Academy #8 Technical Analysis Speakers: Charles & Daniel Get connected to B&R 1

 Charles-Antoine Bory ◦ Board member + chairman Audacity ◦ Swiss: good with other people’s money ◦ Many years of investment experience  Daniel Göttmann ◦ Chairman STCM ◦ German: paying the bill in a few years ◦ Many years of investment experience

 Introduction  Volatility  Charts  Basic patterns  Trend indicators  Momentum indicators  Advanced chart patterns  Links  Conclusion

 Graphical analysis  “In finance, technical analysis is a security analysis discipline used for forecasting the direction of prices through the study of past market data, primarily price and volume.” Wikipedia  Technical analysis is more concerned with finding cues about the market micro structure!  Belief that the historical performance of stocks and markets are indications of future performance.

 Never forget your fundamental analysis!  Use technical analysis as complement  Combination is the key!

 Identifying securities to buy/sell  Timing of buy and sell orders  Drawing in your professional life

 Volatility is a measure for the variation of the price of a financial instrument over time ◦ Standard deviation ◦ A higher volatility implies a riskier asset ◦ Volatility varies over time ◦ Volatility typically high in bear markets

 Negatively correlated with price

 Stocks: volatility goes up, as prices go down  Implication for options?  Want to trade volatility? Use the VIX

 Price level at which demand is thought to be strong enough to prevent the price from declining further

 Price level at which selling it thought to be strong enough to prevent the price from rising further

 Resistance becomes support (and vice-versa)

 Buy signal at (3)

 Sell signal at (3)

 Golden Cross: fast moving average crosses slow moving average from below ◦ Buy signal! ◦ Typically comes with high trading volumes

 Dead Cross: fast moving average crosses slow moving average from top ◦ Sell signal! \\

 1 moving average (e.g. 20 days) +/- 1 standard deviation  Bands as support/resistance  Adjusts to market conditions  Contains ~88% of price movements

 Moving Average Convergence Divergence  MACD=12d EMA – 26d EMA, 9d EMA (signal line)  Trend + momentum  Crossover

 Relative Strength Index  0<RSI<100  RSI>70 => overbought (=> sell)  RSI oversold (=> buy)

 Similar to RSI  Used to forsee reversal  20<STO<80

 Rate of Change (ROC)  Commodity Channel Index (CCI)  StochRSI  TIX  Ulitmate Oscillator (ULT)  Aroon […]

 Most reliable trend-reversal pattern ◦ Detectable by volume peaks 1.Rises to a peak and subsequently declines. 2.The price rises above the former peak and again declines. 3.Price rises again, but not to the second peak, and declines once more.

 Ascending  Descending  Use a price range

 The more volume the better ◦ Lower transaction costs (bid-ask spread)

 Investopedia.com ◦ To lookup easy definitions  Bloomberg.com ◦ Click on “Index Chart” -> “Overlay” / “Indicators”  Stockcharts.com ◦ Perform technical analysis easily ◦ Explanation for each indicator ◦ All indicators available  Chartgame.com ◦ Test your knowledge and predictions!

 Always combine many indicators at the same time ◦ Avoid multicollinearity ◦ E.g. Candle sticks + Volatility + Volume + SMA + MACD + RSI  Focus on liquid stocks  Always use it as a complementary tool to fundamental analysis  Now, impress your investment group!

 Next B&R Beurs events: ◦ 13/12 at 9pm: Social Sus&Co ◦ 15/12: Deadline ABN Amro Turbo Assignment ◦ 10/01: New Year’s drink (Champagne!!)