Technical Analysis #1

Pertaining to this post, all credits goes to Kaplan Schweser notes. Just wanted to do a summary for future references.

Reversal Pattern – Head and Shoulders Pattern – Projecting price target for a for a declining trend.

To look out for: Demand that has been driving the uptrend is fading (each of the highs in the pattern occurs on DECLINING volume as compared to previous highs)

Reversal description.PNGGraph reversal.PNG

Moving averages for different periods can be used together, such as 20-day and
250-day averages. Points where the short-term average (more volatile) crosses the
long-term average (smoother) can indicate changes in the price trend. When the
short-term average crosses above long-term average (a “golden cross”), this is often
viewed as an indicator of an emerging uptrend or a “buy” signal by technical
analysts. The short-term average crossing below the long-term average (a “dead
cross”) is often viewed as an indicator of an emerging downtrend or a “sell” signal.

Relative Strength Index. An RSI is based on the ratio of total price increases
to total price decreases over a selected number of periods. This ratio is then
scaled to oscillate between 0 and 100, with high values (typically those
greater than 70) indicating an overbought market and low values (typically
those less than 30) indicating an oversold market.

“Waves” refer to chart patterns associated with Elliott wave theory. In a prevailing
uptrend, upward moves in prices consist of five waves and downward moves occur in three wavesElliot waves.PNG. If the prevailing trend is down, downward moves have
five waves and upward moves have three waves. Each of these waves, in turn, is
composed of smaller waves of the same general form.

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