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Stock Charting – Technical Analysis

There are all kinds of good videos on utube and elsewhere to learn about charting or technical analysis. I built this section to bring all these resources together being easier, quicker to find and organized.

The 3 chart videos above is a good place to start for beginners, than continue on with others as you please on the left. Oh! and above a pretty face is refreshing now and then :)

There are two very good websites I like to build my charts with any indicators I please. Bigcharts and Stockcharts I have used both, but use bigcharts mostly and that is only because I started there and got use to it.

This page is mostly focused on education, other areas on this web site will show some current technical opportunities in various stocks and indexes. I will have guest technical analysts as well and a lot of the current content will be in the members section!

 

There is all kinds of different technical analysis and charting techniques. None of them are perfectly reliable, but I find when you can find several indicators telling you the same thing on a stock's direction it really increases the odds of an outcome you can predict.

My Own Charting Software

I started charting myself long before anything was available on the web and before the web. The only stock charts you could find at that time would be a few in the financial section of a newspaper. Otherwise you had to pay a lot of money for charting software and subscribe to data source, basically it was exclusive to the brokerage community. I would spend ½ hour or so each day entering the daily market, currencies, commodities and stock prices into a spread sheet. At that time I used Lotus and I could then use Lotus Graphics to create charts. With calculations I also had moving averages, MACD and momentum indicators. It was quite advantageous at the time for a retail investor.

Needless to say, I don't bother anymore it is all available on the web for free

Over the years I have found a number of indicators I like to use. Moving averages as always, candle stick patterns, on balance volume, support/resistance, trend lines, relative strength, bollinger bands, stochastics and a few others at times.

I often look at on balance volume to see if a rally is being driven by a lot of new buying

 

With bollinger bands they will quite often signal a break out is imminent either to the upside or downside when they pinch together. If a stock rallies or falls hard it can often go outside the bollinger bands but this is only likely to last for a few days at most so can signal a move will soon lose momemtum.

 

When a stock or index has seen a large up or down move, when RSI gets to extremes - it is a good signal of an end to that move, 20 on the downside and 80 to the upside. Very seldom does RSI move much more than those extremes.

 

Most often I will draw support and resistance lines on a chart and I use these for targets that I expect stocks to reach. They are very useful to set stop/loss levels on the downside and a que to take profits on the upside.

I am not going to get into all of these, I will leave that to the videos on the left, but when I use the above indicators in charts you can always come back to this section for a refresher on what I am talking about. I am going to talk about Candle stick charting because it has been a long time favorite and I am going to point out a huge mistake practically all candle stick users are making!!

Candle Stick Charting

 homma munehisa

Candlesticks were developed by a Japanese rice trader Munehisa Homma in the late 1700s. He became known as God of the Markets and it is believed he made the equivalent of $10 billion today trading rice. In reality he is the inventor of technical analysis. Candlesticks were used by Japanese traders for quite sometime but only started to become popular in the West in the mid 1980s.

The 1st thing to learn about Candlesticks is a new language and I don't mean Japanese. I am talking about Dragonfly Doji, Hammers, Engulfing, Piercing Clouds, Flying Tops, Morning Stars, Marubozu. When I first started to learn about Candlesticks, I found it very useful to print out a list of the names and configurations of the patterns.

You can find one here japanpic

 

The 1st two Candlestick videos on the left are very good introductions, the 2nd one and longer in length is  more in depth or detailed in nature. I recommend it because it gets into the trader psychology of what Candlesticks mean

 

candlestick

The most important thing to know about Candlesticks and their patterns, it is a measure of trader psychology on any given day and over a few days. The open, closing and trading range of the day are very important.

The one thing you will learn here and probably no where else - is the huge mistake most Candlestick users are making, even the Pros.

Because the opening and closing price are most important, Candlesticks work great for Stocks, but for Commodities and Currencies, Gold and Oil etc. they trade for the most part 24 hours and determining open and close is not clear. The other important factor is the open that is used for Candlesticks charts. For most Futures the opening price  is 5:45PM EST the previous day. However traders in North America are not really that active at least until the morning around 8AM to 9AM. Anytime I see good potential Candlestick patterns in Currencies or Commodities, including Gold, each Candlestick has to be confirmed as accurate by looking at the total daily trading to determine accurate open and close levels, not the Candlestick you see.

The 2nd video touches some on this open close price issue.

hammer

Some of the most important Candlesticks I focus on are the reversal Candlesticks and this includes Hammers, Spinning Tops, Gravestones and  Dojis.

It is also very important to look what follows these Candlesticks that confirm the reversal,  such as Evening and Morning Star patterns.

It is most important to strongly consider these Candlesticks and patterns when they occur with major moves to the upside or downside and with other indicators such as Moving Averages, Trend lines and Support and resistance levels.

 

 

 

Here is examples of Inverted Hammers or Gravestones that are confirmed with reverals the next day.

And it is important the amount of Gap you see the next day that confirms the reversal, normally the larger the gap, the stronger the reversal will be.

 

These examples on the left show these Star reversal patterns. If they form with a Doji that is gapped far below or above they are stronger signals called Morning Doji Star and Evening Doji Star. The chart on left shows the uptrend afterwards. Note the top of the uptrend is a Hanging Man candle, if a down (red candle occured next day, another reversal signal

 

Candlestick Breakout patterns This is a good video by Stephen Bigalow, it may not be a polished video because I think at times there is questions you do not hear but content and explanations are excellent. A lot of these patterns would be called one of the types of Morning or Evening Star and is a pattern I am always watching for on the charts. I find it the most reliable technical indicator out there especially when you see it combined with other indicators.

Bigalow's main point and I agree 100% is not to look for all the different candlestick formations but just the best ones

The video on Hammers, Shooting Stars and Engulfing are some good trading patterns also

 

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Stochastics

Relative Strength RSI

Bollinger Bands

Fibonacci Support & Resistance

Moving Avergage Convergence Divergence MACD

MACD Video 2

Candlestick Intro

Candlestick Basics

Hammers

hammer

Star Reversals

morningstar

Star Reversal Chart

morningstar3

Candlestick Breakout Patterns

Hammers & Engulfing