technical analysis (long) with thomson reuters edit
TRANSCRIPT
TECHNICAL ANALYSIS
Charting Techniques
by
Leo Quinitio
www.pse.com.ph
Random Walk Theory
Author Burton Malkiel
"A Random Walk Down Wall Street“
top-seller finance book
Stock price changes have the same distribution
and are independent of each other, so the past
movement or trend of a stock price or market
cannot be used to predict its future movement.
Followers think that the market cannot be
outperformed without assuming additional risk.
Critics say stocks actually form trends at length
and it is possible to beat the market through
careful study of buying & selling points.
Efficient Market Hypothesis
It is impossible to "beat the market" because
stock market efficiency causes existing share
prices to always incorporate and reflect all
relevant information.
Stocks always trade at their fair value on stock
exchanges, making it impossible for investors to
either purchase undervalued stocks or sell stocks
for inflated prices.
It is impossible to outperform the overall market
through expert stock selection or market timing,
and that the only way an investor can possibly
obtain higher returns is by purchasing riskier
investments.
Efficient Market Hypothesis
A cornerstone of modern financial theory
Believers argue it is pointless to search for undervalued
stocks or to try to predict trends in the market through
either fundamental or technical analysis.
Warren Buffett has consistently beaten the market over
long periods of time, which by EMH is impossible
The 1987 stock market crash when the Dow Jones
Industrial Average (DJIA) fell by over 20% in a single day,
is evidence that stock prices can seriously deviate from
their fair values.
Balance Sheet
Cash Flows
Solvency Ratio
FUNDAMENTAL ANALYSIS
TECHNICAL ANALYSIS
INVESTMENT ANALYSIS
Fundamental Analysis Technical Analysis
Traditional economic + Business
concepts = value of investment
Study of past market data such as
prices + volume = predict future
price movements (I.e.
stocks/markets)
Examination of the above variables
is called Valuation process
Proponents believe that the
market’s judgment of an issue’s
fundamentals are determined by
supply and demand variables that
are already reflected in prices.
Method of forecasting future price
movements of a security based on
political, environmental & other
factors
View from financial statements View from charts
Best employed for long term investing Best employed for short term trading
Data utilized come out periodically
Tends to focus on a specific sector
Data utilized come out daily
INVESTMENT ANALYSIS
Fundamental Analysis Technical Analysis
Focused on what “must” happen Focused on what happens
Top Down Approach Bottom-up Approach
Considers condition affecting
Economy
Financial Markets
Industry
Company
VALUATION PROCESS
Fundamental Analysis Technical Analysis
Works best in determining market
sentiment and factor it in the
creation of investment or trading
decisions
Works best if all investors are
logical and could separate emotions
from investment decision
Will succeed if the analyst finds
overlooked data in identifying
undervalued securities
VALUATION PROCESS
Fundamental Analysis Technical Analysis
Technical
analysis is the
answer!?
Technical Analysis will
improve investing?
Make sensible investment
decisions
NO!
EXPECTATIONS
Should I buy today? What
will the prices be tomorrow,
next week or next year?
YES!
AIM TO REDUCE RISKS &
IMPROVE PROFITS
DON’T AIM TO PREDICT PRICES
CONSISTENTLY & ACCURATELY
DEFINITION
The study of prices, with charts as the
primary tool.
A method of evaluating securities by
analyzing statistics generated by market
activity, such as past prices and volume.
DEFINITION
Once viewed as arcane or mystical but
today it is part of every major investment
or trading decision.
Evolving quickly such that techniques
today may be rendered incomplete or
obsolete tomorrow.
Used as the basis for
automated trading.
ADVANTAGES
Portability
Price based trade or
investment planning
Does not require knowledge of many
mathematical formulas
DISADVANTAGES
May not be used to predict future price
action
Not easy to use with IPOs
May miss 20-25% of the movement
It has a tendency to create self fulfilling
prophecies
Subjectivity
A chart is a picture
A picture is worth a thousand words…
or probably a thousand dollars
Technical analysts
do not attempt to
measure a
security's intrinsic
value, but instead
use charts to
identify patterns
that can suggest
future activity.
Technical
analysts believe
that the historical
performance of
stocks and
markets are
indications of
future
performance.
Equally applicable on any security or tradable
financial instrument (stocks, bonds, commodities,
futures, indices, mutual fund, options)
In a shopping mall
Fundamental analyst: will
go to each store, study the
product and then decide
whether to buy it or not
Technical analyst: will
watch people go into the
stores. Decision would be
based on the patterns or
activity of people going into
each store.
HUMAN ELEMENT
Humans are not easily
quantifiable nor predictable
Many investment decisions are
based on irrelevant criteria
The price of a security is a
consensus of at least two humans
The price depends on human
expectations
HUMAN ELEMENT
The breadth of market participants guarantees
an element of unpredictability and excitement
Why Do Prices Fluctuate?
MARKET PSYCHOLOGY
Each investors would have his or her own opinion
about a certain security or any other object for that
matter
cellphone
MARKET PSYCHOLOGY
THE PRICE IS RIGHT GAME
Cellphone
Five years depreciated
MARKET PSYCHOLOGY
THE PRICE IS RIGHT GAME
Cellphone
previously owned by Hayden Kho
MARKET PSYCHOLOGY
THE PRICE IS RIGHT GAME
Designer shoes
MARKET PSYCHOLOGY
MY CHOICE GAME
Designer shoes
MARKET PSYCHOLOGY
MY CHOICE GAME
Designer shoes
MARKET PSYCHOLOGY
MY CHOICE GAME
Designer shoes
MARKET PSYCHOLOGY
MY CHOICE GAME
Designer bags
MARKET PSYCHOLOGY
MY CHOICE GAME
PRACTICAL MARKET PSYCHOLOGY
Logical: buyers want to buy at the lowest price
possible
Competitive: buyers raise their bids in order to attract
sellers
Emotional: buyers tend to be euphoric when price
increases
PRACTICAL MARKET PSYCHOLOGY
Logical: sellers want to sell at the highest price
possible
Competitive: sellers tend to lower their offer price in
order to attract buyers
Emotional: sellers tend to panic when price drops
MARKET CYCLE
More buyers compete to
attract sellers
High price will urge
sellers’ to cash-in
More sellers compete to
attract buyers
Panic sets in
Price becomes too
cheap to be ignored
by buyersNews of increasing price
spreads, price gains
momentum
Euphoria sets in
MARKET CYCLE
Distribution
1. The market discounts
everything
2. Price moves in trends
3. History tends to repeat itself
BASIC ASSUMPTIONS
Dow Jones Theory 1890
Basic Principles of Dow Theory:
1. Averages discount everything
2. Market trends [primary (tide), intermediate or
secondary (waves), tertiary (ripples)]
3. Bull and bear markets
4. Lines (tight sideways band)
5. Averages must confirm
6. A trend continues until it is reversed
7. Volume goes with trend
ORIGINS
EVOLUTION (WEST)
Elliot Wave 1938 Classical Charting
Dow Theory 1890s
EVOLUTION (EAST)
Japanese Charting 1800s
(Meiji Period)
Candlesticks
Equivolume
Kagi 1870s
Renko
Heikin-AshiIchimoku
ELLIOT WAVE
Ralph Nelson Elliot
The Wave Principle published
in 1938
Based on Fibonacci ratios
“golden ratio” = Nature's Law
— The Secret of the Universe
ELLIOT WAVE
Profit taking
Bargain hunting
More people join
Consolidation
New out
ELLIOT WAVE
Big move
Accumulation
Big move
Distribution Excess
Despair
ELLIOT WAVE
impulse
corrective
biggest wave
Top of wave 1
short or truncated
Below bottom of
wave 4
ELLIOT WAVE
The Elliott Wave Principle does not provide
certainty about any one market outcome.
Instead, it gives you an objective means of
determining the probability of a future
direction for the market.
CLASSICAL CHARTING
Chart Composition
Chart Types
Chart Trend Channels
Chart Patterns & Formations
Chart Indicators & Oscillators
Open - The first price traded for
the period. An important
consensus as all interested
parties were able to “sleep on it”.
High - The highest price traded
for the period. The point where
there were more sellers than
buyers.
Low - The lowest price traded for
the period. The point where there
were more buyers that sellers.
Close – The last price traded for the
period. Most often used price for analysis.
The relationship of the open and close
prices is considered most significant by
technicians.
CHART COMPOSITION
Price Fields
Volume – The number of shares
traded during the period.
Bid – The price a buyer is willing to
pay
Ask – The price a seller is willing to
accept
CHART COMPOSITION
Price Fields
CHART COMPOSITION
Axis
Time lineP
rice
ran
ge
X= time
Y= price
Arithmetic
(or Linear)
CHART COMPOSITION
Grid Scaling
Semi
Logarithmic
CHART COMPOSITION
Grid Scaling
Arithmetic Scaling Semi-log Scaling
CHART COMPOSITION
Grid Scaling
CHART TYPES
Line Chart
Pole Chart
CHART TYPES
high
low
Bar Chart
CHART TYPES
Bar Chart Plotting Exercise
CHART TYPESPCOR
OPEN HIGH LOW CLOSE
DAY 1 6.00 6.00 6.00 6.00
DAY 2 6.00 6.00 5.90 6.00
DAY 3 5.90 5.90 5.90 5.90
DAY 4 5.80 5.90 5.80 5.90
DAY 5 5.90 5.90 5.80 5.90
DAY 6 5.90 6.00 5.90 6.00
DAY 7 6.00 6.10 6.00 6.00
DAY 8 6.10 6.10 6.00 6.00
DAY 9 6.30 6.70 6.30 6.60
DAY 10 6.70 6.80 6.60 6.70
DAY 11 6.70 6.70 6.60 6.70
DAY 12 6.70 6.80 6.70 6.70
DAY 13 6.70 6.70 6.60 6.70
DAY 14 6.70 6.70 6.70 6.70
DAY 15 6.70 6.80 6.70 6.70
DAY 16 6.70 6.70 6.70 6.70
DAY 17 6.70 6.80 6.70 6.70
DAY 18 6.70 6.80 6.70 6.70
DAY 19 6.80 6.80 6.70 6.70
DAY 20 6.80 6.80 6.70 6.70
Bar Chart Plotting Exercise
CHART TYPES
Point & Figure Chart
CHART TYPES
Point & Figure Chart Plotting Exercise
CHART TYPESEDC
CLOSE
5.20
5.10
5.00
4.90
4.80
5.00
5.20
5.20
5.30
5.40
5.40
5.40
5.40
5.60
5.20
5.20
5.20
5.40
5.30
5.20
Point & Figure Chart Plotting Exercise
CHART TYPES
4.80
4.90
5.00
5.10
5.20
5.30
5.40
5.50
5.60
ooooo
xxxxxxx
o xx
x
xoo
5.6 X
5.5 X
5.4 X X
5.3 X X O
5.2 O X O X O
5.1 O X
5.0 O X
4.9 O
4.8 O
Candlestick Chart
CHART TYPES
Candlestick Chart Plotting Exercise
CHART TYPESDAY 1 4.95 4.95 4.90 4.90
DAY2 4.95 5.00 4.80 4.80
DAY 3 4.85 5.10 4.85 5.00
DAY 4 5.10 5.20 5.00 5.20
DAY 5 5.20 5.30 5.10 5.20
DAY 6 5.20 5.40 5.20 5.30
DAY 7 5.30 5.50 5.30 5.40
DAY 8 5.20 5.40 5.20 5.40
DAY 9 5.40 5.50 5.30 5.40
DAY 10 5.50 5.50 5.30 5.40
DAY 11 5.30 5.60 5.30 5.60
DAY 12 5.30 5.40 5.20 5.20
DAY 13 5.10 5.30 5.10 5.20
DAY 14 5.00 5.30 4.95 5.20
DAY 15 5.50 5.60 5.40 5.40
DAY 16 5.20 5.20 5.00 5.10
DAY 17 4.95 5.00 4.90 4.95
DAY 18 4.90 5.00 4.90 4.95
DAY 19 4.80 4.85 4.80 4.80
DAY 20 4.90 4.95 4.80 4.85
Candlestick Chart Plotting Exercise
CHART TYPES
Equivolume Chart
volume
CHART TYPES
Heikin-Ashi (average bar) Chart
CHART TYPES
Modified Formula
xClose = (Open+High+Low+Close)/4
o Average price of the current bar
xOpen = [xOpen(Previous Bar) + Close(Previous
Bar)]/2
o Midpoint of the previous bar
xHigh = Max(High, xOpen, xClose)
o Highest value in the set
xLow = Min(Low, xOpen, xClose)
o Lowest value in the set
Heikin-Ashi (average bar) Chart
CHART TYPES
Candlestick converted to Heikin-Ashi
Anchor Chart
CHART TYPES
open
close
high
low
open
close
high
low
Kagi (Focus) Chart
CHART TYPES
Thick lines are drawn when
price breaks above
the previous high price
(>4%) and is interpreted as
an increase in demand
Thin lines are used
to represent increased
supply when the price falls
below (>4%) the previous
low
Renko (brick) Chart
CHART TYPES
Constructed by
placing a brick in
the next column
once the price
surpasses the top
or bottom of the
previous brick by a
predefined amount
CHART TRENDS CHANNELS & LINESPlotting Support & Resistance
CHART TRENDS CHANNELS & LINESEstablishing Trends (channels & range)
CHART TRENDS CHANNELS & LINESEstablishing Trends (channels & range)
The more times a trend line is
tested, the more significant it
becomes
CHART TRENDS CHANNELS & LINESTrend Acceleration or Deceleration
Angle of trends:
Weak
Healthy
Overheated
CHART TRENDS CHANNELS & LINESWhen support is broken, it becomes the new
resistance
CHART TRENDS CHANNELS & LINESWhen resistance is broken,
it becomes the new support
CHART TRENDS CHANNELS & LINESIdentifying trends, breakouts & breakdowns
Trend Plotting Exercise
CHART TRENDS CHANNELS & LINESHistorical support and resistance
Historical Support & Resistance Plotting Exercise
CHART TRENDS CHANNELS & LINESHistorical support and resistance
Historical Support & Resistance Plotting Exercise
CHART TRENDS CHANNELS & LINESHistorical support and resistance
Historical Support & Resistance Plotting Exercise
CHART TRENDS CHANNELS & LINESRetracements & Reversals
Obtained by drawing a trendline between two extreme points and then dividing
the vertical distance by the key Fibonacci ratios of 23.6%, 38.2%, 50%, 61.8%
and 100%
CHART TRENDS CHANNELS & LINESRetracements & Reversals
Fibonacci Numbers
1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, etc
Any given number is approximately 1.618 times the preceding
number
Each Fibonacci number is approximately 62% of the next higher
number. 38 is the inverse of 62
CHART TRENDS CHANNELS & LINESFanlines
Retracement & Reversal Plotting Exercise
0%
100%
62%
50%
38%
Retracement & Reversal Plotting Exercise
0%
100%
62%
50%
38%
CHART TRENDS CHANNELS & LINESArcs
Retracement & Reversal Plotting Exercise
CHART TRENDS CHANNELS & LINESPitch Forks
handle
tines
tinesX
XX
CHART PATTERNS & FORMATIONSReversal Patterns
Rounding Bottom
Saucer Top
CHART PATTERNS & FORMATIONSReversal Patterns
Double Bottom
Double Top
CHART PATTERNS & FORMATIONSReversal Patterns
Triple/multiple Bottom
Triple/multiple Top
CHART PATTERNS & FORMATIONSReversal Patterns
Reverse Head &
Shoulders
Head & Shoulders
CHART PATTERNS & FORMATIONSReversal Patterns
Spike Bottom
Spike Top
CHART PATTERNS & FORMATIONSContinuation Patterns
Rising Tops Falling Tops
CHART PATTERNS & FORMATIONSNeutral Patterns
Wedge/Symmetrical
Triangle
Usually
accompanied by
decreasing volume
CHART PATTERNS & FORMATIONSNeutral Patterns
Ascending & Descending
Triangles
Broadening (Megaphone)
Formation
CHART PATTERNS & FORMATIONSContinuation Patterns
Flags & pennants
CHART PATTERNS & FORMATIONSContinuation Patterns
Flags & pennants
CHART PATTERNS & FORMATIONSContinuation Patterns
Flags & pennants
CHART PATTERNS & FORMATIONSCandlestick Continuation Patterns
Three White Soldiers Three Black Crows
CHART PATTERNS & FORMATIONSCandlestick Reversal Patterns
Bullish Engulfing Bearish Engulfing
CHART PATTERNS & FORMATIONSCandlestick Reversal Patterns
Bullish Harami Bearish Harami
CHART PATTERNS & FORMATIONSCandlestick Reversal Patterns
Doji Star Dark Cloud Cover
CHART PATTERNS & FORMATIONSCandlestick Reversal Pattern
Morning Star
CHART PATTERNS & FORMATIONSCandlestick Nuetral Patterns
Sushi Roll
CHART PATTERNS & FORMATIONSContinuation & Exhaustion Gaps
Exhaustion gap
Runaway (or measuring) gaps
Breakaway gap
CHART PATTERNS & FORMATIONSContinuation & Exhaustion Gaps
Island Reversal
EXERCISE
EXERCISE
EXERCISE
EXERCISE
VOLUME HISTOGRAMS
Volume spikes may indicate
large scale entry or exit of
money
VOLUME HISTOGRAMS
Steep price increases not
supported by volume are
usually dangerous
CHART INDICATORS & OSCILLATORS
Indicators are essentially calculations based on the price and the
volume of a security and measures factors such as money flow,
trends, volatility and momentum
CHART INDICATORS & OSCILLATORS
Indicators are used as a measure to gain further insight into to
the supply and demand of securities
Also used to confirm price movement and the probability that the
given move will continue
Can also be used as a basis for trading as they can form buy-
and-sell signals
CHART INDICATORS & OSCILLATORS
Oscillators = indicators that are plotted within a bounded range
fluctuate into overbought and oversold conditions based on set
levels based on the specific oscillator usually 30 and 70
CHART INDICATORS & OSCILLATORS
Leading Lagging
Predictive, strongest during
periods of sideways or non-
trending trading ranges
Users need to be careful to make
sure the indicator is heading in
the same direction as the trend
Many buy and sell signals that
make it better for choppy non-
trending markets
Confirmatory, more useful
during trending periods
Better to have less entry and
exit points
Usually gives late entry and
exit points
CHART INDICATORS & OSCILLATORS
Leading indicators are those created to proceed the price
movements of a security giving predictive qualities.
Two of the most well-known leading indicators are the Relative
Strength Index (RSI) and the Stochastics Oscillator
The Stochastic Oscillator compares where a security’s price
closed relative to its price range over a given time period.
Graphic Representation
%K Line = main line (solid line)
%D Line = moving average of %K Line (dotted line)
Variables
• %K Periods = time period used in calculation
• %D Periods = time period used in calculating moving average
CHART INDICATORS & OSCILLATORSStochastic Oscillator
x 100
Today’s Close - Lowest Low in %K Periods
Highest High in %K Periods - Lowest Low in %K Periods
41 - 38
46 - 38x 10037.5 =
CHART INDICATORS & OSCILLATORSStochastic Oscillator
Interpretation:
• Buy when %K or %D lines fall below oversold level
• Sell when %K or %D lines rise above overbought level
• Buy when %K line rises above %D line
• Sell when %K line falls below %D line
• Look for divergences
CHART INDICATORS & OSCILLATORSStochastic Oscillator
CHART INDICATORS & OSCILLATORSStochastic Oscillator
CHART INDICATORS & OSCILLATORSStochastic Oscillator
Negative divergence
CHART INDICATORS & OSCILLATORSStochastic Oscillator
Positive divergence
CHART INDICATORS & OSCILLATORS
Lagging indicators are those that follows price movements and
have less predictive qualities
Well-known lagging indicators are the moving averages, Bollinger
bands and MACD
Useful during trending periods but not during non-trending
periods
Tend to focus more on the trend and produce fewer buy-and-sell
signals
This indicator is comprised of two moving averages, which help to
measure momentum in the security
MACD = shorter term moving average - longer term moving average
Signal line = 9-day exponential moving average
CHART INDICATORS & OSCILLATORS
CHART INDICATORS & OSCILLATORS
CHART INDICATORS & OSCILLATORS
Indicators are used to form buy and sell signals are through
crossovers and divergence
Indicators are also used through divergence, which occurs when
the direction of the price trend and the direction of the indicator
trend are moving in the opposite direction
Two types of divergence - positive and negative. Positive
divergence occurs when the indicator is trending upward while
the security is trending downward
CHART INDICATORS & OSCILLATORS
When to use what
indicator/oscillator?
Study the Directional
Movement Indicator
(DMI)
1978 J. Welles Wilder
Measures the strength of
a prevailing trend or
whether movement
exists in the market
+ DI; - DI; 14 ADX
trading days
CHART INDICATORS & OSCILLATORS
Monetary Indicators - provide insights on external monetary
conditions affecting a security’s price. These basically deal with
economic information such as interest rates, money supply,
corporate debt, inflation, GNP, GDP etc. tells us what security
prices should do.
Sentiment Indicators - are studies on investor expectations
based on price. In large markets, studies may be done on odd lot
boards, the number of call/put ratios, premium on stock index
futures, bull/bear ratio. Tells us what investors expect prices to
do.
Momentum Indicators - are deeper studies on price such as
price/volume indicators, breadth index.Tells us what prices are
actually doing.
BLENDING TECHNICAL & FUNDAMENTAL
ANALYSIS (also INTERMARKET ANALYSIS)
• TA may confirm a FA finding
• FA is useful in identifying which security to invest in
• TA is useful for timing the investment
• Volume trends give additional insights to your research
• Tracking short term movements
• Tracking reactions over time
DISADVANTAGES OF BLENDING
It's History!
A simple chart cannot provide the investor with crucial long-
term fundamental information such as the future direction of
cash flows or earnings per share.
DISADVANTAGES OF BLENDING
The Crowd is Sometimes Wrong
It is possible that a stock that's being accumulated en masse this
week may be under heavy distribution the next. Conversely,
stocks that are being heavily sold this week may be under
accumulation in the weeks to come.
DISADVANTAGES OF BLENDING
Charts Don't Typically or Consistently Forecast Macro Trends
Charts also are generally unable to accurately forecast
macroeconomic trends.
Example, it is nearly impossible to look at a major player in the
oil and gas sector and decipher definitively whether OPEC
intends to increase the amount of oil it pumps, or whether a fire
that just started at a shipping facility in Venezuela will affect
near-term supplies.
DISADVANTAGES OF BLENDING
There is Subjectivity
When it comes to reading a chart, a certain amount of subjectivity
comes into play. Some may see a chart and feel that a stock is
basing, while another person might see it and conclude that there
is still more downside to be had.
EXAMPLES OF BLENDING
EXAMPLES OF BLENDING
EXAMPLES OF BLENDING
IMPROVED TRADING/INVESTING
Creating a System
• Information reaches you
• Check fundamentals of the security
• Look at the chart, start with the big picture
• Try to relate known incidents w/ price action
• Make references for current prices vs historical price
• Zoom in to current price performance
• Identify trends, patterns currently affecting price movement
• Check volume histogram & choice indicator/s
• Compute risk vs. reward
•Draw a strategy: how much to invest & when to enter/exit
• Manage your strategy
TECHNICAL REPORTING
THE TECHNICAL JABBER
HEADER:
.Name of Stock
.Type of Chart (line, bar, candlestick, equivolume, etc.)
.Indicators/oscillators used (stochastics, SMA, EMA, RSI, MACD)
.Volume window (simple or with histogram)
Optional:
.Overlays
.Author
CHART IMAGE (Single, double or triple window)
SUMMARY RECOMMENDATION: (hard or soft buy, sell, hold, combination,
other strategies)
TECHNICAL REPORTING
BODY
Big Picture
.Historical overview (general observation)
.Study of major trends
.Study of fan lines and retracements
.Study of patterns
.Study of volume
.Study of indicators/oscillators (positive or negative convergence,
divergence, overbought or oversold levels, positions,
configurations)
TECHNICAL REPORTING
TAIL
Close up
.Current trend
.Confirmatory or predictive configurations
Prognosis
.Possible scenarios (probable, adverse)
.Strategic recommendations (medium to long term activity)
.Tactical recommendations (short to medium term activity)
.Accumulation or distribution points
SOURCES OF CHARTS IN THE
PHILIPPINES:
• The PSE Website: www.pse.com.ph
• Bloomberg/Thomson Reuters
•Technistock & other vendors
• Trading participants/ Brokers
• Other charting software
RECOMMENDED READING:
•Technical Analysis from A to Z, , Steven B. Achelis, 1995; 2001
•Technical Analysis: Predicting Price Action in the Market, Elli
Gifford, 1995
•The Visual Investor: How to Spot Market Trends, , John J.
Murphy, 1996
•Beyond Candlesticks: New Japanese Charting Techniques
Revealed, A Wiley Finance Edition, Steve Nison, 1994
CHARTING SOFTWARE & DATA:
Contacting the data provider (Payment required):
1. Go to: http://financemanila.net/forum/
2. Register.
3. Look for the person with the name “dragon”
(administrator of this site).
4. Send “Private Message” (PM) indicating that you want to
subscribe to the “End of Day” (EOD) data service. For
reference mention Joseph Li
5. Pay for the data services, normally emailed mid
afternoon.
CHARTING SOFTWARE & DATA:
Obtaining free data (if you have the time to make one).
1. Go to http://www.pse.com.ph/
2. Click “Quotation Report” (left hand side of the PSE site)
3. Click on the applicable day
4. Cut and paste the data on excel or any software capable
of editing.
5. Edit the data in Excel or any software capable of editing
the date leaving only the symbol, Volume, High, Low, Open
Close fields.
6. Save the data.
7. Upload the data in your favorite charting software.
CHARTING SOFTWARE & DATA:
Recommended charting software: Metastock Version 10.1
(www.equis.com) one-time purchase cost of approximately $500
for the basic program. Add-ons available.
Other charting software options:
•Supercharts
•Telechart
•Amibroker
GAMBLING VS INVESTING
50/50
55/45
50/50
60/40
70/30
80/20
Opportunity!
TECHNICAL ANALYSIS
Charting Techniques
by
Leo Quinitio
www.pse.com.ph
CHART
COMPOSITION
Grid 0 100 200 300 400 500 600 700 800 900 1000
|______|______|______|______|______|______|______|______|______|______|______l______l
Arithmetic grid
1 10 100 1000
|___________________|___________________|__________________|
100 101 102 103
Logarithmic grid
Convenient for plotting
large numbers
Equal line segments represent multiples
by a constant factor
Its use would be limited by its lack of detail
can plot a great many more
years than is possible on a
linear scale
CHART
COMPOSITION
Grid
If we were to divide each broad segment
into nine segments and let the ticks
represent the years from 1 to 10, 10 to
100, and 100 to 1000, this is how it would
look:
Each broad segment is
subdivided in the same way
Each tick within a broad segment
represents a multiple of 10 over
the corresponding tick in the
previous segment. For example,
in the segment 100 to 101 the first
mark equals 2. In the segment
101 to 102 the first mark equals
20, and in the segment 102 to 103,
the first mark equals 200
The uneven spacing is because you are
working with the logarithmic function of these
actual numbers not the numbers themselves
log (10) = 1.00
log (20) = 1.30
log (30) = 1.48
log (40) = 1.60
log (50) = 1.70
log (60) = 1.78
log (70) = 1.85
log (80) = 1.90
log (90) = 1.95
100 101 102 103
CHART
COMPOSITION
Grid
Notice that the line
segment between 10
and 20 is equal to that
between 20 and 40,
which is equal to that
between 40 and 80
Similarly the segment between 10 and
30 is equal to that between 30 and 90
Comparison of
Investment Analyses
Definition
Advantages &
Disadvantages
A Study of Market
Psychology
Basic Assumptions
Origins & Evolution
Chart Patterns &
Formations
Chart Indicators &
Oscillators
Blending Technical &
Fundamental Analyses
Technical Reporting
SUMMARY
Elliot Wave
Classical Charting
Chart Composition
Chart Types
Chart Trend
Channels & Lines
SMA
EMA
WMA
Time series, triangular
variable
CHART INDICATORS & OSCILLATORS