Tuesday, February 12, 2013

Chapter 1 Technical Analysis

Chapter 1

      Technical Analysis: Martin Pring Introduction to Technical Analysis and CD_ROM MOMENTUM INDICATORS.  Martin Pring is a text book writer for the CMT's ie; The Certified Market Technicians

       From the one who taught me what i know, Tony Foresight. Thank you Tony. His "Price, Volume, Resistance". A Mantra that was easy to remember. Price makes the Chart Pattern. Volume Follows Price.  And catching a breakout you use volume and the break of Resistance when price completes its Price Pattern. Same goes for Support of course.

     Go Look for Price Pattern Violations and you will find evidence of Divergences. A Divergence is a Leading Indication, or presents higher probability for a future price change. So then you say, something like, "It is probable we may see some Momentum change in the future" When looking for "Confirmation" of a Price Pattern Change we look for a closed value. Usually the longer the time frame the price closes with the better, I LOVE LOOKING FOR WEEKLY CHART BREAKOUTS. If on a Friday close, a Price, Volume, Resistance Pattern is violated. We can now say in a Technical Analysis sort of way,"its probable the price is likely to change next week".

     A picture says a 1000 different things.  Here are some indications that prices in the NASDAQ are coming down.  In My Opinion Prices should come down to the Neck line of the Head & Shoulders.  After that the pattern should complete the Right shoulder and prices will at that point continue on its momentum path downward.  (Click on chart to enlarge)

 1.  The study of Probabilities. What is reality? Does it present an advantage in the market? click on the chart.  Head & Shoulders price formation breakdown. A distribution Phase shown on a weekly chart. If you can see in the NASDAQ weekly chart we labeled many technical issues. Its my Opinion that with the evidence provided that we will see a price change to the downside.

2.  Using volume and price patterns to catch a breakout. On the weekly chart we see the labels, higher high, lower high, and lower volume. The Higher High is the Head & Shoulders Pattern. The NASDAQ is under a Distribution Phase.  On the weekly chart price has confirmed a Resistance break of the Trend line Friday close. The lower high is within the MACD Indicator. The Moving Average Convergence Divergence Indicator is very reliable when looking for Divergences. We look for changes in Momentum and we find it in the Weekly Nasdaq Chart.

3.  Volume usually follows Price Patterns. Volume is great because it a different momentum indicator because it sits separate from Price. Volume in the chart also sets up a divergence. We have a higher high in the price  but volume made a lower high.  It appears that volume is much lower than the previous highs but price made a higher high.  Added evidence supports the Probability that Price will soon come down.

4.  Momentum and how divergence is its probable evidence of price change. There are many ways to find divergences. Martin Pring and his CD-ROMS are very good for learning Technical Analysis and Momentum. I highly recommend them for everyone.

5.  Determining a Resistance break.  Trendlines, Floor Trading Pivot Points and Moving Averages are simply used to find Support and Resistance lines.  In the chart provided, the weekly chart indicates that the Trendline has been violated to the downside.  Click on the chart to enlarge the picture of price below the upward Trendline.
Pivot Points are used by the most influential traders.  Buying support and selling resistance, kind of an opposite feeling when you use them. The chart is not showing the pivot points and are better seen when using smaller time frames such as daily and 60minute charts.  Moving Averages are easily used to determine the trend and doing so can help trades know visually where to make a trade.  A popular Moving Average for Traders is the 10 day moving average 50day and 200day.  I use a simple moving average of 34 to determine the weekly trend.  The weeky trend is important so as not to trade on the opposite side of the trend.  "the Trend is your friend". If price moves above the 34sma on a weekly chart I can determine that price will be bullish if in fact the 34sma is pointing upwards.

6.  Catching a breakout. To sum it up we look for a price pattern break. Volume must be able to carry price across resistance and finally the weekly Friday close confirms a breakout.

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