Outline. Intro Candlestick Charting Support/Resistance, Trends, Retracements Famous Patterns Cup and Handle Head and Shoulders Moving Averages SMA, EMA Bollinger Bands MACD Current Outlook. What is Technical Analysis?.
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“The study of market action, primarily through the use of charts, for the purpose of forecasting future price trends”
- John J. Murphy
OHLC (American Candlestick)
Dark Cloud Cover
Note: Once a trendline is broken it will assume
the opposite role (support or resistance) of that
which it had before.
The two most popular
Forms of moving averages
Are the Simple and
(SMA and EMA).
An SMA sums the
closing prices of a
given amount of
periods (such as
50 days in this graph)
and divides by that
number of periods.
An EMA smoothes
the curve, giving
greater weight to the
most recent data
The most used
Bollinger Bands are made by taking a MA (the 20 SMA is recommended by John Bollinger and the most popular) and placing lines 2 standard deviations above and below the MA.
Whenever a band is touched, it serves as an indicator that the security is overextended and will reverse.
The Moving Average Convergence/Divergence indicator uses two MAs for a security, typically the 12 and 26 period EMAs like in this chart. The difference found from subtracting the 26 EMA from the 12 EMA is used to form the MACD line (Red). The trigger line (Blue) is a 9 period EMA of the previously calculated MACD line.
When the MACD line crosses above the trigger line from below, it generates a buy signal. When the MACD line crosses below the trigger line from above, it generates a sell signal.
A histogram is often including on MACD plots to make it easier to see by how much the two lines are diverging and when convergence takes place.