1. Thought
For
The Day

2. Tell me and I will forget;
Show me and I may remember;
Involve me and I will understand.
Confucius 450 B.C.E.

3. Technical Analysis Review OC Traders Group June 2, 2012 Bob Daniels
All the usual disclaimers apply to this presentation. Besides, I can safely presume my audience knows a lot more, and has a lot more experience, with trading than I do.

4. TA REVIEW • Trend • Support • Resistance
One other key component is price momentum – not being covered now.

5. TA REVIEW
Technical Analysis involves many different indicators.

6. TA REVIEW
The most influential indicator – and perhaps the most important – is derived from price.

7. TA REVIEW
Through price, you can recognize: • trends • resistance levels • support levels • price patterns, and • candle patterns.
Candle – price momentum
By doing this you improve your odds of having a higher probability trade.

8. TA REVIEW
HOW MANY DIFFERENT DIRECTIONS ARE THERE?

9. TA REVIEW HOW MANY DIFFERENT DIRECTIONS ARE THERE? Up a lot
Up a little
Sideways
Down a little
Down a lot

10. TA REVIEW
Defining the trend enables you to follow the prevailing direction of a stock’s price movement.

11. TA REVIEW
Defining the trend enables you to follow the prevailing direction of a stock’s price movement.
Puts the probabilities in your favor.

12. TA REVIEW
A trend is determined by analyzing the price action on a chart.

13. What is the direction of the trend?

14. Lower highs and lower lows
The secret is to work from the right hand of the chart to the left when analyzing hi’s and lo’s. – current to past, so to speak.
Lower highs and lower lows

15. The more points the line touches the better

16. Some times it’s helpful to draw a channel

17. t
So, the trend is down….
But is it really?

18. t
6 months, daily

19. t
1 year, daily

20. A lot of “noise” with daily
1 year, daily

21. Weekly is better…if going out 2-5 years, switch to monthly
1 year wkly

22. 1 year wkly 1 year wkly 23.6% Fib 38.2% Fib 50.0% Fib 61.8% Fib
Weekly is better…if going out 2-5 years, switch to monthly
61.8% Fib
78.6% Fib
1 year wkly
1 year wkly

23. 1 year wkly 6 month daily 23.6% Fib 38.2% Fib 50.0% Fib 61.8% Fib
Weekly is better…if going out 2-5 years, switch to monthly
50.0% Fib
1 year wkly
61.8% Fib
6 month daily

24. TA REVIEW
So here is the point of the chart/trend line examples:

25. You have to define what your time line is for your trade.
TA REVIEW
So here is the point of the chart/trend line examples:
You have to define what your time line is for your trade.

26. TA REVIEW • Short term – days to weeks
• Intermediate term – weeks to months
• Long term – months to one year (or more)
Short term – 2 days to 4 wks
Intermediate term – 4 wks to 1 year
Long term – one year on

27. TA REVIEW
What constitutes a Support & Resistance level?

28. TA REVIEW What constitutes a Support & Resistance level?
Price levels that are created by the buying (demand) and selling (supply) pressures

29. TA REVIEW These levels are not absolute.
Think of them as more of a price zone.

30. Horizontal levels show critical trading points
Old Resistance becomes New Support – and visa versa
Horizontal levels show critical trading points
6 months, daily

31. Can be used to estimate price target – IF –
Resistance is broken
6 months, daily

32. Does adding a trend line help?
QUESTION: Does a support level always have to be horizontal?
Does adding a trend line help?
6 months, daily

33. TA REVIEW
Question: Does the support level always have to be horizontal to be valid?

34. Support level is a not horizontal
QUESTION: Does a support level always have to be horizontal?
Chart is EC – Ecopetrol S.A. AmericanDepositoryShares. Went on up to the level in 4.5 months
Support level is a not horizontal
This is a typical price pattern – double bottom

35. TA REVIEW
Fibonacci tool – can help in identifying hidden price support levels…

36. TA REVIEW
Fibonacci tool – can help in identifying hidden price support levels…
…and potential resistance levels, and even targets.

37. Imagine this is the current day
How far could the price retrace?
38.2%
50.0%
61.8%
Dow theory: retracements like at one-third, one-half, or two thirds…close to Fibonacci’s 38%, 50% and 62%

38. S R
38.2%
50.0%
61.8%
Dow theory: retracements like at one-third, one-half, or two thirds…close to Fibonacci’s 38%, 50% and 62% – To see support, draw from low to high

39. Fibonacci used to evaluate potential resistance
To see resistance, draw from high to low
Lets’ blow this up a little more.
Fibonacci used to evaluate potential resistance

40. S R
To see resistance, draw from high to low. ….didn’t “stop” at high point, so I could read the % and price data.
Most valuable in the short term technique.
OBVIOUSLY, you can do just the opposite for a bullish target on a pull back/correction

41. Drawing tools in TOS platform

42. Drawing tools in TOS platform

43. TA REVIEW
If there’s time, let’s do Trend, Support & Resistance analysis on a couple of stocks from the audience.

44. In closing, here’s a few points to consider
TA REVIEW
In closing, here’s a few points to consider
when doing technical analysis

45. Decision making matrix

46. Decision making matrix
• Trend – “it’s your friend”
50% weight

47. Decision making matrix
• Trend – “it’s your friend”
50% weight
• Support & Resistance
30% weight

48. Decision making matrix
• Trend – “it’s your friend”
50% weight
• Support & Resistance
30% weight
• Momentum (candles) 15% weight
Candles are real time momentum indicators – not lagging. Shows what is going on today, now.

49. Decision making matrix
• Trend – “it’s your friend”
50% weight
• Support & Resistance
30% weight
• Momentum (candles) 15% weight
• Volume 5% weight

50. – WRITE THIS DOWN –

51. – WRITE THIS DOWN –
I look at the chart and I trade what I see…

52. – WRITE THIS DOWN –
I look at the chart and I trade what I see…
…not what I think!

53. – WRITE THIS DOWN –
I look at the chart and I trade what I see…
…not what I think!
…not what I feel!

54. – WRITE THIS DOWN –
I look at the chart and I trade what I see…
…not what I think!
…not what I feel!
…not what I image I know about the future!

55. TA REVIEW
It’s always a challenge to present meaningful information to those in the room who have way more experience than I do.

56. TA REVIEW For those of you who stayed awake – I thank you.
For those of you who fell asleep – I don’t blame you.