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Daily Candlestick Chart for ONCS
[img]stockcharts.com/c-sc/sc?s=ONCS
$SOPW BarChart Trader's Cheat Sheet
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EquiVolume Chart Support/Resistance Breaks
Volume is important for validating a move in particular support or resistance breaks. A break on low volume is not as convincing as a break on high volume. Low volume shows tepid interest and weak buying or selling pressure. In contrast, high volume reflects elevated interest and strong buying or selling pressure. Chart 4 shows Caterpillar (CAT) with two small breakouts followed by one big breakout. The stock formed a falling wedge into early July and broke the trend line with the widest EquiVolume box in over a month. A break above the late June high was followed by a gap and another wide candlestick. Buying pressure was slowing picking up steam. The final, and biggest breakout, occurred with another gap and move above 38. This EquiVolume box is no doubt the widest in the last two months, which means buying pressure was the strongest in two months. Volume clearly confirmed these breakouts.
The next chart shows Intuit (INTU) breaking support with a wide EquiVolume box. This move showed strong selling pressure that broke the September lows.
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Non-Random Walk Theory
A Non-Random Walk Down Wall Street is a collection of essays offering empirical evidence that valuable information can be extracted from security prices. Lo and MacKinlay used powerful computers and advanced econometric analysis to test the randomness of security prices. Although this book is a heavy read, the findings should be of interest to technical analysts and chartists. In short, this book documents the presence of predictable components in stock prices.
Just prior to this book, Andrew Lo wrote a paper for the Journal of Finance in 2000: Foundations of Technical Analysis: Computational Algorithms, Statistical Inference, and Empirical Implementation. Harry Mamaysky and Jiang Wang also contributed. The paper's opening remarks say it all:
"Technical analysis, also known as charting, has been part of financial practice for many decades, but this discipline has not received the same level of academic scrutiny and acceptance as more traditional approaches such as fundamental analysis. One of the main obstacles is the highly subjective nature of technical analysis. The presence of geometric shapes in historical price charts is often in the eyes of the beholder. In this paper, we propose a systematic and automatic approach to technical pattern recognition using nonparametric kernel regression, and apply this method to a large number of U.S. stocks from 1962 to 1996 to evaluate the effectiveness of technical analysis. By comparing the unconditional empirical distribution of daily stock returns to the conditional distribution conditioned on specific technical indicators, such as head-and-shoulders or double-bottoms, we find that over the 31-year sample period, several technical indicators do provide incremental information and may have some practical value." This paper can be found at www.nber.org
Daily Candlestick Chart for APLN
[img]stockcharts.com/c-sc/sc?s=APLN
$AWKS BarChart Trader's Cheat Sheet
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Trendlines drawn on 3-box Reversal P
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Trend lines can offer great insight, but if used improperly, they can also produce false signals. Other items - such as horizontal support and resistance levels or peak-and-trough analysis - should be employed to validate trend line breaks. While trend lines have become a very popular aspect of technical analysis, they are merely one tool for establishing, analyzing, and confirming a trend. Trend lines should not be the final arbiter, but should serve merely as a warning that a change in trend may be imminent. By using trend line breaks for warnings, investors and traders can pay closer attention to other confirming signals for a potential change in trend.
The uptrend line for VeriSign (VRSN) was touched 4 times, and seemed to be a valid support level. Even though the trend line was broken in Jan-00, the previous reaction low held, and did not confirm the trend line break. In addition, the stock recorded a new higher high prior to the trend line break.
Daily Candlestick Chart for XTGR
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$ZERO BarChart Trader's Cheat Sheet
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A Note on Technical Analysis
Technical analysts consider the market to be 80% psychological and 20% logical. Fundamental analysts consider the market to be 20% psychological and 80% logical. Psychological or logical may be open for debate, but there is no questioning the current price of a security. After all, it is available for all to see and nobody doubts its legitimacy. The price set by the market reflects the sum knowledge of all participants, and we are not dealing with lightweights here. These participants have considered (discounted) everything under the sun and settled on a price to buy or sell. These are the forces of supply and demand at work. By examining price action to determine which force is prevailing, technical analysis focuses directly on the bottom line: What is the price? Where has it been? Where is it going?
Even though there are some universal principles and rules that can be applied, it must be remembered that technical analysis is more an art form than a science. As an art form, it is subject to interpretation. However, it is also flexible in its approach and each investor should use only that which suits his or her style. Developing a style takes time, effort and dedication, but the rewards can be significant.
Daily Candlestick Chart for MWIP
[img]stockcharts.com/c-sc/sc?s=MWIP
Support/Resistance
Simple chart analysis can help identify support and resistance levels. These are usually marked by periods of congestion (trading range) where the prices move within a confined range for an extended period, telling us that the forces of supply and demand are deadlocked. When prices move out of the trading range, it signals that either supply or demand has started to get the upper hand. If prices move above the upper band of the trading range, then demand is winning. If prices move below the lower band, then supply is winning.
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Methods to Establish Support and Resistance?
Support and resistance are like mirror images and have many common characteristics.
Highs and Lows
Support can be established with the previous reaction lows. Resistance can be established by using the previous reaction highs.
The above chart for Halliburton (HAL) shows a large trading range between Dec-99 and Mar-00. Support was established with the October low around 33. In December, the stock returned to support in the mid-thirties and formed a low around 34. Finally, in February the stock again returned to the support scene and formed a low around 33 1/2.
After each bounce off support, the stock traded all the way up to resistance. Resistance was first established by the September support break at 42.5. After a support level is broken, it can turn into a resistance level. From the October lows, the stock advanced to the new support-turned-resistance level around 42.5. When the stock failed to advance past 42.5, the resistance level was confirmed. The stock subsequently traded up to 42.5 two more times after that and failed to surpass resistance both times.
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Daily Candlestick Chart for CRTP
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Daily Candlestick Chart for MIESF
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$ARCS BarChart Trader's Cheat Sheet
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EquiVolume Chart Volume Climax
EquiVolume boxes can be used to identify exceptionally high volume periods that represent a volume climax. A typical selling climax involves a new price low, an intraday plunge and a strong intraday recovery with good volume. An EquiVolume climax occurs with an exceptionally wide box. Often the box is wider than it is tall. This represents a period of relatively little price change with high volume, which shows indecision that can sometimes foreshadow a significant move.
Chart below shows Weatherford International (WFT) finding support in the 9-10 area from mid January to early March. An exceptionally wide EquiVolume box formed on February 25 to further reinforce support and act as a volume climax. The subsequent breakouts at 11 and 13 opened the door to an extended advance.
Chart below shows Akami Technologies (AKAM) with a big gap down and an exceptionally wide EquiVolume box that looks more like a square than a rectangle. This wide EquiVolume box acted as support in the 16-17 area. AKAM firmed for a few days and then gapped higher with good volume. After this short-term reversal and bounce, AKAM returned to the wide EquiVolume box and tested support here. Also notice that a falling channel formed. The stock successfully tested support and broke channel resistance with a breakout. Admittedly, the breakout lacked a wide EquiVolume box for confirmation, but held after a successful test at 10 in early October.
Daily Candlestick Chart for NWMT
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Daily Candlestick Chart for ERBB
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Elder Impulse System Introduction
The Elder Impulse System was designed by Alexander Elder and featured in his book, Come Into My Trading Room. According to Elder, "the system identifies inflection points where a trend speeds up or slows down". The Impulse System is based on two indicators, a 13-day exponential moving average and the MACD-Histogram. The moving average identifies the trend, while the MACD-Histogram measures momentum. As a result, the Impulse System combines trend following and momentum to identify tradable impulses. This unique indicator combination is color coded into the price bars for easy reference.
Calculation
Green Price Bar: (13-period EMA > previous 13-period EMA) and
(MACD-Histogram > previous period's MACD-Histogram)
Red Price Bar: (13-period EMA < previous 13-period EMA) and
(MACD-Histogram < previous period's MACD-Histogram)
Price bars are colored blue when conditions for a Red Price Bar or
Green Price Bar are not met. The MACD-Histogram is based on MACD(12,26,9).
Green price bars show that the bulls are in control of both trend and momentum as both the 13-day EMA and MACD-Histogram are rising. A red price bar indicates that the bears have taken control because the 13-day EMA and MACD-Histogram are falling. A blue price bar indicates a split or equilibrium between buying and selling pressure.
Daily Candlestick Chart for PFFBQ
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$ERBB BarChart Trader's Cheat Sheet
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What is Fundamental Analysis?
Fundamental analysis is the examination of the underlying forces that affect the well being of the economy, industry groups, and companies. As with most analysis, the goal is to derive a forecast and profit from future price movements. At the company level, fundamental analysis may involve examination of financial data, management, business concept and competition. At the industry level, there might be an examination of supply and demand forces for the products offered. For the national economy, fundamental analysis might focus on economic data to assess the present and future growth of the economy. To forecast future stock prices, fundamental analysis combines economic, industry, and company analysis to derive a stock's current fair value and forecast future value. If fair value is not equal to the current stock price, fundamental analysts believe that the stock is either over or under valued and the market price will ultimately gravitate towards fair value. Fundamentalists do not heed the advice of the random walkers and believe that markets are weak-form efficient. By believing that prices do not accurately reflect all available information, fundamental analysts look to capitalize on perceived price discrepancies.
Daily Candlestick Chart for ORGN
[img]stockcharts.com/c-sc/sc?s=ORGN
Understanding Business Cycle
The graph below shows the idealized business cycle and the intermarket relationships during a normal inflationary environment. This cycle map is based on one shown in the Intermarket Review by Martin J. Pring (www.pring.com). The business cycle is shown as a sine wave. The first three stages are part of an economic contraction (weakening, bottoming, strengthening). Stage 3 shows the economy in a contraction phase, but strengthening after a bottom. As the sine wave crosses the centerline, the economy moves from contraction to the three phases of economic expansion (strengthening, topping and weakening). Stage 6 shows the economy in an expansion phase, but weakening after a top.
Stage 1 shows the economy contracting and bonds turning up as interest rates decline. Economic weakness favors loose monetary policy and the lowering of interest rates, which is bullish for bonds.
Stage 2 marks a bottom in the economy and the stock market. Even though economic conditions have stopped deteriorating, the economy is still not at an expansion stage or actually growing. However, stocks anticipate an expansion phase by bottoming before the contraction period ends.
Stage 3 shows a vast improvement in economic conditions as the business cycle prepares to move into an expansion phase. Stocks have been rising and commodities now anticipate an expansion phase by turning up.
Stage 4 marks a period of full expansion. Both stocks and commodities are rising, but bonds turn lower because the expansion increases inflationary pressures. Interest rates start moving higher to combat inflationary pressures.
Stage 5 marks a peak in economic growth and the stock market. Even though the expansion continues, the economy grows at a slower pace because rising interest rates and rising commodity prices take their toll. Stocks anticipate a contraction phase by peaking before the expansion actually ends. Commodities remain strong and peak after stocks.
Stage 6 marks a deterioration in the economy as the business cycle prepares to move from an expansion phase to a contraction phase. Stocks have already been moving lower and commodities now turn lower in anticipation of decreased demand from the deteriorating economy.
Keep in mind that this is the ideal business cycle in an inflationary environment. Stocks and bonds advance together in stages 2 and 3. Similarly, both decline in stages 5 and 6. This would not be the case in a deflationary environment, when bonds and stocks would move in opposite directions.
$LAWEQ BarChart Trader's Cheat Sheet
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Daily Candlestick Chart for SNTL
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Daily Candlestick Chart for HPGI
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$CRCUF BarChart Trader's Cheat Sheet
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Daily Candlestick Chart for PTEEF
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$OHRP BarChart Trader's Cheat Sheet
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Daily Candlestick Chart for WCYN
[img]stockcharts.com/c-sc/sc?s=WCYN
What Are Charts?
A price chart is a sequence of prices plotted over a specific time frame. In statistical terms, charts are referred to as time series plots.
On the chart, the y-axis (vertical axis) represents the price scale and the x-axis (horizontal axis) represents the time scale. Prices are plotted from left to right across the x-axis with the most recent plot being the furthest right. The price plot for IBM extends from January 1, 1999 to March 13, 2000.
Technicians, technical analysts and chartists use charts to analyze a wide array of securities and forecast future price movements. The word "securities" refers to any tradable financial instrument or quantifiable index such as stocks, bonds, commodities, futures or market indices. Any security with price data over a period of time can be used to form a chart for analysis.
While technical analysts use charts almost exclusively, the use of charts is not limited to just technical analysis. Because charts provide an easy-to-read graphical representation of a security's price movement over a specific period of time, they can also be of great benefit to fundamental analysts. A graphical historical record makes it easy to spot the effect of key events on a security's price, its performance over a period of time and whether it's trading near its highs, near its lows, or in between.
$SFEG BarChart Trader's Cheat Sheet
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Daily Candlestick Chart for RBCC
[img]stockcharts.com/c-sc/sc?s=RBCC
$DEWM BarChart Trader's Cheat Sheet
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