This is an introduction and justification for technical analysis. It begins by examining the history of Charles Dow and the Dow Theory and then considers the origins of patterns in share price charts, trading strategies, the random walk theory and the flaws in that theory, the idea that technical analysis is a social science which studies group investor behaviour and the importance of volume in this form of analysis.
Lecture Modules - Technical
Technical analysis is the study of patterns in share prices and volumes. These lectures begin with the rationale for pattern recognition and proceed to examine various mathematical methods of pattern analysis. The analysis of these patterns is divided into formation analysis, line charts (of which there are many) and finally cycle theory. The use of computers to scan vast quantities of share market data has revolutionised share market timing and to a lesser extent, share selection.
This lecture considers the anatomy of a typical share price cycle. We look at the activities of the smart money and the typical involvement of uninformed investors. The importance of this lecture is to execute a major shift in attitude and approach from becoming interested when a share is rising to becoming interested when it is falling. Finally we consider the effect of a long-term moving average in identifying major turning points on Wall Street and other markets.
In this lecture we look at the candle stick charting method in some detail. We begin with an explanation of the basic candle stick charting form and then move on to consider various candle stick formations and their interpretation. We examine the hammer, shooting star, inverted hammer, hanging man, engulfing patterns, piercing patterns, dark cloud cover, counter attack lines, tweezers, harami, star reversal patterns and many other formations.
This lecture looks at the determination of trendlines, support and resistance levels and the various formations which can be identified using these concepts. We consider corrections in bull trends and rallies in bear trends, the importance of long-term channel lines, broadening formations, double tops and bottoms, "V" tops and bottoms, saucer tops and bottoms, triangles and the head-and-shoulders formation.
This lecture deals with the number of shares which change hands during the trading day, known as the "volume". We distinguish between thinly-traded and free-dealing shares. We consider the importance of volume as an indicator of insider trading. Finally, we look at the various volume indicators and how they are calculated and interpreted. We look at the volume oscillator, the volume oscillator percentage, the on balance volume and the volume price trend.
In this lecture we examine the moving average as an indicator. We go through the methodology of their construction and their strengths and weaknesses as a method for deriving reliable "buy" and "sell" signals. Finally, we consider the effect of different length moving averages, the difficulties of being "whip-lashed" in a sideways market and the usefulness of moving averages in determining bull and bear trends.
This lecture discusses the acceleration and deceleration of share prices and other data streams. The calculation of a simple momentum indicator is explained. This can be used to anticipate changes in the direction of the trend before they occur.
This lecture examines in detail the various weighting and smoothing options available in the Sharetrackin Now software. Moving averages are one of the most useful and important indicators available to the investor and correct use of them is often more effective that other sophisticated indicators.
In this lecture we try to give insight into the movements of markets and how they can be interpreted. Using the live S&P500 feed we examine various formations and the psychology behind them as they unfold in front of us. We conclude with a look at a method for determining whether the market is in a bull or a bear trend.