CONFIRMATION AND DIVERGENCE

TECHNICAL ANALYSISWHAT IS TECHNICAL ANALYSIS? It is the study of any market that uses price and volume information only in order to forecast future price movement and trends. Technical analysts rely on historical and current price and volume information only.

HOW IT IS DONE? ChartsPatternsIndicators

PRICE AND VOLUME BASICSPrice Charting Bar Charts Line Charts Candle sticks

PRICE AND VOLUME BASICSBar Charts:

PRICE AND VOLUME BASICSLine Chart

PRICE AND VOLUME BASICSCandle Sticks

Candle Sticks

Candle Sticks

VolumeVolume expands in the direction of trendVolume changes tend to precedes price changes Look at bigger vol. days in upswing and larger vol. total in downswing

Volume Vol. should increase in the direction of dominant trend On Balance Volume: Changes in OBV precede price changesExample:Assume we started with a stock that traded 1 million shares on day 1. If the stock closes higher the next day and 750,000 shares are traded, day 2s volume figure is added to the first day and assigned a positive number, as our running total is so far a positive number, with OBV on day 2 at +1,750,000. [Note: OBV would be a negative number, if our example stock closed lower on day 2, on 1,500,000 shares: OBV would be 500,000.] On day 3 the stock closes lower on 500,000 shares and we subtract that days volume from our cumulative OBV total: On day 3, OBV is +1,250,000. When the stock is unchanged in price on day 4, we leave OBV unchanged at +1,250,000. This continues on into the future.

Volume Direction of OBV is the primary concern; whether the line is moving up or down. Check out the Price-OBV divergence.

TRENDSTrend could be: upwards, downwards, sideways.

TRENDS

TRENDLINES

TRENDLINES

CONFIRMATION AND DIVERGENCE

SUPPORT AND RESISTANCE

SUPPORT AND RESISTANCE

CHART PATTERNSReversal Patterns: Double and triple tops or bottoms W bottoms or M tops V tops or bottoms Rounding tops and rounding bottoms The head and shoulders pattern Rectangles Wedges Triangles Broadening tops or bottoms Breakaway and exhaustion gaps

REVERSAL PATTERNS

TRIPLE TOP

DOUBLE BOTTOM

TRIPLE BOTTOM

DOUBLE TOP

TRIPLE TOP

HEADS AND SHOULDERS

HEADS AND SHOULDERS

HEADS AND SHOULDERS

HEADS AND SHOULDERS

HEADS AND SHOULDERS

ROUNDING TOPS AND BOTTOMS

ROUNDING TOPS AND BOTTOMS

CONTINUATION PATTERNSFlagsMost trianglesMost rectanglesvirtually the same as a line formationRunaway and measuring gaps

RECTANGLE

GAPS (Price)

GAPS (Exhaustion & Runaway)

TRIANGLES

FLAGS

TECHNICAL INDICATORSTECHNICAL INDICATORS(MOVING AVERAGE)

TECHNICAL INDICATORS(MOVING AVERAGE)

TECHNICAL INDICATORS(TYPES OF MOVING AVERAGE)

SUPPORT AND RESISTANCE FOR MOVING AVERAGES

SUPPORT AND RESISTANCE FOR MOVING AVERAGES

MOVING AVERAGE WITH OTHER TOOLS

Bearish Trend Reversal is indicated by this upside breakoutMOVING AVERAGE CROSSOVERS

BOLLINGER BANDS

BOLLINGER BANDS

OSCILLATORS

OSCILLATORS

MOVING AVERAGE CONVERGANCE DIVERGANCE (MACD)

MOVING AVERAGE CONVERGANCE DIVERGANCE (MACD)

RELATIVE STRENGTH INDEX

RELATIVE STRENGTH INDEX

RELATIVE STRENGTH INDEX

RELATIVE STRENGTH INDEX

RELATIVE STRENGTH INDEX

RELATIVE STRENGTH INDEX (RSI)

RELATIVE STRENGTH INDEX (RSI)

RELATIVE STRENGTH INDEX (RSI)

RSI DIVERGENCE

RSI DIVERGENCE