Sign In
Sign Up
Jompesh
Home
Video Tutorials
Class Notes
Handout
Group Study
Discussion
Books
Question
Foto Newz
Showcase
Audio
Polls
Games
Offer
Events
Recent Documents
Secondary Com..
0 comments | 0 likes
Mathmatics fo..
0 comments | 0 likes
Change life w..
0 comments | 0 likes
admin
admin's Documents
Search Documents
Share Technical Analysis training
Created by
admin
November 2, 2010
- Category:
Share Market
- Tags:
#DSE
#CSE
#TA
#Technical Analysis
0 comments, 342 views, 1 like
This slide will provide the technical analysis in easiest ways.
TECHNICAL ANALYSIS www.jompesh.com Questions y How does technical analysis differ from fundamental analysis? y What are the underlying assumptions of technical analysis? y What major assumption causes a difference between technical analysis and the efficient market hypothesis? y What are the major advantages of technical analysis compared to fundamental analysis? www.jompesh.com Questions y What are the major challenges to technical analysis and its rules? y What is the logic for the major contrary-opinion rules used by technicians? y What are some of the significant rules used by technicians who want to follow the smart money, and what is the logic of those rules? y What are the breadth of market measures and what are they intended to indicate? www.jompesh.com Questions y What are the types of price movements postulated in the Dow Theory, and how are they used by a technician? y Why is the volume of trading important and how do technicians it in their analysis? y What are support and resistance levels, when do they occur, and how are they used by technicians? www.jompesh.com Questions y What is the purpose of moving average lines and how do technicians use them to detect major changes in trends? y What is the rationale behind the relative-strength line for an industry or a stock? y How are bar charts different from point-and-figure charts? y What are some uses of technical analysis in foreign security markets? y How is technical analysis used when analyzing bond markets? www.jompesh.com Technical Analysis vs. Fundamental Analysis y Technical analysis involves the development of trading rules based on past price and volume data for individual stocks and the overall stock market. y Fundamental analysis involves economic, industry, and company analysis that lead to valuation estimates for companies, which can then be compared to market prices to aid in investment decisions. www.jompesh.com Technical Analysis y To non-believers, technical analysis can sound like a lot of focus-pocus! www.jompesh.com Underlying Assumptions of Technical Analysis y Trading via technical analysis involve a number of assumptions about markets y The market value of any good or service is determined solely by the interaction of supply and demand y Supply and demand are governed by numerous factors, both rational and irrational www.jompesh.com Underlying Assumptions of Technical Analysis y Technical analysis assumptions: y Disregarding minor fluctuations, the prices for individual securities and the overall value of the market tend to move in trends, which persist for appreciable lengths of time y Prevailing trends change in reaction to shifts in supply and demand relationships and these shifts can be detected in the action of the market www.jompesh.com Advantages of Technical Analysis y Unlike fundamental analysis, technical analysis is not heavily dependent on financial accounting statements y Problems with accounting statements: y Lack information needed by security analysts y GAAP allows firms to select reporting procedures, resulting in difficulty comparing statements between firms y Many psychological and other non-quantifiable factors do not show up in financial statements www.jompesh.com Advantages of Technical Analysis y Fundamental analyst must process new information and quickly determine a new intrinsic value, but technical analyst merely has to recognize a movement to a new equilibrium y Technicians trade when a move to a new equilibrium is underway but a fundamental analyst finds undervalued securities that may not adjust to correct prices as quickly www.jompesh.com Challenges to Technical Analysis y Challenges to basic assumptions y Empirical tests of Efficient Market Hypothesis (EMH) show that prices do not move in trends y Challenges to technical trading rules y Rules that worked in the past may not be repeated y Patterns may become self-fulfilling prophecies y A successful rule will gain followers and become less successful y Rules all require subjective judgement www.jompesh.com Technical Trading Rules and Indicators y Stock cycles typically go through a peak and trough y For instance, consider the following stock price graph over time, and then consider how a technical analyst would interpret the chart www.jompesh.com Typical Stock Market Cycle Stock Price www.jompesh.com Typical Stock Market Cycle Stock Price Declining Trend Channel Peak Flat Trend Channel Sell Point Rising Trend Channel Declining Buy Point Trend Trough www.jompesh.com Buy Point Trough Channel Contrary-Opinion Rules y Many analysts rely on rules developed from the premise that the majority of investors are wrong as the market approaches peaks and troughs y Technicians try to determine whether investors are strongly bullish or bearish and then trade in the opposite direction y These positions have various indicators www.jompesh.com Contrary-Opinion Rules y Mutual fund cash positions y Buy when the mutual fund cash position is high, sell when low y Assumes that mutual fund managers are poor judges of market turning points y Credit balances in brokerage accounts y Buy when credit balances increase, sell when credit balances fall y Investment advisory opinions y Buy when advisory firms become more bearish www.jompesh.com Contrary-Opinion Rules y OTC versus NYSE volume y If OTC volume increases relative to NYSE volume, sell since speculation increases at peaks y Chicago Board Options Exchange (CBOE) put/call ratio y Buy when option purchasers are bearish (when the put/call ratio increases) y Futures traders bullish on stock index futures y Sell when speculators are bullish www.jompesh.com Follow the Smart Money y While contrary-opinion rules assume that most investors are not smart, these indicators seek to follow the path of sophisticated, and assumed smart, investors y The Barron s Confidence Index y Measures the yield spread between high-grade bonds and a large cross section of bonds y Declining (increasing) yield spreads increase (decrease) this index, and are a bullish (bearish) indicator www.jompesh.com Follow the Smart Money y T-Bill - Eurodollar yield spread y Decreases in this spread indicates greater confidence, and is a bullish indicator y Debit balances in brokerage accounts y Such balances represent buying on margin, which is assumed to be done by largely sophisticated investors y Increases are a bullish signal www.jompesh.com Other Market Indicators These indicators are meant to gauge overall market sentiment y Breadth of market y Advance-decline (number of advancing minus the number of declining issues) y Short interest y Cumulative number of shares sold short in uncovered positions y Actually a bullish indicator, as it indicates potential demand www.jompesh.com Other Market Indicators y Stocks above their 200-day moving average y Technicians use moving averages to compute general trends, and evaluate current stock prices relative to those trends y Block uptick-downtick ratio y Gauges institutional investor sentiment by looking at the proportion of block trades that resulted in an uptick (buy) or a downtick (sell) www.jompesh.com Stock Price and Volume Techniques y 1. 2. 3. y The Dow theory Major trends are like tides in the ocean Intermediate trends resemble waves Short-run movements are like ripples Key is to identify the nature of a current price movement Ratio of upside-downside volume Price movements are not very important unless they are confirmed by volume www.jompesh.com y y y Importance of volume Stock Price and Volume Techniques y y Support and resistance levels Support level: the level that a price is unlikely to decline below; when price reaches the support level, demand surges for the stock Resistance level: the level that a price is unlikely to rise above; when price reaches the resistance level, we observe selling or profit taking Movements below (bearish) and above (bullish) this range provide indicators y y www.jompesh.com Stock Price and Volume Techniques y y y Moving average lines Moving average prices are calculated and track for several different time periods When the shorter-term moving average line is consistently above the longer-term line, it is considered a bullish signal www.jompesh.com Stock Price and Volume Techniques y Relative-strength (RS) ratios y For individual stocks and industry groups y Measure relative price changes across different stocks or industries y Other Indicators y Bar charting y Multiple indicator charts y Point-and-figure charts y Idea is to get an overall feel from numerous technical indicators www.jompesh.com Technical Analysis of Foreign Markets y Some foreign market data is more limited than U.S. market data y Greater reliance on stock and volume data y Merrill Lynch publishes various indicators for several countries y Technical analysis of foreign exchange rates y Traders look for trends in exchange rates that could give rise to profit opportunities www.jompesh.com Technical Analysis of Bond Markets y Many of the same indicators and trading rules can be applied to bond markets y Generally not possible to get bond market volume data www.jompesh.com
0 comments
Najmul Hasan
likes this
Social Share
Share