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Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Webinar: Technical Analysis Explained:

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1 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Webinar: Technical Analysis Explained: Elliot Wave, Cycles, etc. Shaun van den Berg Head of Client Education Wednesday, 24 th July 2013 13h00 until 14h00

2 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Agenda Different Approaches Cycle Analysis Elliot Wave Theory Fibonacci Studies Retracement Arcs Fans Time Zones Gann Studies Fan Grid Summary Conclusion

3 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Different Approaches TA become popular - People believe past performance Strong indication of future performance. Everyone has a different theory on what works & what does not. Technical analysis is a terrific tool More effective when combined with fundamental analysis. Different Approaches Price Action – Line, Bar & Candlestick charts (Chart patterns) Indicators - General, Relative Strength & Volume, etc. Drawing Tools – Trend lines, Fibonacci studies, etc.

4 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Introduction to Cycle & Wave Theory

5 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Cycle & wave theory is based on the assumption that ‘’history repeats itself.’’ Cycle theories postulate a regular time frame, whereas wave theories postulate a regular pattern. Terms are not interchangeable - Many do not distinguish between the two. Cycle theorists maintain that almost every data stream Move in regular waves which are consistent in length. Numerous cycles are assumed to operate simultaneously Major peaks & troughs occur - Action of several cycles fall into line. The Kondratieff theory is an example of a cycle theory. Wave theorists propose that share prices move in a specific wave sequence Amplitude & length of each pattern being variable. The Elliot Wave Theory is perhaps most sophisticated wave theory model. Introduction to Cycle Analysis & Wave Theory

6 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 A cycle is an event, such as a price high or low, which repeats itself on a regular basis. Business cycle - Economic downturn, bottom, economic upturn & top. Cycles in nature include the four seasons Cycles are also part of technical analysis of the financial markets. Cyclical forces, both long & short, drive price movements in the financial markets. Price & time cycles are used to anticipate turning points. Lows are normally used to define cycle length & then project future cycle lows. Cycles exists but do change over time & even disappear at times. While this may sound discouraging, markets trend but not all the time. Trend disappears when markets move into a trading range Reverses when prices change direction Do not expect cycle analysis to pinpoint reaction highs or lows Cycle analysis should be used in conjunction with other aspects of technical analysis to anticipate turning points. Introduction to Cycle Analysis Source: http://stockcharts.com/school/doku.php?id=chart_school:chart_analysis:cycle_lineshttp://stockcharts.com/school/doku.php?id=chart_school:chart_analysis:cycle_lines

7 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 The Perfect Cycle The perfect cycle with a length of 100-days but not all cycles are this well-defined. First peak is at 25-days & the second peak is at 125-days (125 - 25 = 100). First cycle low is at 75-days & the second cycle low is at 175-days (also 100-days later). The cycle crosses the Y axis at 50, 100 & 150, which is every 50 points or half a cycle. Crest: Cycle high Trough: Cycle low Phase: Position of cycle on particular point in time. This cycle is at.95 on day 20. Inflection Point: This is where the cycle line crosses the Y axis. Amplitude: Height of the cycle from Y axis to peak or trough. Length: Distance between cycle highs or cycle lows Source: http://stockcharts.com/school/doku.php?id=chart_school:chart_analysis:cycle_lineshttp://stockcharts.com/school/doku.php?id=chart_school:chart_analysis:cycle_lines

8 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Cycles allow us to accurately predict events in nature, e.g., bird migrations, the tides, planetary movements, etc. You can also use Cycle analysis to predict changes in financial markets Not always with the accuracy found in nature. Many commodity prices reflect seasonal cycles. Due to the agricultural nature of most commodities - Cycles are easily explained & understood. Prices are a consensus of human expectations. Expectations are always changing, shifting the supply & demand lines Causes prices to oscillate between overbought & oversold levels. Fluctuations in prices are a natural process of changing expectations & lead to cyclical patterns. Many technical indicators were developed in an attempt to profit from cyclical nature of prices. Overbought/Oversold indicators (e.g., Stochastic, RSI, etc.) - Designed to help you determine the excessive boundaries of a cycle. To successfully profit from cycle analysis, the cycle should have a strong track record Be used in conjunction with other trading tools. Cycle Analysis Source: http://stockcharts.com/school/doku.php?id=chart_school:chart_analysis:cycle_lineshttp://stockcharts.com/school/doku.php?id=chart_school:chart_analysis:cycle_lines

9 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Research in 1930 found a 28-day cycle in wheat market. Some attribute this to the lunar cycle (Moon Phases) Many markets, including stocks - Have a 28-day cycle. The 28-day cycle is calendar days. This is approximately 20-trading days. Popular Cycles: 28-Day Trading Cycle Source: http://stockcharts.com/school/doku.php?id=chart_school:chart_analysis:cycle_lineshttp://stockcharts.com/school/doku.php?id=chart_school:chart_analysis:cycle_lines

10 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Popular Cycles: 20-Day Trading Cycle

11 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Introduction to Lunar Cycles/ Moon Phases The moon has an effect on the ocean tides - High tide & Low Tides What about our bodies? Our human bodies are made up mostly of water. Seems like some sort of esoteric idea - Actually more scientific than you think. Nothing to do with astrology - Astronomy & physics. Moon cycle from new moon to new moon is called the Synodic Cycle 29.5 days in length "Synod" means place of meeting Planetary Synodic Cycles are cycles that occur between one planet & another. They start when two planets align in their orbits, when looking from the sun. Although invisible – Cycle appears to have quite an effect on financial markets. Direct correlation between the primary phases of the moon & the points at which any given market changes direction. Look at each date listed in the market - Notice pivots occur on or around those days. The pivot day is not the reversal day but the day just before it (known as the setup day) - Signals the change about to come.

12 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Lunar Cycle / Moon Phases Source: http://www.ask.com/web?qsrc=6&o=102140&oo=102140&l=dir&q=Phases+of+the+Moon+Charthttp://www.ask.com/web?qsrc=6&o=102140&oo=102140&l=dir&q=Phases+of+the+Moon+Chart

13 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Popular Cycles: Lunar Cycle / Moon Phases 27/01/2013 25/02/2013 27/03/2013 25/04/2013 25/05/2013 23/06/2013 22/07/2013 21/08/2013 19/09/2013 19/10/2013 17/11/2013 17/12/2013 New Moon Full Moon

14 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Geo-cosmic Indicators: Sun Angles

15 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Stock market has shown an uncanny tendency to: End the year higher if prices increase during the month of January, End lower if prices decline during January. Saying: "So goes January, so goes the rest of the year." In the US markets, e.g., between 1950 – 1993 January Effect was correct 38 out of 44 times Accuracy of 86%. Popular Cycles: January Effect Source: http://stockcharts.com/school/doku.php?id=chart_school:chart_analysis:cycle_lineshttp://stockcharts.com/school/doku.php?id=chart_school:chart_analysis:cycle_lines

16 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Popular Cycles: January Effect

17 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Popular Cycles: US Presidential Cycle Cycle based on U.S. presidential election - Occurs every 4-years. It is not infallible - Has produced good results over last 50-years. Stocks tend to rise in general, but S&P 500 rises more during second half of President's term than first half. Stock prices decline following the election Newly elected president takes unpopular steps to make adjustments to the economy. Mid-term, stock prices begin to rise - Anticipation of a strong election day economy. Source: http://stockcharts.com/school/doku.php?id=chart_school:chart_analysis:cycle_lineshttp://stockcharts.com/school/doku.php?id=chart_school:chart_analysis:cycle_lines

18 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Popular Cycles: US Presidential Cycle The chart above shows the S&P 500 with the Presidential Cycle over the last 20 years. Starts with Reagan's first two years (1981-1982) & ends with Obama's first year (2009). Source: http://stockcharts.com/school/doku.php?id=chart_school:chart_analysis:cycle_lineshttp://stockcharts.com/school/doku.php?id=chart_school:chart_analysis:cycle_lines

19 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 9-Year Cycle (Juglar Wave) In 1860 Clemant Juglar found that a cycle lasting approximately 9-years existed in many areas of economic activity. This cycle had a strong presence from 1840 to 1940. 54-Year Cycle (Kondratieff Wave) Named after a Russian economist, the Kondratieff Wave is a long- term, 54-year cycle identified in prices & economic activity. Since the cycle is extremely long-term, it has only repeated itself three times in the stock market. Some more Popular Cycles Source: http://stockcharts.com/school/doku.php?id=chart_school:chart_analysis:cycle_lineshttp://stockcharts.com/school/doku.php?id=chart_school:chart_analysis:cycle_lines

20 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 A Kondratieff Cycle consists of four distinct phases & vivid mood changes Tone determined the actions of individuals involved in the economy. The awareness of these characteristics allows for the anticipation of the change in the economy & the psychological mood that will prevail. The four distinct phases are as follows: Beneficial inflation (Spring), Stagflation (Summer), Beneficial deflation (Autumn), and Deflation (Winter). Since the last Kondratieff cycle ended around 1949, we have seen: Beneficial inflation 1949-1966, Stagflation 1966-1982, and Beneficial deflation 1982-2000 According to Kondratieff, we are now in the deflation cycle (Winter) Started in 2000 & should end in about 2020. Kondratieff Cycle Theory – Four Phases

21 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Kondratieff Cycle Source: www.financialsense.comwww.financialsense.com

22 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Cycles add significant value to technical analysis tool box. Cycles are not perfect. Some will miss, some will disappear & some will provide a direct hit. Important to use cycles in conjunction with other aspects of technical analysis. Trend establishes direction Oscillators define momentum Cycles anticipate turning points. Look for confirmation Support or resistance on the price chart Turn in a key momentum oscillator. It also helps to combine cycles. For example: The stock market is known to have 10-week, 20-week & 40-week cycles. Signals are enhanced when multiple cycles nest at a cycle low. Summary: Cycle Analysis Source: http://stockcharts.com/school/doku.php?id=chart_school:chart_analysis:cycle_lineshttp://stockcharts.com/school/doku.php?id=chart_school:chart_analysis:cycle_lines

23 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Introduction to Elliot Wave Theory

24 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Introduction to Elliot Wave Theory Developed by Ralph Nelson Elliott (1871–1948), a professional accountant. Popularised by Robert Prechter Elliot Wave Theory (EWT) asserts that crowd behaviour ebbs & flows in clear trends. Based on this ebb & flow, Elliott identified a certain structure to price movements in the financial markets. He proposed that market prices unfold in specific patterns, called waves. Some ardent followers of the EWT called it "the purest form of technical analysis." One of the best places to see this spectacle is in the share market - Shifting investor psychology is noted in share price movements. Price movements show the way that the crowd goes Extreme point of optimism at the top Extreme point of pessimism at the bottom. Describes the steps that human beings go through when part of the investment crowd. They change their psychological orientation from bullish to bearish. Since people do not change much; the path they follow in moving from extreme optimism to extreme pessimism & back again tends to be repeated over & over again, regardless of news & irrelevant events.

25 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Main strengths behind the Elliott Wave Theory is one of “building up” & “pulling down.” Newton’s law of motion states that "Every action creates an equal & opposite reaction." We this in share price movements up or down - They are followed by opposing movements. Price action is divided into: Bullish or bearish trends - Shows the main direction of prices Corrections or rallies - Move against the major trend. Sideways or neutral movements. Elliot labelled these as “Impulsive waves” & “Corrective waves.” There are 5-waves in the direction of the main trend / Followed by 3-corrective waves A 5-3 move completes a cycle. This 5-3 move then becomes two sub-divisions of the next higher 5-3 wave. The underlying 5-3 pattern remains constant – The time span of each may vary. The basic pattern is made up of 8-waves (5-up & 3-down) - Labelled 1, 2, 3, 4, 5, a, b, & c. Elliott Wave Theory gets much more complicated than this 5-3 combination Focus on the very basics. The Basic Elliot Wave Pattern

26 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 The Basic Elliot Wave Pattern Progress takes the form of 5-waves of specific structure. Waves (1), (3) & (5) actually affect the directional movement. Waves (2) & (4) are counter trend breaks. Two breaks are required for overall directional movement. Share market is always somewhere in the basic 5-wave pattern at the largest degree of trend. 5-wave pattern is the principal form of market progress All other patterns are incorporated into it.

27 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Main trend shows 5-waves in its pattern. Within each impulsive wave Another 5-waves are found. In this smaller pattern again Same pattern is repeated, etc. Labelled as different wave degrees in EWT. Elliot Wave Theory – Impulse Waves

28 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Elliot Wave – Basic 5 Wave Pattern 1, 3 & 5 are Impulsive Waves (Directional) 2 & 4 are Corrective Waves (Counter trend breaks) 1 5 3 4 2 Numbered phase

29 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Corrective Wave move against the main trend Composed of three waves. Normally has 3 but can have 5 or more distinct price movements Two in the direction of the main correction (A & C) One against it (B). Wave A & C are called corrections. Waves A & C go in the direction of the shorter term trend Impulsive - Composed of five waves. An impulse wave formation followed by a corrective wave & his forms an Elliott wave degree as it consists of trend & counter trend. Elliot Wave Theory – Corrective Waves

30 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Elliot Wave – Basic 3 Wave Pattern A C B Waves A & C are impulsive waves (Directional) Wave B is a corrective wave (Counter trend break) Lettered phase

31 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Elliot Wave – Complete 8 Wave Pattern 1, 3 & 5 are impulsive waves 2 & 4 are corrective waves 1 5 3 4 2 A C B Waves A & C are impulsive waves Wave B is a corrective wave I II 1, 2, 3, 4 & 5 = Bigger Wave I A, B & C = Bigger Wave II Patterns pictured above are bullish The same applies for bear markets - The main trend is down.

32 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Elliot Wave – Complete 8 Wave Pattern 1, 3 & 5 are impulsive waves 2 & 4 are corrective waves 1 5 3 4 2 A C B Waves A & C are impulsive waves Wave B is a corrective wave I II 1, 2, 3, 4 & 5 = Bigger Wave I A, B & C = Bigger Wave II

33 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 EWT may be used in all time frames. Fractal nature of the markets - Fractals are mathematical constructs On an ever-smaller scale infinitely repeat themselves. Elliot analysed markets in greater detail Spot unique characteristics of wave patterns Helped him make detailed market predictions based on patterns identified EWT is useful for predicting market movements in all time frames. EWT is somewhat based upon Dow Theory Price movements also move in waves. Waves come in steps - Smaller being the building blocks for the larger. Waves link together to form larger versions of themselves They also link together to form the same patterns at the next larger size. Some of the largest wave patterns span hundreds of years Smallest span a few hours. Elliot Wave Theory – Time Frames

34 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Waves may be subdivided to establish different degrees of trend. EWT assigns a series of categories to waves in order of the largest to the smallest. "Grand Super Cycle", the "Super Cycle", the "Cycle", the "Primary Cycle", the "Intermediate Cycle", the "Minor Cycle" & the "Minute Cycle". Elliot Wave Theory – Categories of Waves

35 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 The trends start with the largest degree (Grand Super Cycle) & work their way down to waves of lesser degree. Cycle wave is one larger degree than the Primary wave. Primary wave is one lesser degree than the Cycle wave. Wave 1 of (1) would indicate that Wave 1 is part of a larger degree Wave (1). Wave 1 is a lesser degree than Wave (1). Most chartists will only use 1 to 3 wave degrees on their charts. Chartists using 1 to 3 wave degrees can simply label: The highest degree waves with upper case Roman numerals (I,II,III,IV,V,a,b,c), The middle degree waves with numbers (1,2,3,4,5,A,B,C) The lowest degree waves with lower case Roman numerals (i,ii,iii,iv,v,a.b,c). This provides three distinct groups for labelling various waves. It can get quite complicated trying to apply nine Wave degrees Even just using the labelling convention in the order provided. Elliot Wave Theory – Degrees of Trend

36 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Determine the “Main Wave” or “Super Cycle.” Enter a trade when it is bullish Exit a trade when it becomes bearish as the pattern runs out of steam A price reversal is around the corner. EWT suggests no absolute time requirements for a cycle to complete. The principal reason for using the different wave & cycle theories - To determine the future trend. Aim to buy as near to the starting point of an upward cycle in a share's price Sell as near to the top of the cycle as possible. Identify repeating patterns in prices Figure out where in those repeating patterns we are today Predict where we are going in the future. EWT does not provide certainty about any one market outcome Objective means of assessing the relative probabilities of possible future paths for the market Identify market structure & anticipate the most probable next move based on position within the structure Anticipate what the market could probably do next What the market will not do next. By using EWT you can be sure of the highest probable moves with the least risk. Using Elliot Wave Theory in everyday trading

37 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Only 3 rules when it comes to interpreting Elliott Wave. Many guidelines, but only three HARD rules. These are unbreakable. Guidelines are bendable & subject to interpretation. These rules only apply to a 5-wave impulse sequence. Correction, which are much more complicated, are given more leeway when it comes to interpretation. Elliot Wave Theory: Three Rules

38 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Elliot Wave Theory: Three Rules 1, 3 & 5 are Impulsive Waves (Directional) 2 & 4 are Corrective Waves (Counter trend breaks) 1 5 3 4 2 Rule 1: Wave 2 cannot retrace more than 100% of Wave 1. Rule 2: Wave 3 can never be the shortest of the three impulse waves. Rule 3: Wave 4 can never overlap Wave 1.

39 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Elliot Wave Theory 1 4 3 2 5 I II III IV V A B C A, B & C

40 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Introduction to Fibonacci Studies Fibonacci Retracement Lines Fibonacci Arcs Fibonacci Fan Fibonacci Time Zones

41 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Introduction to Fibonacci Leonardo Fibonacci (c. 1170 – c. 1250) - Italian mathematician Considered by some "the most talented western mathematician of Middle Ages.“ Best known to the modern world for a number sequence named the Fibonacci numbers Fibonacci sequence of numbers - Each number is the sum of the previous numbers. Fibonacci sequence: 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233, 377.. Carried the calculation up to the 12-place (14th in modern counting) = 233 Source: http://en.wikipedia.org/wiki/Fibonaccihttp://en.wikipedia.org/wiki/Fibonacci

42 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Original problem that Fibonacci investigated was about how fast rabbits could breed in ideal circumstances. Suppose a newly-born pair of rabbits - One male, one female, are put in a field. Rabbits are able to mate at the age of one month so that at the end of its second month a female can produce another pair of rabbits. Suppose that our rabbits never die & the female always produces one new pair (one male, one female) every month from the second month on. How many pairs will there be in one year? 1.After the first month, they mate, but there is still one only 1 pair. 2.Second month the female produces a new pair – Two pairs of rabbits in the field. 3.Third month – Original female produces a 2nd pair - 3 pairs in all in the field. 4.Fourth month - Original female has produced yet another new pair The female born two months ago produces her first pair also - Making 5 pairs. The Fibonacci Rabbits Source: http://www.maths.surrey.ac.uk/hosted-sites/R.Knott/Fibonacci/fibnat.htmlhttp://www.maths.surrey.ac.uk/hosted-sites/R.Knott/Fibonacci/fibnat.html

43 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 The Fibonacci Rabbits Source: http://www.maths.surrey.ac.uk/hosted-sites/R.Knott/Fibonacci/fibnat.htmlhttp://www.maths.surrey.ac.uk/hosted-sites/R.Knott/Fibonacci/fibnat.html Number of pairs of rabbits in the field at the start of each month: 1, 1, 2, 3, 5, 8, 13, 21, 34,...

44 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Fibonacci sequence of numbers not as important as the mathematical relationships Expressed as ratios between numbers. Created by taking two extreme points (usually a major peak & trough) on chart To find these retracement levels - Find recent significant Swing Highs & Swings Lows. Uptrends - Click on the Swing Low & drag the cursor to the most recent Swing High. Downtrends - Click on the Swing High & drag the cursor to the most recent Swing Low. Divide the vertical distance by the key Fibonacci ratios of 23.6%, 38.2%, 50%, 61.8% & 100%. Once these levels are identified - Horizontal lines are drawn - Identify possible support & resistance levels. This Fibonacci tool works best when the market is trending. Go long (or buy) on a retracement at a Fibonacci support level when the market is trending up Go short (or sell) on a retracement at a Fibonacci resistance level when the market is trending down. Fibonacci Retracement Source: http://www.investopedia.com/terms/f/fibonacciretracement.asp

45 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Each number Fibonacci number sequence is approximately 1.618 times greater than the preceding number. Common relationship between every number in the series Foundation of the common ratios ("the golden ratio" or "the golden mean“) Key Fibonacci ratio of 61.8% Divide one number in the series by number that follows it. For example: 8/13 = 0.6153 & 55/89 = 0.6179 38.2% Fibonacci ratio Divide one number in series by the number found two places to the right. For example: 55/144 = 0.3819. 23.6% Fibonacci ratio - Divide one number in series by number 3-places to the right. For example: 8/34 = 0.2352 Fibonacci Retracement Source: http://www.investopedia.com/ask/answers/05/fibonacciretracement.asp

46 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Fibonacci Retracement – Uptrend

47 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Fibonacci Retracement – Downtrend

48 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Fibonacci Arcs consist of three curved lines Purpose - Anticipating key support/resistance & areas of ranging. Fibonacci Arcs are created by dragging the cursor between two points (usually the high & low in a given period) Draws three curves that intersect at the key Fibonacci levels of 38.2%, 50% & 61.8%. Trading decisions are made when the price crosses through these key levels. Fibonacci Arcs Source: http://www.investopedia.com/terms/f/fibonacciarc.asphttp://www.investopedia.com/terms/f/fibonacciarc.asp

49 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Fibonacci Arcs

50 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Fibonacci Fan Consists of three diagonal lines that use Fibonacci ratios to help identify key support & resistance levels. First draw a trend line through two points (usually the high & low in a given period) Divide the vertical distance between the two points by the key Fibonacci ratios of 38.2%, 50% & 61.8%. Three 'fan' lines are created Each representing a Fibonacci ratio. Source: http://www.investopedia.com/terms/f/fibonaccifan.asphttp://www.investopedia.com/terms/f/fibonaccifan.asp

51 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Fibonacci Fan

52 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Identify periods in which price will experience a significant amount of movement. Consists of a series of vertical lines that correspond to the sequence of Fibonacci numbers (1, 2, 3, 5, 8, 13, 21, 34, etc.). Choose a starting position (usually after a major move) on the chart A vertical line is placed on every subsequent day - Position in the Fibonacci number sequence. Fibonacci numbers play an important role in determining relative areas where prices experience large price moves or change direction. Fibonacci Time Zones Source: http://www.investopedia.com/terms/f/fibonaccitimezones.asphttp://www.investopedia.com/terms/f/fibonaccitimezones.asp

53 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Fibonacci Time Zones

54 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Introduction to Gann Studies Gann Fan Gann Grid (Angles)

55 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 William Delbert Gann (1878-1955) was a legendary trader. W.D. Gann predicted the abdication of Kaiser & the end of the World War I. In 1927, he predicted the Japanese attack on Pearl Harbor (7 December, 1941) Financial predictions were even more profound. In early 1929, he predicted that the markets would probably continue to rally on speculation& hit new highs… until early April. Delivered daily financial forecasts focusing on stock & commodity markets. Daily financial publication gained notoriety - Published several books. Began releasing his techniques he used to make these forecasts: Gann studies. Tested his strategy - Opened one account with $300 & one with $150. Made $25 000 profit with his $300 account in only three months Made $12 000 profit with his $150 account in only 30 days! Became famous on Wall Street as one of the best forecasters of all time. Gann Studies Source: http://www.investopedia.com/articles/technical/04/042804.asphttp://www.investopedia.com/articles/technical/04/042804.asp

56 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Gann based predictions of price movements on three premises: Price, time & range are the only three factors to consider. The markets are cyclical in nature. The markets are geometric in design & in function. Gann's strategies involved 3-general areas of prediction: Price study– Support & Resistance lines, pivot points & angles. Time study – Looked at historically repeating dates, derived by natural & social means. Pattern study – Looked at market swings - Trend lines & reversal patterns. Gann Studies Source: http://www.investopedia.com/articles/technical/04/042804.asphttp://www.investopedia.com/articles/technical/04/042804.asp

57 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Gann Fan Consists of a series of nine diagonal lines called Gann angles. These angles are superimposed over a price chart to show support & resistance levels. Supposed to help technical analysts predict price changes. Gann's ideal angle was a 45 degree angle based on his ideal balance of time & price. The Gann fan relies heavily on subjective choices made by individual traders - Chart may be limited in its usefulness & accuracy. Source: http://www.investopedia.com/terms/g/gann-fans.asphttp://www.investopedia.com/terms/g/gann-fans.asp

58 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Gann Fan

59 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Gann Grid Gann used a method of predicting price movements through the relation of geometric angles in charts depicting time & price. Ideal balance exists when prices move identically to time Gann angle of 45 degrees. Nine different Gann angles Identify trend lines & market actions. When trend lines are broken Following angle will provide support or resistance. Past, present & future all exist at the same time on a Gann angle. When analysing / trading the direction of a particular market Where the market has been, Where it is in relation to that former bottom or top, How to use the information to forecast future price action. Source: http://www.investopedia.com/terms/g/gannangles.asphttp://www.investopedia.com/terms/g/gannangles.asp

60 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Gann Grid

61 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Cycle, Elliot Wave, Fibonacci & Gann studies are all valuable tools to the analyst or trader if used properly. Have an open mind & grasp the key concepts. These studies can help you analyse & trade any market with more accuracy. Learning the characteristics of the different markets – Using these studies will help improve your analytical skills. Summary: Elliot Wave, Cycles, etc.

62 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Upcoming Webinars** Trading Introduction to Exchange Traded Products Date: Wednesday, 7 August 2013 Time: 13:00 - 14:00 Trading Currency Futures (Part 2) Date: Wednesday, 28 August 2013 Time: 13:00 - 14:00 Introduction to the Share Market Date: Wednesday, 11 September 2013 Time: 13:00 - 14:00 Conquering Technical Analysis Date: Wednesday, 25 September 2013 Time: 13:00 - 14:00 Trading Equity Derivatives Date: Wednesday, 2 October 2013 Time: 13:00 - 14:00 **Please note: limited to 100 people Understanding Fundamental Analysis Date: Wednesday, 30 October 2013 Time: 13:00 - 14:00 Introduction to Japanese Candlesticks Date: Wednesday, 13 November 2013 Time: 13:00 - 14:00 Investment Strategies: Value, Growth & Dividends Date: Wednesday, 27 November 2013 Time: 13:00 - 14:00 Introduction to Point & Figure Charts Date: Wednesday, 11 December 2013 Time: 13:00 - 14:00

63 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Upcoming Traders Forum meetings Traders Forum meeting (JHB) Date: Tuesday, 30 July 2013 Time: 18:00 until 20:00 Traders Forum meeting (CPT) Date: Wednesday, 21 August 2013 Time: 18:00 until 20:00 Traders Forum meeting (PTA) Date: Monday, 30 September 2013 Time: 18:00 until 20:00 Traders Forum meeting (DBN) Date: Monday, 7 October 2013 Time: 18:00 until 20:00 Traders Forum meeting (JHB) Date: Tuesday, 26 November 2013 Time: 18:00 until 20:00 Traders Forum meeting (CPT) Date: Tuesday, 10 December 2013 Time: 18:00 until 20:00

64 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Presentation & recording links will be emailed Review this PowerPoint presentation Listen to the Webinar Recording Research Cycles, Elliot Wave, Fibonacci & Gann Studies Email any questions Book for the upcoming Webinars / Traders Forum Good Luck Happy Trading! Conclusion

65 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Contact Us Thank You Shaun van den Berg Shaunvdb@psg.co.za (011) 996 5254

66 Online Securities Ltd. Is a member of the JSE Ltd. and an authorised Financial Services Provider, FSP No. 42996 Disclaimer This publication has been issued by PSG Online. It is confidential and issued for the information of clients only. It shall not be reproduced in whole or in part without our permission. The information contained herein has been obtained from sources which and persons whom we believe to be reliable but is not guaranteed for accuracy, completeness or otherwise. Opinions and estimates constitute our judgement as of the date of this material and are subject to change without notice. Past performance is not indicative of future results. This report is provided for informational purposes only. No information contained herein, no opinion expressed and no recommendation made constitutes a representation by us or a solicitation for the purchase of any of the securities mentioned herein and we have no responsibility whatsoever arising here from or in consequence hereof. Securities, financial instruments or strategies mention herein may not be suitable for all investors and investors must make their own investment decisions using their own independent advisers as they believe necessary and based upon their specific financial situations and investment objectives. The employees of PSG Online may from time to time own securities mentioned herein. Analyst Certification The research analyst who prepared this report certifies that the view expressed herein accurately reflect the research analyst’s personal views about the subject security and issuer and that no part of his compensation was, is or will be directly or indirectly related to specific recommendations or views contained in this report.


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