Technical Analysis (No Questions)

[g3235286]

In this thread, you can present your own technical analysis (TA) for which you seek confirmation or another perspective from others. This brings out a potential trade opportunity that can benefit all readers. The writer themselves also benefits if they receive constructive counter-analysis or additional support from other indicators for their analysis from other writers.

This thread is not for inquiries about company X’s situation from a TA perspective. Another thread can be opened for that.

For discussion and questions about studying TA, terms, and theory, there is a thread: https://keskustelut.inderes.fi/t/tekninen-analyysi-ja-tradingview-opiskelu-kysy-vastaa-ketju/

[N.K]

It would be interesting to hear more from you, @DayTraderXL, if you’re interested in sharing. I’ve also been following this from the sidelines, mouth agape, wondering what this whole thing is all about

[DayTraderXL]

I don’t have the energy to explain this to those who are completely unfamiliar with it. I encourage anyone interested to research and learn about it. Investopedia.com is a perfectly decent basic source of information. Once the basic concepts are clear, you can start by looking for a few basic indicators, buying a tool to use them, and getting online course data for the desired stock exchanges. That’s how it starts.

I copied a short summary from the site above, which describes quite well what it’s all about.
@g3235286: You yourself probably examine price curves, their rises and falls, and look for price levels where the prices have been before. Technical analysis (TA) allows data to be analyzed more deeply, and statistical data can help determine when it’s a good time to buy or sell, or to try to predict the future. Prices tend to settle according to certain patterns. On the other hand, all the information that has formed for a stock through fundamental analysis (FA) is contained within the price curves. If the market has mispriced something, one can of course try to correct it through FA and form one’s own opinion. However, the markets do not necessarily price things in the same way.

In addition to TA, I also try to understand the main aspects of FA for the target of purchase, so I am not a TA purist. I believe that utilizing both is the best way to try to do things as well and professionally as possible.

I haven’t looked for any discussion groups in Finland regarding TA, but I do actively participate in one international group.

Charles Dow released a series of editorials discussing technical analysis theory. His writings included two basic assumptions that have continued to form the framework for technical analysis trading.

1. Markets are efficient with values representing factors that influence a security’s price
2. Market price movements are not purely random but move in identifiable patterns and trends that tend to repeat over time

The efficient market assumption essentially means the market price of a security at any given point in time accurately reflects all available information, and therefore represents the true fair value of the security. This assumption is based on the idea that the market price reflects the sum total knowledge of all market participants. While this assumption is generally believed to be true, it can be affected by news or announcements about a security that may have varied short-term or long-term influence on a security’s price.

The second basic assumption underlying technical analysis, the notion that price changes are not random, leads to the belief of technical analysts that market trends, both short-term and long-term, can be identified, enabling market traders to profit from investing based on trend analysis.

Read more: Technical Analysis https://www.investopedia.com/terms/t/technicalanalysis.asp#ixzz5WAmP3lhS
Follow us: Investopedia on Facebook

[g3235286]

@DayTraderXL

With TA, data can be analyzed more deeply, and statistical information can be used to help determine when it’s a good time to buy or sell, or to try to predict the future.

In some situations, TA can indeed provide support for decision-making and help identify historical over- and undervaluation. However, I still believe that markets wouldn’t magically turn at support and resistance levels unless a large group of investors assumed that would happen based on TA. Investors acting according to TA make the markets behave that way. It’s somewhat similar to panic and rallies. Panics are usually good buying opportunities and strong rallies are selling opportunities, because the market usually overshoots. In the small picture, however, I don’t believe that TA works for any other reason than due to investors using TA and pure chance.

[DayTraderXL]

These days, a lot of trading is done by bots, so behavior based on statistical data is more significant than before. And of course, if people make decisions and a large part of people utilize statistical data, then e.g. support and resistance levels influence behavior. But in a way, the way you frame your question is bad, how TA works or doesn’t work → people or software works. That’s why you get an edge for investment decisions from it - the better you can utilize it, the more. Isn’t that what this is all about? On the other hand, it’s not always like this, as one would have assumed based on TA, so it’s not some cash register engine either.

• markets don’t magically turn anywhere, but they can be interpreted as having turned retrospectively. Prices react predictably in certain situations, and TA helps with that

[g3235286]

Well, that’s how it goes. So TA works because many (bots or humans) act according to it. The more such actors there are in the market, the stronger the adherence to TA.

[DayTraderXL]

I got a bit stuck on the term “TA works”. But you can think of it that way.
I myself consider analysis to be the utilization of statistical data, meaning looking into the past and programmatically utilizing accumulated data. Different indicators then show different things that are suitable for different perspectives.
And it doesn’t matter how much people make their decisions based on it. They all simulate into charts. You can’t see under/overvaluations there; you have to consider them from fundamental data. But buy/sell decisions can be optimized according to price action, allowing you to buy and sell efficiently. That’s what TA briefly helps with. It encompasses a lot of different things besides support and resistance levels. And no one utilizes everything. Most people have their own methods and indicators that they have found easy and effective. I recommend checking it out.

[DayTraderXL]

One example of TA from today.
I’ve had SPY equipped with Fibonacci (one indicator) to try to envision what kind of movements a target might make in the future.

• I had estimated that SPY would bounce to the fib 0.618 level (280.92)
• and this is exactly what ended up happening quite precisely
• from that level, I had then assumed that we would next come down to the 0.5 level, from which we would then see if we continue up or down. It’s also possible that we might even correct to the 0.382 level, but since the sentiment is perhaps more positive now than a week ago, the 0.5 level should be enough.
• time will tell what happens

[Johannes_Sippola]

Awesome, @DayTraderXL, that you’re here to explain a bit about technical analysis. I’ve also entered the market with a bit of a short-term trading technique, even though I don’t know much technical analysis yet. Resistance and support levels are, in my opinion, nice to utilize in the short term. Could you somehow elaborate on those different indicators, e.g., Fibonacci, and how they can be used and what they are based on? I’ve only heard about the Fibonacci sequence in high school, so it’s a bit of an unfamiliar term in the investment world (like all other indicators besides Fibonacci)

[DayTraderXL]

@Johannes_Sippola

Stock markets move in waves. These movements can be observed over different timeframes. The longer the timeframe of your investment, the larger the time resolution you should use to follow it. Time resolutions: year, month, week, day, hour, half an hour, 15min, 5min, 2min, 1min (for example, in the TradingView tool, you can change the resolution on the fly, allowing you to quickly jump from, say, day to hour when examining a single asset).

The turns in these wave movements can then be studied more closely, attempting to discern the meaning of the movement using various indicators, of which Fibonacci Retracements is one.

• Its highest value (1) can be set either to a previous peak or a trough, depending on whether the trend being examined has been rising or falling.

For some reason, the mathematician’s calculation model has been found to work well with these Fibonacci numbers when estimating the steps of reversals. Surprisingly often.

You can read more about the topic here (e.g., TradingView includes the aforementioned indicator, so it can be easily applied to an asset, as it was in my example SPY chart).

https://www.investopedia.com/articles/trading/06/retracements.asp

[Johannes_Sippola]

Thanks a lot for the quick response @DayTraderXL! Investopedia is great for looking into these trading-related things (and all of them are, of course, relevant in the long run, at least to some extent). That’s how I learned about resistance and support levels, at least in broad strokes

[DayTraderXL]

Spy is progressing approximately with the stepping predicted by Fibonacci - 0.382 was broken slightly, but accurate enough to give a correct picture of the situation.
If we don’t get an upward bounce from this level tomorrow, a drop to the next 0.236 level could be ahead.

• that would be a clear change in trend direction, because currently the daily trend is still upward (support 269.59)

[N.K]

@DayTraderXL

Can I ask for a comment on Finnair’s and Fiskars’ current TA chart?

I’ve been keeping an eye on them myself, and you got me a little interested in the topic! Investing is exciting - you’re always learning more and new things. It’s as addictive as the ‘devil’ - you give it an inch (investing), and it takes a mile! P.S. Hope it doesn’t take my money

[DayTraderXL]

I’ve been recharging in the sun, and on the other hand, from my perspective, I thought it was quite useless to post anything from TA here on the forum, because it’s a monologue here. I only follow occasionally now.

Fiskars is a “falling knife.” On a weekly level, the next support is 15.00

• The nearest resistance, a higher low, is 16.94, which absolutely needs to be broken with high volume for the first signs of a trend change to be visible.
• This situation indicates that the company is clearly in big trouble with its business, and the market has no confidence in the company’s ability to make a quick turnaround.
• Think carefully about what you are looking for in such a company as an investment, unless you are seeking a short intraday bounce or considering shorting.

[DayTraderXL]

Charts should be viewed in the timeframe relevant to the length of the investment you are considering. This is a weekly chart, which helps in assessing a medium/long-term horizon.

• The bottoms (at least for now) have clearly been found at the 5.585 level.
• The double top at 7.670 forms a relatively strong resistance going forward. Breaking above it would be a strong bullish signal.
• A clear EQ is starting to form, with a low of 6.880 and a high of 7.670 – it will likely consolidate within this range for some time. The current price level is above the Middle Bollinger Band (MA20), and if this week closes and stays above it, it would be a good signal for the next week, indicating a potential break of the double top.
• Nordea’s target price is at the 7.500 level, which also acts as a form of resistance.

[DayTraderXL]

On a daily level, the formation of the weekly EQ (Equilibrium) is clearly visible, meaning we have consolidated and a rather beautiful, tightening EQ can be observed.

• On the daily level, the EQ low is at 7.040/7.020, the top is the same as weekly
• The price is rising above the EMA26 level (green), which is a positive signal. Next, it should still break through EMA12 (red) and MBB/MA20 (yellow)
• A third bull candle is forming, so now it’s about how high we rise/close today
• For the RSI (lower chart), I drew a resistance level that you can follow; breaking it would be important for confirming the continuation of the price increase
• Follow the daily level to see how this EQ behaves (which way it breaks)
• It’s typical for volume levels to weaken during consolidation

[gravytrainer]

@DayTraderXL

I found it quite useless to post anything about TA here on the forum, because it’s a monologue here.

Please don’t stop, I have at least gotten really great added value from those candles you’ve posted in each situation. Keep up the good work!

[DayTraderXL]

@gravytrainer By the way, you can also analyze information from candles. For Finnair, the last two bear candles tell quite a lot. The previous week was still relatively bullish in terms of the body (the thick part of the candle), with the weight still slightly more towards the upper part (body relative to the wires (shadows or tails/wicks) coming from it). This week formed a spinning top, where its closing value (close) is in the lower part of the body. This is a slightly bearish phenomenon combined with the previous week’s candle.

• if you are interested, you can read more about these here https://stockcharts.com/school/doku.php?id=chart_school:chart_analysis:introduction_to_candlesticks

This week’s candle did not close above EMA12 (red) or MBB/MA20, so the pressure to decline still exists. The weekly EQ may well break downwards, but for the course development, the next higher low can still be visually well perceived somewhere at the 6.6-6.7 level without yet endangering the upward trend, as long as bear volume does not start to grow. So consolidation is still healthy.

[Samu]

@gravytrainer Hah, I read it all and understood well (probably) what you meant with each point without going into too much detail with all the terms. This did give me motivation to start studying the subject from the very basics, even though trading isn’t my main thing when it comes to investing. Thanks for the examples!

[DayTraderXL]

Purely from a TA perspective:

• Looking at buys/sells from a volume perspective at 4h resolution
• 28.12.2018 at 2-6 PM bull volume: approx. 271,000 pcs
• 8.1.2019 at 10 AM-2 PM bear volume: approx. 243,000 pcs (at 2-6 PM bear volume approx. 90,000 pcs)
• Even though other trades were made between those times and, of course, bought/sold at a price-neutral level, one could also consider if the price was pumped up a bit? In any case, a lot was also sold in a short time.