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Technical Analysis -Advance Level RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED.

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Presentation on theme: "Technical Analysis -Advance Level RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED."— Presentation transcript:

1 Technical Analysis -Advance Level RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED

2 Disclaimer This presentation is being provided solely for informational purposes. Mercantile Exchange Nepal Limited does not warrant the accuracy or completeness of any information provided in this presentation and such information is provided without any correctness or condition of any kind. Neither Mercantile Exchange Nepal Limited nor any other person associated with the creation of this presentation or its contents shall be liable or responsible to any person for any harm, loss or damage that may arise in connection with the use of this presentation, including without limitation, any indirect, third party, or consequential damages. RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED

3 Flow of Presentation Technical Indicator Japanese Candlesticks Technical Indicators Conclusion RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED

4 Technical Indicators A technical indicator is a series of data points that are derived by applying a formula to the price data of a security Price data includes any combination of the open, high, low or close over a period of time RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED

5 Technical Indicators A technical indicator offers a different perspective from which to analyze the price action. Some, such as moving averages, are derived from simple formulas and the mechanics are relatively easy to understand Others, such as Stochastics, have complex formulas and require more study to fully understand and appreciate Technical indicators can provide unique perspective on the strength and direction of the underlying price action RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED

6 Technical Indicators Why Use Indicators?  An indicator can act as an alert to study price action a little more closely  Indicators can be used to confirm other technical analysis tools  Some investors and traders use indicators to predict the direction of future prices RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED

7 Technical Indicators Tips for Using Indicators  Indicators indicate  Signals should be taken in context with other technical analysis tools  Learning how to read indicators is more of an art than a science  Hundreds of indicators in use today  Choose carefully and moderately RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED

8 Japanese Candlesticks Candlestick charting first appeared sometime after 1850 Credit goes to legendary rice trader named Homma from the town of Sakata Original ideas were modified and refined over many years of trading eventually resulting in the system of candlestick charting that we use today RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED

9 Japanese Candlesticks RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED

10 Candlesticks Pattern, WHY?? RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED

11 Doji Major Candlesticks Pattern Bulls and Bears are at an equilibrium A state of indecision Always take notice RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED

12 Major Candlesticks Pattern Gravestone Doji Open and the close occur at the low of the day Top of a up- trend RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED

13 Dragonfly Doji Open and the close occur at the top of the day Bottom of a down- trend Major Candlesticks Pattern RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED

14 Bullish Engulfing Pattern End of a downtrend Buying pressure Beginning of an up - trend Major Candlesticks Pattern RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED

15 Opposite to the bullish pattern End of an up – trending market Selling pressure Major Candlesticks Pattern Bearish Engulfing Pattern RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED

16 Major Candlesticks Pattern RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED Dark Cloud Cover Two – day bearish pattern End of an upturn Closes below the 50% level

17 End of a declining market Price opens lower than the previous day Closes above the 50% level Piercing Pattern Major Candlesticks Pattern RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED

18 Hammer Long lower shadows and small real bodies Patter at the bottom of the down-trend is Hammer Major Candlesticks Pattern RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED

19 Hanging-man Major Candlesticks Pattern Long lower shadows and small real bodies Pattern at the top of the up-trend is Hanging Man RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED

20 Morning Star Bottom reversal signal Beginning of an up - trend Major Candlesticks Pattern RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED

21 Major Candlesticks Pattern Evening Star Opposite of the Morning Star Top reversal signal Beginning of a down - trend RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED

22 Shooting Star Warning that the top is near Bottom of a trend is a bullish signal (inverted hammer) Major Candlesticks Pattern RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED

23 Moving Averages Simple Moving Averages Exponential Moving Averages RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED

24 Moving Averages Simple Moving Averages Average Value of a commodity over a set period Emphasizes the direction trend Upward trend is when a shorter duration MA (for e.g., 15 days) crosses over the longer duration MA (for e.g., 50 days) Downward trend is when a longer duration MA (for e.g., 50 days) crosses over the shorter duration MA (for e.g., 15 days) RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED

25 Moving Averages Simple Moving Averages RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED

26 Moving Averages Exponential Moving Averages Similar to Simple Moving Averages Except more weight is given to the latest data 12- and 26-day EMA’s are the most popular Example of EMA RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED

27 Moving Averages Exponential Moving Averages RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED

28 Pivot Points Predictive indicator of market movement Uses the previous time frame prices to calculate the next time frame’s pivot points Calculation used for Pivot Points Resistance 3 = H + 2*(P-L) Resistance 2 = P + (Res1- Sup1) Resistance 1= 2 * P - L Pivot Point = ( H + C + L ) / 3 Support 1 = 2 * P - H Support 2 = P - (Res1-Sup1) Support 3 = L - 2*(H-P) RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED

29 Example of Pivot Points Gold Prices on 31st March 2011Gold Prices on 31st March 2011 OpenHighLowClose R2R1PivotS1S RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED

30 Example of Pivot Points RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED

31 Relative Strength Index Developed by J. Welles Wilder Measures the magnitude of gains against the magnitude of losses over a period Range Formula= /(1+RS) where, RS=Average Gain / Average Loss RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED

32 Relative Strength Index RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED

33 Relative Strength Index RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED

34 Bollinger Bands Created by John Bollinger in 1980s Determines the overbought and oversold zones Consists of three curves  Upper Band-Middle Band+2 S.D.  Middle Band-20 Days SMA  Lower Band-Middle Band-2 S.D. RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED

35 Bollinger Bands RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED

36 Fibonacci Discovered by Leonardo Pisano Series numbers: 0, 1, 1, 2, 3, 5, 8, 13, 21, and so on Fibonacci Retracement Levels (Golden Mean)  0.236, 0.382, 0.500, 0.618, Fibonacci Extension Levels  0, 0.382, 0.618, 1.000, 1.382, RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED

37 Fibonacci Retracement Works best when the market is trending Used to determine support and resistance level General consensus is the market always reverses from one of the support/resistance levels RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED

38 Fibonacci Retracement Uptrend RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED

39 Fibonacci Retracement Uptrend RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED

40 Fibonacci Retracement DowntrendDowntrend RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED

41 Fibonacci Retracement DowntrendDowntrend RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED

42 Fibonacci with Trend Lines Useful on trending market i.e. Uptrend or Downtrend Example of silver Want to take a long position but don’t know when Draw the trend line from 24th August till 22nd October Draw the Fibonacci levels taking a swing low price of USD 22.79(coinciding with one of the lowest trend levels of 22nd October) and swing high price of USD RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED

43 Fibonacci with Trend Lines RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED Silver Prices found support at 61.8 level i.e. USD (coinciding with the trend line as well) on 16th November Take a Long position at this level Silver Prices broke the swing high level on 4th December

44 Fibonacci with Japanese Candlesticks Tracking the development of exhaustive candlesticks Indicates a continuation of a trend Example of Gold Draw the Fibonacci levels taking a swing low price of USD 1156 on 27th July and Swing high price of USD on 14th October RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED

45 Fibonacci with Japanese Candlesticks RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED Gold prices found support at 23.6 Fib Level on 21st October Formation of a Dragonfly Doji after a bearish candle the preceding day Dragonfly Doji indicates the beginning of a bullish trend Take a long position at this level Gold Prices break the swing high level on 5th November

46 MACD Developed by Gerald Appel in late 1970sDeveloped by Gerald Appel in late 1970s Acronym for Moving Average Convergence DivergenceAcronym for Moving Average Convergence Divergence Identify a new trendIdentify a new trend CalculationCalculation MACD: (12 Day EMA-26 Day EMA)MACD: (12 Day EMA-26 Day EMA) Signal Line: 9 Day EMASignal Line: 9 Day EMA MACD Histogram: MACD-Signal LineMACD Histogram: MACD-Signal Line Rules for TradingRules for Trading When MACD>Signal Line=Bullish MarketWhen MACD>Signal Line=Bullish Market When MACD

47 MACD RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED

48 Conclusion Technical Indicators work in tandem with each other Weigh the pros and cons of each indicator before reaping the results The best strategy forward is using technical and fundamental factors simultaneously RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED

49 For further updates, Like Us on Facebook! Link: https://www.facebook.com/mexhomehttps://www.facebook.com/mexhome


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