Introduction to Technical
Analysis
BY EVAN FRISCIA AND PARTH THAKKAR
What is Technical Analysis
 Technical analysis is a security analysis discipline for
forecasting the direction of prices through the study
of past market data, primarily price and volume.
 Technical Analysts look at the CHARTS to make a
prediction about the FUTURE!
Tenets of Technical Analysis
 Market Action Discounts
Everything
 Prices Move in Trends
 Trends (History) tend to Repeat
themselves
Lengths of Trends
 Long term
 9 months or longer
 Intermediary
 3 months to a 9 months, but no
longer than a year
 Short term
 Days to weeks, but no longer
than 3 months
Chart Types
 Bar Chart
 Line Chart
 Japanese Candle Chart
Bar Chart
Line Chart
Candlestick Chart
Candlestick Chart
Directions a Trend can take
 Up Trend
 Down Trend
 Horizontal Trend/Sideways or No Trend
Uptrend
 A series of higher peaks and higher troughs on a
price chart.
Down Trend
 A series of lower peaks and lower troughs on the
price chart
Horizontal Trend/Sideways or No Trend
 A series of relatively similar peaks and troughs.
Support
 Support is an imaginary price level that is difficult
for a stock to move below because there are so many
investors willing to buy at that level. It may be a
horizontal or diagonal price level.
Support
Resistance
 Resistance is the opposite of support. It is an
imaginary price level that is difficult for a stock to
penetrate on the upside. It may be either a horizontal
or diagonal price level. Resistance is created when
the bears gain enough momentum to overwhelm the
bulls and stop or reverse upward movement.
Resistance
Channels
How do we Conduct Technical Analysis?
Studies!
A Technical Study is a function derived from
the stock price, or an underlying factor that
determines the stock price.
When graphed, these functions allow give us
the information needed to form a Bullish or
Bearish opinion towards a stock!
More on Technical Studies
Oscillators
Overlays
Indicators
Overlays
Simple &
Exponential
Moving
Averages
Linear
Regression
Curve &
Trendline
Bollinger
Bands
Fibonacci
Retracements
Simple Moving Averages
The average stock price over a certain period
of time.
Exponential Moving Averages
A type of moving average that is similar to a simple
moving average, except that more weight is given to
the latest data.
This type of moving average reacts faster to recent
price changes than a simple moving average.
Linear Regressions
Bollinger Bands
Fibonacci Retracements
Indicators
Moving Average Convergence
Divergence (MACD)
Relative Strength (RSI)
MACD
An indicator frequently used in technical analysis
showing the average value of a security's price over a
set period. Moving averages are generally used to
measure momentum and define areas of possible
support and resistance.
MACD Application
 Observe the Crossovers
MACD Application
 Observe the Crossovers
MACD Application
 Observe the Crossovers
Relative Strength Indicator
 A technical momentum indicator that compares the
magnitude of recent gains to recent losses in an
attempt to determine overbought and oversold
conditions of an asset. It is calculated using the
following formula:
 RSI = 100 - 100/(1 + RS*)
 *Where RS = Average of x days' up closes / Average of
x days' down closes
Relative Strength Indicator Application
 Observe when the RS crosses above the 70 line and
below the 30 line
Relative Strength Indicator Application
 Observe when the RS crosses above the 70 line and
below the 30 line
Relative Strength Indicator Application
 Observe when the RS crosses above the 70 line and
below the 30 line
Oscillators
Stochastic Oscillator
Projection Oscillator
Stochastic Oscillator
 A technical momentum indicator
that compares a security's closing
price to its price range over a given
time period
 The theory behind this indicator is
that in an upward-trending market,
prices tend to close near their high,
and during a downward-trending
market, prices tend to close near
their low.
Stochastic Oscillator Application
 Observe when the stochastic lines cross the bounding
lines (just like RSI)
Stochastic Oscillator Application
 Observe when the stochastic lines cross the bounding
lines (just like RSI)
Stochastic Oscillator Application
 Observe when the stochastic lines cross the bounding
lines (just like RSI)
Projection Oscillator
 The Projection Oscillator study shows the
relationship between the current price and its
minimum and maximum prices over time. Unlike the
Stochastic Oscillator, here the minimum and
maximum prices are adjusted up or down by the
slope of the price's regression line.
Projection Oscillator
Questions