Stock Market Charts
(they are easier than you think)
Michael Kahn, CMT
February 2014
Who am I?
Chartered Market Technician (CMT)

trained and certified in market analysis
Columnist – Barron's Online
Newsletter Editor – Quick Takes Pro
Former charting software designer
…and beaten up enough by the markets
What do I do?
Help investors assess risk and reward.
no crystal ball
no tea leaves
no chicken entrails
Agenda
Just
the basics
When
the market is moving - trend
When the market is resting - pattern
Other important stuff – volume, sentiment, time
Possible Goals
Get
the feel for the market (sentiment, momentum)
What
does the market say?
 Bullish?
 Manic?
Does
 Or
the chart agree with the fundamentals?
at least not disagree?
Intangibles
 The
Fed
 Gurus
 “Risk on”
Possible Goals
What
part of the market is best? (relatives)
Size
 big
or small
Sectors
 Defensive
or aggressive?
 Traditional leaders or not?
Bonds?
Gold?
 Maybe
it is time to diversify asset classes
Technical analysis is a windsock,
not a crystal ball.
- Carl Swenlin
People

People tend to do similar things when
faced with similar situations.

People’s behavior is the basis for chart
patterns.

The chart is the chart is the chart.
(no analyst guesses and gov’t revisions)
What is Fundamental Analysis?
A method of evaluating a security that
entails attempting to measure its intrinsic
value by examining related economic,
financial and other qualitative and
quantitative factors.
-- from the CFA Institute website
(and Investopedia)
What is Technical Analysis?
A method of evaluating securities by
analyzing statistics generated by market
activity.
-- from the Market Technicians Association website
What do they have in common?
Neither one can handle conditions that
cause the market to be restricted,
manipulated and otherwise not free.



Fraud
Mergers
Quantitative Easing
Dated humor
Save us Obi Ben Bernanke
(sorry Janet)
How I cope
I will make you a chart
you cannot refuse
The Godfather of
Technical Analysis
Price Rules!

Price - The stuff you put in the bank
In price, there is knowledge.
Alan Shaw, CMT, Chief Technical Analyst.
Smith Barney, retired
Ralph Acampora, CMT, Chief Technical
Analyst, Prudential Securities, retired
Volume is next

Volume – How much money is moving
In volume, there is truth.
Dennis Jarrett, Jarrett Research
Momentum

Momentum – How fast it got there
Which speed is profitable and most sustainable?
Structure (Patterns)

Structure – Trends and Patterns
Sentiment (Fear and Greed)

Sentiment
I feel good!
Tesla Oct 2013
Whatever
She’s gonna eat us!
Electronic Arts Jul 2012
We got game!





Price
Volume
Momentum
Structure
Sentiment
Looks like a cheaper place to buy
How many times have you thought, “My stock is on sale, let’s buy!”
Looks like a cheaper place to buy
Same price, different trend……could the same be on tap for 2014?
The trend said it all
It works in both directions.
What does the market have to say?
The trend said it all
It works in long-term time frames at major turning points, too.
Does something look right here?
The Big Picture a few years ago.
And today…
Log scales
Leadership
Changing? Barron’s Online November
Leadership
Changing again?
Leadership
Leadership
Sentiment
It’s the end of the world as we
know it. – R.E.M.
Sentiment

Are you the last to be invited to the party?





social media stocks last year? biotech now?
Is your hair stylist giving you tips?
Are they ridiculing the bearish
commentators?
Gold is going to $800!!!!!!
Or for early 2009, were doom and gloom
forever?
Quiz Time

Question - What does it mean when the
neighborhood tavern has CNBC on the
television and not ESPN?
Quiz Time


Question - What does it mean when the
neighborhood tavern has CNBC on the
television and not ESPN?
Answer - the market is not at a bottom
Quiz Time

Question - What does it mean when the
banks are offering new interest only
mortgages?
Quiz Time


Question - What does it mean when the
banks are offering new interest only
mortgages?
Answer – the real estate market is not at
a bottom……(sound familiar?)
Quiz Time

Question - What does it mean when
there are whole aisles in the supermarket
dedicated to the Atkins diet?
Quiz Time


Question - What does it mean when
there are whole aisles in the supermarket
dedicated to the Atkins diet?
Answer – time to buy bread and cereal
stocks
Quiz Time

Question - What does it mean when
everyone is talking about the Great
Depression and Financial Armageddon?
Quiz Time
Question - What does it mean when
everyone is talking about the Great
Depression and Financial Armageddon?
Answer – It’s March 2009!



The AAII survey showed 70.27% bears on
March 5. Unprecedented. And it was not the
only one.
Quiz Time

Question – What does it mean when,
after a five-year bull market, mutual fund
company advertisements show regular
people saying “we’ve got to get back
into the market?”
Quiz Time


Question – What does it mean when,
after a five-year bull market, mutual fund
company advertisements show regular
people saying “we’ve got to get back
into the market?
Somebody is about to get burned again.
Up is good, down is bad.
Nice long-term base
What do you see?
How about this?
or this?
There was no need to lose it all.
There was no need to lose it all.
real trading!
If you don’t see anything, it’s not there.
If you don’t see anything, it’s not there.
Get it?
Up is good, down is bad.
Up is good, down is bad.
Up is good, down is bad.
The Real World Right Now
The Real World Right Now
Double top, bear reversal
Up is good,
Down is Bad
The real reason we do this:
To make the buy, sell or hold
decision.
Not to predict the future
The Big Question
Does market analysis work anymore?
Yes! (mostly)
The Real World Right Now
Profitable Trading. Written up on the breakout. Failed this week
The Real World Right Now
Does Mikey like it?
The Real World Right Now
Does Mikey like it?
The Real World Right Now
Does Mikey like it?
The Real World Right Now
Does Mikey like it?
The Real World Right Now
The Real World Right Now
Mmmm, dividends
The Real World Right Now
End with some laughs
An ode to
Quantitative Easing
Ben Lightyear.
QE to infinity and beyond!
Have another shot
of Bernanke juice.
Ben Bernanke as a child
Quick Takes Pro
Getting Technical
Twitter
www.QuickTakesPro.com
www.Barrons.com
@mnkahn
Books:
Beginner’s Guide to Charting Financial Markets
Copies available right here
Technical Analysis: Plain and Simple – 3nd edition
Real World Technical Analysis
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