written by reader Technical Analysis classroom

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
Alan Harris
5 years ago

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
5 years ago

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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πŸ‘ 1301
Alan Harris
Alan Harris
5 years ago
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
Alan Harris
5 years ago
Reply to  Alan Harris

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

Lulu
5 years ago
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
5 years ago
Reply to  Lulu

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

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Lulu
5 years ago
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,

πŸ‘ 1301
Alan Harris
Alan Harris
5 years ago
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
Alan Harris
5 years ago
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
Alan Harris
5 years ago
Reply to  Lulu

SP= share price

Alan Harris
Alan Harris
5 years ago
Reply to  Lulu

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

Lulu
5 years ago
Reply to  Alan Harris

Over what number of days…..?

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Alan Harris
Alan Harris
5 years ago
Reply to  Lulu

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

hendrixnuzzles
5 years ago
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.

πŸ‘ 9959
biotechlong (btl)
5 years ago

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

πŸ‘ 2793
Lulu
5 years ago

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!

πŸ‘ 1301
Lulu
5 years ago

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

πŸ‘ 1301
biggdan
biggdan
5 years ago