Financial Market Technical Analysis


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    Technical indicators - Aroon, ATR, CMO, ADX

    AroonThis is a technical indicator developed 10 years ago and can be used to find out if a stock is trending and how strong the trend is. It has also been designed to show the beginning of a new trend. It consists of two lines, upper aroon and lower aroon. It uses mainly just one parameter – time periods. Upper Aroon line is the amount percentage of time between the start of a time period and the point at which the highest price during that period occured. If a stock make a new low of the give... Continue reading

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    Elliot wave - guidelines for wave framework

    Lets go on with Elliot wave theory and talk about the guidlines of the wave framework. Guidelines for the wave frameworkWhile there’s just 3 rules in the wave theory, there are a number of guidelines than in theory should make our lives a lot more easier, but in practice make it all more confusing. But in order to work with wave theory right, we also need to be aware of those. Relationships between waves that reflect the aspect of Fibonacci ratios are just tendencies, not permanent relationshi... Continue reading

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    Introduction Elliot Wave Principle & Fibonacci ratios

    Now it’s time to cover Elliot Wave principle basics. Firstly, if you make your trading decisions based on chart patterns then these decisions should be supported by some form of probability analysis – how potential such a move is and when is it likely to happen. Elliot Wave theory all by itself is unable to predict specific price movements but it does help us recognize the state of the market and probable price actions. By using Wave theory, it does help us find the most profitable wave format... Continue reading

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    MACD histogram

    Previously I have mentioned MACD indicator, now lets familiarize ourselves with MACD histogram. But before going there, remind yourself what MACD indicator was - „MACD is a variation of the price oscillator, it is calculated by taking the difference between two exponentially smoothed moving averages of 12 and 26 days. The MACD line is the differences between the two averages – longer one is subtracted from the shorter one. Then a moving average of 9 periods is calculated of this different... Continue reading

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    The Three Moving Average system

    This system is mainly used to find markets which should be avoided when trading with technical indicators because they are often unprofitable. Three oving average system helps to find entry and exit points which could be profitable.This system consists of 3 moving averages with different time periods. The averages could be called as fast, middle and low. The length of the averages could be 5, 21 and 63 for example. Entry is signaled when he middle moving average crosses the long moving average... Continue reading

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    Technical indicators: Williams %R indicator

    Previously I talked about Parabolic SAR indicator and that it can be used with Williams %R indicator. It is similar to Stochastic Oscillator with the difference that Williams %R has upside down scale while Stochastic Oscillator has internal smoothing.What is Williams %R indicator? Williams %R indicator was developed by Larry Williams and it is a momentum indicator. It is usually used to find overbought and oversold levels in non-trending markets. The value of William %R is static 0 to -100. Re... Continue reading

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    Technical indicators: Parabolic SAR (Stop & Reverse)

    Parabolic SAR is a very useful technical indicator during trending periods. However, it shouldn’t be used if there is no trending period. Trend periods exist approximately 30% of the time.In trending markets it provides useful entry and exit points. The name parabolic comes from its shape which is like a parabola. SAR lets our investor follow the dots in an upward or downward trend until SAR is reached and then the trend reverses.SAR’s stop loss is calculated for each day via the previous days... Continue reading

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    Geometry for predicting market behaviour (Michael Jenkins)

    Michael Jenkins, in his book „The Geometry of Stock Market Profits. A Guide to Professional Trading for Living.” says that fear and greed are the main reason for price changes. He says that if we track day to day price movements, apply mathematical models to them, we can time highs and lows on the market if we identify underlining currents of greed to fear and back to greed. He says that the stock’s angular momentum of the stock’s initial rise has the ability to forecast the size and duration ... Continue reading

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    Bollinger bands

    Bollinger bands are envelops that surround the price bars on a chart. Click here to see an example. Bollinger band consists of the middle band, upper band and lower band. Middle band is a simple moving average (N period), upper band is K times N period standard deviation above the middle average and lower band K times N period standard deviation below the middle average. For short term trading, the simple moving average is suggested to be 10-days simple moving average, 20 days for intermediate... Continue reading

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    Relative strengh indicator - RSI

    What is RSI? RSI is a momentum oscillator that compares stock’s or currencies magnitude of recent gains with magnitude of recent losses. It ranges between fixed values – 0 to 100 (where values usually move between 30 and 70). RSI is based on ratio of the average upward movements and average downward movements in a given period of time. Higher than 70 means usually overbought environment and below 30 oversold environment. How is RSI calculated exactly? We take some sort of period ( one of the m... Continue reading

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    Introduction to technical indicators II

    In Introduction to technical indicators I we talked about moving averages, now lets go on with Oscillators. OscillatorsOscillator is an indicator that is generally said to swing forward and backward within a certain area (minimum and maximum). Often the minimum value is 0 and maximum value 100. What is Oscillator meant for? It measures market momentum or the rate of price change. It helps us search for strongest trends in their strongest momentum. Momentum oscillatorsMomentum oscillator calcul... Continue reading

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    Introduction to Technical indicators I

    Technical indicators are basically mathematical formulas based on price activity. Technical indicators should be used together with chart patterns to get the best idea of what’s happening with a stock, currency or anything else and what sort of change could be expected. The primary input for technical indicators is close price, less often also open, low or high.Technical indicators can be mainly used to · Measure strength of a trend· Find support and resistance areas in trends·&... Continue reading

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    Recognizing chart patterns II

    In my previous post I started talking about chart patterns , so...lets continue a bit. Head & Shoulders PatternNot to confuse with the shampoo – we are still talking about investing, trading, technical analysis which exists a lot due to human nature and psychology. So the next pattern we are looking at is Head & Shoulders pattern.H & S pattern is similar to the tripple top pattern as it also contains 3 tops followed by a downside trend reversal. Only with the difference that the mi... Continue reading

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    Recognizing chart patterns I

    Chart patterns can help you predict price movements because there are different cycles of buying and selling action in the market. In this post I will try to explane how to notice different patterns, how they look, what they are and how to recognize the main patterns on charts. Note that nothing in technical analysis nor in recognizing patterns is 100% objective as there is always a number of different interpretations possible. However, some patterns still have proven themselves rather valuabl... Continue reading

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    More on volume & OBV

    Before I have told you that volume does play an important role in price changes and the meaning of the changes. If the price changes and the volume is high compared to the usual then there’s a great chance the the price will go on changing in the same direction – volume increases in the direction of the trend. If the volume expands in case of trend-direction price movement then it may also contract in case of countertrend movements. But like I have also mentioned before – volume is not the mai... Continue reading

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    Introduction to charts

    Charts are a very important part of technical analysis as a whole. There are different kinds of charts available – bar charts, line charts, candlestick charts, point and figure charts.Bar Chart is a vertical line on a graph where the bottom end of the line is the low price and top part is the high price for the period (independent of the length of the period). This kind of chart usually shows time in the bottom horizontal line and price in right vertical line. If you can see hyphens (-) on the... Continue reading

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    Introduction to Dow’s Market trends

    There’s generally three types of market trends – Primary (major), Secondary and Minor. The Primary trend (major) is of most importance to long-term investors as this trend lasts a year or more. The secondary trend is a countertrend movement compared to the primary trend. This is often caused by bullish or bearish expectations due to predicted earnings or anything else related. These can be called reactions or corrections of the price. Secondary trend usually lasts only up to couple of months. ... Continue reading

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    Who is Charles Dow and why should you know him?

    Charles Dow is the „inventor” of technical analysis. He is the co-founder of Dow Jones & Co. and its newspaper Wall Street Journal. Charles Dow published his market observations in the Wall Street Journal which were very helpful to readers.  Charles Dow also created the first stock market average which is now called Dow Jones. It consists of 20 transportation, 30 industrial and 15 utility stocks. Now there’s Dow Jonees Transportation, Dow Jones Industrial average also available separa... Continue reading

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