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Lesson 6 - Technical Analysis

Technical analysis uses patterns in stock price charts to identify emotional shifts among investors from optimism to pessimism. It helps time entries and exits based on probabilities rather than making absolute predictions. Key concepts include identifying uptrends where prices make higher highs and higher lows, downtrends with lower highs and lows, and support/resistance zones that provide buy or sell opportunities when prices break above or below them. Moving averages further help identify trends and support/resistance levels.

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232 views

Lesson 6 - Technical Analysis

Technical analysis uses patterns in stock price charts to identify emotional shifts among investors from optimism to pessimism. It helps time entries and exits based on probabilities rather than making absolute predictions. Key concepts include identifying uptrends where prices make higher highs and higher lows, downtrends with lower highs and lows, and support/resistance zones that provide buy or sell opportunities when prices break above or below them. Moving averages further help identify trends and support/resistance levels.

Uploaded by

tls726
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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Value Momentum

Investing Course Lesson 6


Timing Your Entries with Technical Analysis

By Adam Khoo
Professional Stock & Forex Trader

www.piranhaprofits.com
www.wealthacademyglobal.com
Introduction to Technical Analysis
•In the short-term, the stock market is driven by emotions
(sentiment) and not fundamental logic.

•This is because stock prices are driven by demand and supply, which
is in turn driven by the emotions of fear and greed.
Introduction to Technical Analysis

• Technical analysis is the study of emotional patterns that are


captured on stock price charts.

•By studying chart patterns, we can tell if investors are getting


more and more optimistic (bullish) or more and more
pessimistic (bearish).

•Understanding Technical Analysis will better help us to time


our entries and exits in the market
Technical Analysis Is Not About Prediction
But about Probability
• It is impossible predict stock market prices with absolute certainty
•Technical analysis is used to identify high probability outcomes
(Are prices more likely to move up or down?)

• Entering the market when price has a higher probability of rising


in the short term will maximise our investing profits
A Typical Trading Day

Day High
$100.30

Close
Price
Open $99.99
Price
$99.70
Day Low
$99.45
Line Chart
A line chart connects the daily closing prices
!
Candlestick Chart
Candlestick charts reveal a stock’s opening,
closing, high and low price
!
Candlestick Chart

Daily Candles
Lesson 6
Technical Analysis
Identifying Trends

Copyright ©
Adam Khoo Learning Technologies Group Pte Ltd 2017
The Law of the Trend
• An established trend in price is statistically more likely to continue from one
interval to the next than it is to reverse
• Once you are able to identify a new trend and the reversal of a trend, you can
better time entries and exits into a stock
Price On an Uptrend

Price makes higher highs and higher lows


The market is bullish (optimistic)
Price On an Uptrend

We buy during dips on uptrends

Buy on ‘Dips’
Price On an Uptrend

We buy during dips on uptrends

Buy on ‘Dips’
Price On a Downtrend

Price makes Lower highs and lower lows


The market is bearish (pessimistic)
Price On a Downtrend

We go sell during Rallies on a Downtrend

Sell on ‘Rallies’
Price On a Downtrend

We go sell during Rallies on a Downtrend

Sell on ‘Rallies’
Price in a Consolidation

Same Highs, Same Lows


Resistance

Buy at Strong Support Levels


Support
Lesson 6
Technical Analysis
Support & Resistance

By Adam Khoo

Copyright ©
Adam Khoo Learning Technologies Group Pte Ltd 2017
Resistance Zones

• When a stock fails to break resistance, it creates bearish momentum


(possible short opportunity)
• Avoid buying stocks when they are near a resistance line.
Resistance Zones

• When a stock breaks above resistance, it creates bullish momentum


(possible buy opportunity)
Support Zones

• When a stock bounces off support, it creates bullish momentum


(possible buy opportunity)
• Avoid Selling Short when Price is near a Support Zone.
Support Zones

• When a stock breaks support, it creates bearish momentum


(possible sell opportunity)
Support & Resistance Zones
When a stock breaks a resistance zone, that zone now
becomes a support zone

Resistance
Support
Support & Resistance Zones
When a stock breaks a support zone, that zone now becomes
a resistance zone

Resistance
Support
Up Trending support
Down Trending Resistance
Lesson 6
Mastering Technical Analysis
Moving Averages

By Adam Khoo

Copyright ©
Adam Khoo Learning Technologies Group Pte Ltd 2017
Moving Averages
• Moving averages indicate trend direction & support/ resistance levels
• A Simple Moving Average (SMA) is the simple average of the price over a pre-defined
number of periods
• An Exponential Moving Average (EMA) is a weighted MA that applies more weight to
recent prices.
Moving Averages
•The slope of the MA indicates the direction of the trend
•Moving averages provide support on uptrends and resistance
on downtrends
• Price tends to revert to the mean (moving average)
Identifying Trends with Moving Averages
Using the 50 & 150 Day Simple Moving Average
!

Downtrend to Uptrend
1) 50, 150MA flatten or slope up
! 2) 50MA crosses above 150MA
150$DMA$

50$DMA$

50$DMA$crossover$150$
DMA$signals$uptrend$
Identifying Trends with Moving Averages
Using the 50 & 150 Day Simple Moving Average
!

50$DMA$cross$below$
150$DMA$signals$&$
50$DMA$ Both$DMA$slope$down$
signals$downtrend$
150$DMA$

Uptrend to Downtrend
1) 50, 150MA flatten or slope down
2) 50MA crosses below 150MA
Identifying Trends with Moving Averages

Price above 200MA with


200MA sloping up
= Long term uptrend

Price below 200MA with


200MA sloping down
= Long term downtrend
Identifying Trends with Moving Averages
Using the 200 Day Simple Moving Average
!

!
Candles#cross#200#DMA#
&#200#DMA#slopes#up#
200#DMA#
signals#uptrend#
Identifying Trends with Moving Averages
Using the 200 Day Moving Average
!

Candles#cross#below#
200#DMA#&#200#DMA#
slopes#down#signals#
200#DMA# downtrend#
Value Momentum
Investing Course Lesson 6
Timing Your Entries with Technical Analysis

By Adam Khoo
Professional Stock & Forex Trader

www.piranhaprofits.com
www.wealthacademyglobal.com

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