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written by reader Technical Analysis classroom

By , May 7, 2014

This thread came about due to a request for more technical analysis info. Its to be hoped that even old dogs can learn new tricks. Certainly they can teach us puppies how to yap!
Enjoy.

This is a discussion topic or guest posting submitted by a Stock Gumshoe reader. The content has not been edited or reviewed by Stock Gumshoe, and any opinions expressed are those of the author alone.

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Alan Harris
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Alan Harris
November 14, 2014 4:23 am

Opps….missed this post till now. Yes Im a great believer that the MA’s are an excellent indicator of general market sentiment. So v simply, I buy when the price crosses up above the MA and sell when it crosses below. Im sure there are fancier systems, but its a v simplistic strategy thats served me well.
Trust me, Im not just playing dumb…..Im the real deal !

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Lulu
November 14, 2014 11:34 am

Good morning Alan,
Which particular MAs have been better indicators for med to long term trades for you? Im watching GILD and CELG trying to decide where a good entry point might be. Im neither long nor short. Stock or option. Thanks for sharing…..Lulu

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Alan Harris
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Alan Harris
November 14, 2014 1:40 pm
Reply to  Lulu

I use three. 10+20 for trading. 20+50 for investing. The shorter of the two gives you a clue to whats developing. The longer tells you whats already mostly happened. By watching the two converge/diverge (I call it balooning) you get a good idea of the market sentiment. Its a lot like MACD….which I also add to the mix at standard settings.

Try this. Set up a yahoo 1 yr graph with 10 (coloured blue) +20 (coloured red) mA. You can use ANY ticker, it really doesnt matter. Place a sheet of paper over your screen to blank out the graph. Now slide the paper away bit by bit to the right till the 10/20 converge. If the SP crosses down thru that MA cross……slide the paper a bit more and see if it would have been a good time to sell???? Ditto when the 10/20 converge with the sp rising above the cross.
Let me know. xx

Alan Harris
Guest
Alan Harris
November 14, 2014 1:43 pm
Reply to  Alan Harris

Wow I made 1k Thumbs….Im humbled guys.

Lulu
November 14, 2014 2:12 pm
Reply to  Alan Harris

Thank you Alan…….XO ( really a newbie SP ? )
GILD so……
Seeing the 10 SMA cross over downward thru the 20 earlier today, and the spread seems to be widening. Id sell if I was long and a day trader?
CELG so….
Looks like 10 is about to cross over the 20, a sell signal as well?
Or
Sit sideline/ hold if in correct position with trend) until see a cross over move one way or the other again?
Congrats 1K – smiles

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Lulu
November 14, 2014 2:14 pm
Reply to  Lulu

Either way, when red and blue converge/diverge, its purple my favourite colour!

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Lulu
November 14, 2014 2:46 pm
Reply to  Lulu

Alan, did you just spank me? I will do my very best to post in the correct thread. I have simply been ‘replying’ but I understand. Oooops, sorry,

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Alan Harris
Guest
Alan Harris
November 14, 2014 3:57 pm
Reply to  Lulu

Its a learning curve that everyone has to go thru and I just seem to be Mr Nasty. But unless we have some order, we’ll just end up in chaos.

Alan Harris
Guest
Alan Harris
November 14, 2014 4:09 pm
Reply to  Lulu

You get the idea. Best to do the paper over the screen game for the graph of the last 12months (Its difficult to believe whats being foretold about the future unless you back test the strategy to see it works in the past). I cant find a SINGLE example where the system failed in the past. Thats why I said any ticker will do. The system ‘seems’ to work irrespective. But it only works long term…..day trading still works, but the market can turn round in seconds, so you can be wrong sided very quickly.

Re sit sideline: Thats a dangerous game. When is enough enough? There again, you have to factor trading in/out costs. Its understanding the subleties of any game that makes the expert an expert.

Alan Harris
Guest
Alan Harris
November 14, 2014 6:17 pm
Reply to  Lulu

SP= share price

Alan Harris
Guest
Alan Harris
November 14, 2014 6:27 pm
Reply to  Lulu

Have a look tomorrow and tell me if CELG and GILD were a sell. The system is rarely (never) wrong.

Lulu
November 14, 2014 2:54 pm
Reply to  Alan Harris

Over what number of days…..?

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Alan Harris
Guest
Alan Harris
November 14, 2014 6:16 pm
Reply to  Lulu

What ‘over what number of days’? I dont understand the question.

hendrixnuzzles
April 7, 2015 2:02 pm
Reply to  Alan Harris

Hi Alan,

I’m late to the thread but wanted to mention a few things on technical analysis and a question that was not answered clearly up above on MAs and EMAs. I imagine you know this but other readers may benefit.

The exponential moving average applies higher weight to more recent prices, so it is more sensitive to recent moves depending on the number of days and the factor attached to weighting.

In todays world with the ability to custom design all manner of trading signals,
I tend to set my day parameters on MA and EMA just a little shorter than the default settings. If the default is 50 days I’ll use 35 or 40. This is because ten zillion people are using the default settings and reacting the same way. Since I’m not a day trader, if I’m a little early or late, it’s not life threatening.

I like to buy cheap in sectors I believe in. So I won’t trade or invest purely on technicals, I have to like the sector and the company and look at fundamental analysis first.

Someone asked why bother with technicals. My answer is, because they record real life results of buyer sentiment, and the actual decisions of all the people in the market.
The interpretation of this data is of necessity somewhat fuzzy. Our interpretations can be wrong. But the charts are what has actually happened, and sometimes it is helpful to look at these, and sometimes we can make valid interpretations of the thinking of “the market” by looking at what decisions they have made. It all comes out in the data.

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biotechlong (btl)
November 14, 2014 7:16 pm

Food for thought for chartists plotting ahead 4-to-6 weeks: will history repeat itself?
http://finance.yahoo.com/blogs/talking-numbers/the-market-has-done-this-just-4-times-in-the-last-20-years-232157220.html

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Lulu
November 14, 2014 9:57 pm

Good evening ‘boys’..
Lawrence, interesting video. Thats the pull back Im hoping for! Now have to do the research on what happened after those times. Thanks for posting that.
Alan: Already answered, thank you. yes I agree to the statements u made above concerning fees, and missing out. SP is what I thought, one never knows with you schmardt boys tho, thot I better be sure. I will re-chart tomorrow when the brain is fresh, and report. Thank you for yr patience ( not nasty at all). I understand.
Its firkin -10 here in Beautiful Okanagan Valley BC, Global warming my butt!

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Lulu
November 14, 2014 11:05 pm

Alan
Ill look again in the am but since I u may be 3 hours ahead of me time wise ….
here is what I see.
CELG was not a sell
GILD was a sell, Nov 13, 2014
Lulu

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biggdan
Member
biggdan
November 18, 2014 2:24 am

To answer from the Payola thread about a “Shooting Star” pattern, I don’t know much more than anyone else but noted several posts on the ESPR Stocktwits page pointing out that ESPR had one today. Here is the explanation of a Shooting Star: http://en.m.wikipedia.org/wiki/Shooting_star_(candlestick_pattern)

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Mark2m
Member
Mark2m
November 22, 2014 1:35 pm

I just would like to throw my two cents referencing technical analysis. I have been a member of stockgumshoe for many years, but I have never been involved in any of the discussions. Many years ago I joined a trading group with the sole purpose of learning and continue education in technical analysis. We were quite fortunate in those years that due to the size of the group, we managed to get the best traders in the country and off course every platform developer, chartist etc.. . The traders purpose was to drum up business for their $1K + seminars over a weekend at the Hyatt. Especially helpful was the location in Denver, Colorado which meant a vacation/business trip for them. To provide interest we always were privy to 3-4 hours of mini seminar, from the traders, chartists, platform developers and anyone else in the business.
These seminars were concentrated on futures, options, equities, with strictly technical analysis. Prior to joining this club, I also read the usual, and later found that most of the authors I read sell books and have never traded. Most of these books concentrate on the usual buzz words of Stochastics, EMA, VWP, ADX, linear progressions, Bollinger, RS, MACD, need I say more?. Of course your typical retail brokerage will include all the previous buzz words and unfortunately, most traders and investors accumulate indicators and studies to find the Holy Grail.
The bottom line is throughout all these meetings the same message came thru, from the successful traders, not those that sell books.
The recurrent theme with most of them is to keep it simple, in today’s world you can have your charts looking like Christmas tree ornaments, every conceivable addition which becomes more of a burden and a method of interpretation that only a Phd or nine year old child could understand. (only being facetious).
To simplify matters this is what I have learned from many seminars, of note I would not recommend full blown seminars since your retention rate is minimal, even with the T-shirt, hat, workbook, DVD, etc.
This is my recommendation, plus the commonality of information from these traders.
1- Get a plan (which means money management, strict entry and exits, determining are you a trader or investor, are you trading for scalping, swing trader, etc.. I think you get the jest.) other factors are beyond the scope of this email.
2- Learn Candlesticks
3- Indicators, EMA or MA ,Volume , Price, Money Stream, in some cases stochastics and macd although these are lagging indicators.
4- Learn the makeup of the charts patterns, head and shoulders, triangles, flags, etc..
5- Again Learn Candlesticks ( I cannot over emphasize this)and study Volume and Price.
6- Learn ABC ups and ABC Downs in conjuction with Fibonacci.
Once you learn those basics than I would delve into the more esoteric studies if that is of interest to you. Remember, keep it simple there is no reason to have excess brain damage.

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hipockets
November 22, 2014 2:18 pm
Reply to  Mark2m

Thank you for your post, Mark. (I wonder: Why are comments called a “post”?)

I’m just starting to make some headway in TA, and I have to agree — keep it simple until you have experience with the simple techniques (such as moving average cross overs, chart patterns, and support and resistance points.) I have found that the basics of the simple techniques are easy to understand – but not the nuances.

I chart the stocks in which I am interested daily. My method is to download the prices and volumes in one batch, and then manually update the individual charts. It’s a time consuming process for about 50 stocks. My questions to all of the Irregulars – what process(es) do you use, especially for a multitude of stocks? What method do you use to screen stocks, looking for investables? [ Yes, spll checker, I know . . . “investables” is not a word. It is now! 🙂 ]

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arch1
November 22, 2014 4:35 pm
Reply to  hipockets

Just a quick flyby,,, Something written for all was often fastened on a light post etc. for whole village to read,,hence post= public notice. Investable and investible are both equally good words with slight nuances of meaning,,,If you can invest in a thing it is investable,,things you are investing in are investibles,,,,clear as mud? Spell checker is a dolt.

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Mark2m
Member
Mark2m
November 22, 2014 3:02 pm

There are multiple free sources for charts on the web, although bottom line having experienced quite a few platforms including Trade Station, E Signal, Ensign, etc.. The best program for me is Worden Telechart. There is ton’s of information, ton’s of support, plus you have the option of a real time system or with 20 minute delay. The original program TC 2000K was the best/cheapest program and I have used it for 12+ years. The learning curve is a bit steep, but well worth the opportunity to navigate. Also their latest program which is also separate is very good and both at $29 per month. Of note if you want real time, instead of 20 minute delay (sometimes no delay) than I would recommend their platinum at $100 per month. The benefits are incredible, and you can sort for fundamentals, volume, anything you so desire in real time. The only drawback is since it is a visual item for me , yes I am alway’s looking at patterns in a 3 minute chart, than I scan and work with Telechart and put up multiple charts 15-20 of interest with my brokerage. My main brokerage is IB, and their charts are worthless, so I have a small brokerage where I can put up multiple charts.
The only drawback to TC is their Fibs which are hard to interpret so I have to do the analysis on my own. I believe TC has a 30 day free period, and does include simple Algebraic functions to create your own Personal Criteria Formula’s. For instance on my scans I have Breaking out of a trading range, Close up 2% with volume 2X 10 day moving average. Also the beauty of that program is the ability to surf the web or stock gumshoe, take information and add to the TC program .

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hipockets
November 23, 2014 12:19 am
Reply to  Mark2m

Thanks, Mark. That’s just the type of informtion I was looking for.

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Alan Harris
Guest
Alan Harris
November 27, 2014 2:42 pm

All (except KSS!!): Theres a new post on Jingle Bells. I urge you to read it v soon. http://www.stockgumshoe.com/2014/11/microblog-jingle-bells/#comment-3379639

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Alan Harris
Guest
Alan Harris
December 9, 2014 5:46 am

Theirre: Are you here?

SoGiAm
December 9, 2014 6:19 am

Gummies I don’t want to be the only bear in the room but this revelent and timely imho:
http://www.smallcapnetwork.com/The-Market-Just-Ran-Out-of-Gas-or-More-Specifically-Ran-Out-of-Buyers/s/article/view/p/mid/7/id/1716/
I think that most of us are in the same boat looking for dry gun powder and safest liquidity to temporarily exit to maximize profits now. Watch the markets carefully especially today! Best-Ben

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Alan Harris
Guest
Alan Harris
December 10, 2014 4:55 pm

All: If anyone wants to send a jinglebells greeting to KSS…heres the place http://www.stockgumshoe.com/2014/12/microblog-happy-christmas-dr-kss-from-all-us-gummies/

Lulu
January 9, 2015 2:41 pm

Useful links:
Understanding Analysts’ Recommendations. FINRA’s guide provides some great information about how to read analysts’ ratings systems and how analysts’ recommendations should and should not factor into your investment decisions.
Here are some highlights from their free guide:
– Ratings tend to be inflated. Brokerage firms and investment research firms rarely ever issue “sell” and “underperform” ratings. “Buy” ratings are really “hold” ratings and “hold” ratings are really “sell” ratings.
– Companies use very different ratings systems. One firm’s “buy” rating may be its top rating; however, another firm might have one or two ratings above its “buy rating.”
– Not all ratings companies’ recommendations carry equal weight in the eyes of the market. Some equities research firms, like Goldman Sachs and Merrill Lynch, have much more influence on the movement of stock prices than smaller, boutique firms.
– Firms may not be acting in your best interest. Brokerages and research houses offer ratings primarily for the benefit of large, institutional investors, not for retail investors. Firms may also have conflicts of interest relating to the companies that they rate. For example, a firm that is underwriting an IPO is very unlikely to have anything negative to say about the stock once it comes out.
Click Here to Get Your Copy of FINRA’s Guide to Understanding Analysts’ Recommendations (FREE)
cheers Lulu

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Mark2m
Member
Mark2m
April 6, 2015 1:14 pm

Has this post moved, or is this dormant since no one has any interest in TA ?

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hendrixnuzzles
April 7, 2015 2:09 pm

Recently here, new subscriber.

I use candlesticks and relatively straight forward basic technical indicators…EMA, volume,
MACD over different time frames. Do not have the temperment for highly complicated technicals.

What’s on your mind ?

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Mark
Guest
Mark
April 7, 2015 2:30 pm

I have written previously Nov 22,2014 about my methods to keep it simple. I recently have come across Ichimoku Cloud while looking for a better means of trading Forex. It turns out that with equities and the scanning capabilities of my program, Ichimoku is excellent in determining Bullish/Bearish/or neutral. I wanted some insight and communicate with others that are familiar with Ichimoku. Since a simple scan seems more efficacious utilizing the cloud vs Fibonacci.

hendrixnuzzles
April 14, 2015 3:31 am

I’m not the right guy for you, never heard of Ichimoku. Know a little on Fibonacci but I find as a practical matter I am not disciplined enough to apply it. Best wishes

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