyst, on the other hand, is analyzing the company purely from an investment standpoint for a portfolio manager. If there is a relationship with the company, it is usually on different terms. In some cases this may be as a large shareholder.
Daily Candlestick Chart for AGDY
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$EPGL BarChart Trader's Cheat Sheet
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Daily Candlestick Chart for MDHI
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$ATDN BarChart Trader's Cheat Sheet
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$TUFF BarChart Trader's Cheat Sheet
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Daily Candlestick Chart for HLOSF
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$GFSZF BarChart Trader's Cheat Sheet
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Daily Candlestick Chart for PEFDF
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Group Selection
If the prognosis is for an expanding economy, then certain groups are likely to benefit more than others. An investor can narrow the field to those groups that are best suited to benefit from the current or future economic environment. If most companies are expected to benefit from an expansion, then risk in equities would be relatively low and an aggressive growth-oriented strategy might be advisable. A growth strategy might involve the purchase of technology, biotech, semiconductor and cyclical stocks. If the economy is forecast to contract, an investor may opt for a more conservative strategy and seek out stable income-oriented companies. A defensive strategy might involve the purchase of consumer staples, utilities and energy-related stocks.
To assess a industry group's potential, an investor would want to consider the overall growth rate, market size, and importance to the economy. While the individual company is still important, its industry group is likely to exert just as much, or more, influence on the stock price. When stocks move, they usually move as groups; there are very few lone guns out there. Many times it is more important to be in the right industry than in the right stock! The chart below shows that relative performance of 5 sectors over a 7-month time frame. As the chart illustrates, being in the right sector can make all the difference.
$SHKZ BarChart Trader's Cheat Sheet
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Daily Candlestick Chart for ONCS
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![]() ![]() ![]() UPDATE; 5-1-22 courtesy of charting /\ wit tweezer top calls /\ Tony @Montana_Trades Really good study sheet on Candlestick Patterns [-chart]pbs.twimg.com/media/FRn8188XMAAdZvk?format=jpg&name=small[/chart] ![]()
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