Technical Analysis and Winner Stocks - Assignment Example

Technical Analysis Chapter 13: What is there other than price? In technical analysis, various aspects are employed to aid in the determination of the stock and market movements. These include charts and graphs that technical analysts use to determine the market effects. The application of tables aids in the explanation of the price changes and the volumes sold during that price day. The table analogy applies in finding the values that are tabled to provide the details for development of the market curves. The breadth of the market refers to a market analogy used for analysis in which the gauging the direction that the overall market is moving towards and the various companies advancing and those performing low (Kahn, p.98). In positive markets, there exist more companies moving higher than those moving on the lower end. Both the top-down approach and the bottom-up approaches aim at the same goal of identifying great stocks on the market. In top-down, the investors aim at defining the big picture in which different companies are looked at with the potential that they have in future. In bottom-up, strategy applies the strategy to the broad sector and various economic conditions prevailing on the market. When the majority of stocks are falling, some indices may remain performing well on the market. The indices performing better may be as a result of their strong position on the market. These normally occur when the company has a strong market capitalization compared to the others. Stock indices measure the type of sections in the market and their performance. Chapter 14: Volumes: “The more shares that change hands, the more important the price move” indicates to the changes in prices based on the volumes of stocks traded on the market. Trade based on the volumes movements indicates the traders follow demand and supply. In cases of high volume movements, the demand is high and the prices increase affecting the price upwards in cases of low demand and a high volume supply, the prices move downwards. Money that provides the promise of an association with better returns to investors motivate them to invest is smart money. On the other hand, dumb money provides money that carries harm to the invertors’ money. Weeding out dumb money provides room for smart money investors. The NASDAQ graph below indicates a change in volume preceding a change in price. Chapter 18: Winner stocks hold good values and a volatility that provides a controllable aspect to the prices. Winner stocks hold a value price volatility that allows for a good movement of the prices. Winner stocks too have a beta that easily reacts to the market information affecting the prices. Marketing momentum refers to the speed of changes in prices of the market. The speed of the momentum refers to the rate at which the prices change on the market. This momentum provides the basis for the market volume movements. The power aspect provides for the strength of the stock to withstand market pressures and remain on a positive price course. Following the price changes, the price trends, and the volume trends provides a basic for understanding the momentum. Relative strength refers to the ability of a stock to maintain a strong performance on the market while the relative strength index allows for a determination of a relative approach. It is better to use RSI based on its ability to move. Chapter 19: Risk Versus Reward – is this Stock Really Worth it? A good buy is a stock that promises to have a good presence on the market with a positive growth in price to provide for the profits of the investors either for the long term or short term. On the other hand, a good trade is a stock that has reached its peak performance according to the market analysis and would soon start on a downward direction. This stock provides a good sale at a point of profit to the investor. Chapter 20: This isn’t Brian Surgery: Technical analysis is a science. The application of the various statistical means to picture forecasts on the prices of the stock provides the technical analysis with a scientific approach to investing. Other aspects like the need to create a continuous experimental approach to identifying the market’s position to keep it scientific. On the other hand, dealing with the stocks on the basis of identifying the necessary historical aspects and relating them provides an art approach to some extent. Chapter 21: This isn’t Brain Surgery: Swing traders aim for a small change in price to profit and dispose the stock. Using the daily charts for the stock provides a good picture of the stock and its movement on the market. Value funds aim at making investments to profit their investors and owners. The need to consider daily charts over a longer period of time proves necessary. Day traders too depend on the daily market swings in prices and hence they need to consider the daily charts over a shorter period of few months. A false break refers to a price movement on the market that follows a stock beating resistance on the market or support. An increased volume follows this in sales and high volatility creating a false impression that the stock would have had a strong price movement. The false break will create an impression that the price is gaining well and after the volatility increases, it starts having constant swings that may provide a low market price hence affecting the investors. Chapter 22: How to know if you are wrong: Chapter 23: Sometimes being wrong is good: The table below shows a period that had breaks after the failure of the price maintenance. The chart above may also apply in the study of a failed breakout that finally gets to have the prices lower again. The chapter dwells on the possibility of investors and analysts making a wrong judgment of the market movements and their prices. The price moves in a direction that makes it easier to predict the prices leading the investors whose predictions result into a wrong market forecast. The chapter dwelt on explaining this and its advantages to the analysts sometimes. Chapter 24: When to Sell: Stocks who have a growth rate that is reasonable say 3% for a grown company and above 10% for a small growing company provide a good hold for the investor. New products too provide a good hold. The company keeps reinventing its products and building new products. These provide a need to hold to create a further profit in the stock. Stocks that seem to have a negative effect provide a selling opportunity. Those that have declined in performance and have a good share price present a sell. A divergence refers to a market indicator in which the price of the stock is moving in the opposite direction compared to the various indicators on the market. These provide a confusing direction to the investors especially new comers and could lead to wrong decisions. The stocks trading up much on the anticipation of an announcement that would provide a positive response in the market with a huge buy after which the stock is sold. These includes the pump in the market price when the company is about to release their financial results. The market was underperforming and a bailout would aid support its performance. The timing of eh release and the anticipation of its results led to a market movement that was positive. The effect did not last for long since many investors sold shortly after the news were passed. It’s good to sell when the company stops proving profitable, the growth rate of the company declines, the price movement favors a sell to the investors. Chapter 25: Bear markets Bear markets include markets in which the prices keep falling encouraging the sell of the shares by most of the shareholders. In 1998 for Coca Cola Company, the stock market crashed and indicated a bear market as shown below. In this market, the prices dropped on a scale as indicated. The price changes originated from the various market positions. During bear markets, a few stocks perform well despite the failures of diversification. Chapter 26: A Word about your Ego: The art of investing provides for the creation of wealth and that provides the motivation that an investor needs to invest. The reason is existent in the FNCE 325. Chapter 27: What do I really need to get started? A technical toolbox requires the following: A trend line Moving averages These include the study of the following factors: Price action The trend in prices Volume traded Pattern recognition Chapter 28: Building your technical toolbox The price action would help him predict price movements while the trend in prices will allow one-make forecasts. The volumes traded would also aid in indicating the demand and supply factors. Chapter 29: Final Advice The study chapter discusses factors of technical analysis and the tools that would provide a guide to their application. The application of these in evaluating market factors provides a good beginning to investors. The consideration of the various trends on the market provides an exemplification of the momentum of the stock and prices provide for easy forecasting. Chapter 33: How good is your Broker’s Stock? The need to identify market false breaks from actual breaks, the need to evaluate the various market movements to provide a market effect for positive decision making, the identification of smart money from dumb money and the need to keep a close watch on the market to stay away from wrong market impressions. From these, one may apply in their money management aspects including the use of money for positive investments that promise a better return in the future. Chapter 34: Introduction to Candlesticks Candle charts have points that the investors look at to identify the possible price movements that would result into a better decision or forecasts, which bar charts do not offer. These peaks provide points on the market curve indicate better points of price differences that the investor needs to identify the prices to buy at and sell at. Bar charts luck these points making them not possible to provide better and more accurate market indications. Candlesticks rely on the study of the opening price and closing price of the stock and its application in decision making by analysts to make decisions on stocks. The graph below shoes candlesticks applied in the analysis. Chapter 35: Cycles Cycles indicate the various peaks and lows in the prices of the stock. Investors look at this point in making decisions on the market. They explain these points in references to prices that the investors need to buy at and sell at for a gain. Obtained from http://www.prometheusmi.com/2012/12/02/stock-market-annual-cycle-undergoes-important-test/ Cycles indicate the movement of the stock market and the period in which the stock price remains within a given cycle and stage. Chapter 37: Technical Terms you may have heard Open interest details the number of options or contracts meant for the future that remains unclosed on a particular trading day. It helps analysts plan for future engagement on the stocks. A tick refers to the upward or downward movement that is of a minimum nature on the movements of a stock. The stock counter had numerous ticks during the previous trading week. Chapter 38: Debunking the TV Analyst The application of candlesticks to the making of decisions in investing provides the ability for the investors to make better decisions in the stocks to invest. These in real life aids one identify possible points for a person to handle their finances. Real money investments in real life need the identification of the good times of investments and when to get into markets and make sells. Chapter 39: Fun with Jargon A bear trap is a false signal to investors that indicates that the stocks’ rising trends indicate a reversal in the market when it has not yet. In this, the investors make shorts onto the market but the market ends up remaining flat or slightly recovers. The graph below indicates a bear trap in the market. A dead cat bounce refers to the short-term or temporary recovery of a stock’s prices on the market as a result of speculators buying heavily to position themselves for a move. Whipsaw In situations where the price of the stock keeps in one direction then suddenly changes to another in the opposite end in which the price goes negative or positive from the positive or negative respectively. These originate from the push and pull options. Catapult in investing provides for an environment in which an occurrence pushes the prices of a stock higher in the existence of a leverage. A saucer according to the market refers to a shape in the stock market curves that indicate a price that declined and formed a cuplike structure on the price with a cup-shaped base. In this market situation, the stocks do not post back into the market but remain balanced here with a few indications of bounce backs. The graph below indicates a cup shaped structure on a stock curve that indicates a saucer. Works Cited Kahn, Michael. Technical Analysis Plain and Simple: Charting the Markets in your Language. FT Press. 2009. Print. Read More