Technical Analysis with shade343. Lecture 2
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In Lecture 2, We will cover the basics of Trends and trendlines.
A Trend & Change of trend
B Retracement
C Support & Resistance
A. TREND
A trend is a direction used to indicate the pattern of the price.
There are 3 different types of trends.
Uptrend : Series of higher highs, higher lows, and higher closes.
Downtrend : Series of lower highs, lower lows, and lower closes.
Sideways : Prices trading at broadly similar highs and lows.
CHANGE OF TREND
As the price flutuates greatly, a change of trend may occur.
Uptrend to Downtrend
(i) First signal is occurrence of a LOWER low.
(ii) Downtrend confirmed by the occurrence of a LOWER high.
Downtrend to Uptrend
(i) First signal is occurrence of a HIGHER high.
(ii) Uptrend confirmed by the occurrence of a HIGHER low.
Why do prices RISE in an uptrend?
o There are two activities in a market at any one time – buying and selling. There are two groups of traders – buyers and sellers. They oppose each other in the market, and price will move up or down depending on the strength of either buyers or sellers.
o If there is bullish news in the market, there are more buyers than sellers. The excess buyers then compete for the limited supply of sellers.
Result : prices are pushed up.
o As prices rise even higher, those who held the view that the market was going down eventually give up this belief and join the buyers, thus forcing prices up and creating an uptrend.
Why do prices FALL in a downtrend?
o If there is bearish news in the market, there are more sellers than buyers. The excess sellers then compete for the limited supply of buyers.
Result : prices are push down.
o As prices fall lower, those who held the view that the market was going up eventually give up this belief and join the sellers, thus forcing prices down and creating a downtrend. -
B. RETRACEMENT OR CORRECTION
A retracement or correction is a temporary price movement (up or down) against the prevailing trend. There are many possible explanations why such an event may occur.
Why do prices retrace or correct down in the uptrend?
After prices have risen significantly, those who have bought decide to sell out to take profit.
At the same time, some of those that sold earlier at lower levels may find it even more attractive to sell again at the higher levels.
Result : Prices start to fall or correct/retrace.
Why do prices retrace or correct up in a downtrend?
After prices have fallen significantly, those who have sold decide to buy back to take profit.
At the same time, some of those who bought earlier at higher levels may find it even more attractive to buy again at the lower prices.
Result : prices start to rise or correct/retrace.
Why do markets CONGEST or go SIDEWAYS?
o Due to lack of factors to drive a market consistently in one direction, prices drift up and down.
Result : prices trade in a range. -
C. SUPPORT & RESISTANCE
SUPPORT
Price area where a falling market encounters buying which drives prices up.
Support Level
There are many methods to forecast the support level in a market. Using price history alone, the support level in the future is the most recent major low price in the chart.
Break of nearest support
Once the nearest support is penetrated, the previous lower low becomes the support.
RESISTANCE
Price area where a rising market encounters selling which turns prices down.
Resistance Level
There are many methods to forecast the resistance level in a market. Using price history alone, the resistance level in the future is the most recent major high price you can find in the chart.
Break of nearest resistance
Once the nearest resistance is penetrated, the previous high becomes the next resistance.
Strength of a Support/Resistance Level
Strength of a support/resistance level depends on how long it has taken to establish the support/ resistance. The longer it takes to form, the stronger the support/ resistance level.
REVERSAL OF ROLE OF SUPPORT & RESISTANCE
Support turn resistance
o In a downtrend, the recent low point which is a support level, when penetrated, assumes the role of resistance as price retraces UP.
Resistance turn support
o In an uptrend, the recent high point which is a resistance level, when penetrated, assumes the role of support as price retraces DOWN.
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I will post some illustrations on trendlines as soon as I find a way to...
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Thank you for your kind efforts, Ill be following this thread.
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Haha. No prob. Im having holidays now so I got time to do this.Originally posted by Li Ka Shing:Thank you for your kind efforts, Ill be following this thread. Other than that, Im busy spending my time researching on REITs and Funds for my Final year project . -
teach me how to become rich by investing please.Originally posted by shade343:Haha. No prob. Im having holidays now so I got time to do this. Other than that, Im busy spending my time researching on REITs and Funds for my Final year project . -
PLS READ LECTURE 1 OF MY TA LECTURES. Especially the first part. Its very important.Originally posted by hisoka:teach me how to become rich by investing please.
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Originally posted by shade343:
Why not just cut and paste a chart, like posting a photo here. You can draw the trendline on the chart.
I will post some illustrations on trendlines as soon as I find a way to... -
I drew my trendlines in Microsoft word....And I realised I cant put it here...Originally posted by Li Ka Shing:Why not just cut and paste a chart, like posting a photo here. You can draw the trendline on the chart. -
Originally posted by shade343:
Eh, wrong lah.
[
Why do prices RISE in an uptrend?
o There are two activities in a market at any one time – buying and selling. There are two groups of traders – buyers and sellers. They oppose each other in the market, and price will move up or down depending on the strength of either buyers or sellers.
o If there is bullish news in the market, there are more buyers than sellers. The excess buyers then compete for the limited supply of sellers.
Result : prices are pushed up.
o As prices rise even higher, those who held the view that the market was going down eventually give up this belief and join the buyers, thus forcing prices up and creating an uptrend.
Why do prices FALL in a downtrend?
o If there is bearish news in the market, there are more sellers than buyers. The excess sellers then compete for the limited supply of buyers.
Result : prices are push down.
o As prices fall lower, those who held the view that the market was going up eventually give up this belief and join the sellers, thus forcing prices down and creating a downtrend.
[/b]
Buyers and sellers are always the SAME as in for every buyer, there is a seller.
Prices rise because buyers are willing to bid a higher price and sellers are able to sell at a higher price.
Prices fall because sellers are willing to offer at a lower price and buyers are able to buy at a lower price.
Your course got go through professional vetting or not? -
Thanks for the other reasons you stated. I did not include them as I thought it was common sense.Originally posted by charlize:Eh, wrong lah.
Buyers and sellers are always the SAME as in for every buyer, there is a seller.
Prices rise because buyers are willing to bid a higher price and sellers are able to sell at a higher price.
Prices fall because sellers are willing to offer at a lower price and buyers are able to buy at a lower price.
Your course got go through professional vetting or not?
However, buyers and sellers are NOT ALWAYS the same. There may be more buyers than sellers and vice versa. If for every buyer there is a seller, buy volume=sell volume. -
Hello, when you buy something, someone must be selling it to you right?Originally posted by shade343:Thanks for the other reasons you stated. I did not include them as I thought it was common sense.
However, buyers and sellers are NOT ALWAYS the same. There may be more buyers than sellers and vice versa. If for every buyer there is a seller, buy volume=sell volume.
You are refering to bid and offer on the stock exchange. It is not buying/selling volume per se as it only implies the price people are willing to buy/sell for the stock.
More people bidding at the bid price does not imply price will go up if they are not willing to hit the offer price and vice versa.
I can have 1,000,000 lots queuing to buy at $14 for DBS and 1 lot offered to sell at $14.10. Price will not go up if "buyers" do not hit the offer. It is only the willingness to buy at a higher price or sell at a lower price that moves the market and hence prices. Not because there are more "buyers" than "sellers".
You are refering to "buyers" and "sellers" as those queueing to buy/sell in the market. However, they have not bought or sold anything until someone hits the bid/offer.
But don't believe what I say.
You know I talk crap everyday in here. -
Must see the portfolio of the each stock you buy
See how the funds are being allocated
Then decide -
Technical anylysis is just another tool the gambling operators use to induce people to gamble. The gullible think that they have something concrete to go on when they use technical analysis.
Gambling is gambling. In the long run you will end up losing all you have. if you become an addict, you might end up dead. Many gambling addicts wish that they were dead because the addiction is worse than death.
It is very simple. When you are lucky, you win and the market is always there waiting for you to become unlucky.
When you are unlucky, you exit because you run out of money. Technical anylysis is there to trick you into thinking that there is more to it than "luck." It is what kills you in the end, the illusion that it is skill and not luck. -
The basic idea here is this. For the price to go up, the power of buyers must outnumber the power of sellers. So yah, when excess buyers compete with the limited number of sellers(assuming a situation where there is bullish news), some of the buyers would offer a higher price. Why would people offer a higher price if there is less buyers around? Its a case of demand and supply.Originally posted by charlize:Hello, when you buy something, someone must be selling it to you right?
You are refering to bid and offer on the stock exchange. It is not buying/selling volume per se as it only implies the price people are willing to buy/sell for the stock.
More people bidding at the bid price does not imply price will go up if they are not willing to hit the offer price and vice versa.
I can have 1,000,000 lots queuing to buy at $14 for DBS and 1 lot offered to sell at $14.10. Price will not go up if "buyers" do not hit the offer. It is only the willingness to buy at a higher price or sell at a lower price that moves the market and hence prices. Not because there are more "buyers" than "sellers".
You are refering to "buyers" and "sellers" as those queueing to buy/sell in the market. However, they have not bought or sold anything until someone hits the bid/offer.
But don't believe what I say.
You know I talk crap everyday in here.
But anyway, thanks for you contribution. -
Yes but do you agree that when the buyers buy something, someone has to sell it to them?Originally posted by shade343:The basic idea here is this. For the price to go up, the power of buyers must outnumber the power of sellers. So yah, when excess buyers compete with the limited number of sellers(assuming a situation where there is bullish news), some of the buyers would offer a higher price. Why would people offer a higher price if there is less buyers around? Its a case of demand and supply.
Buyer buys 1 lot of DBS = Seller sells 1 lot of DBS.
Again, prices go up because of the WILLINGNESS to buy at a higher price. Buyer will still equal seller. More people wanting to buy but not willing to pay a higher price will not move prices at all.
Ok, ok.
This will be my last post for this thread.
Up to you if you think I am talking crap. -
Pls read my lecture 1 notes. I dont really depend on TA to make investment decisions. Im more of a fundamentalist. TA is useful in the sense that it provides an alternative way to forecast price movements other than just using FA.Originally posted by casino_king:Technical anylysis is just another tool the gambling operators use to induce people to gamble. The gullible think that they have something concrete to go on when they use technical analysis.
Gambling is gambling. In the long run you will end up losing all you have. if you become an addict, you might end up dead. Many gambling addicts wish that they were dead because the addiction is worse than death.
It is very simple. When you are lucky, you win and the market is always there waiting for you to become unlucky.
When you are unlucky, you exit because you run out of money. Technical anylysis is there to trick you into thinking that there is more to it than "luck." It is what kills you in the end, the illusion that it is skill and not luck.
TA started out as an art but it has now evolved to a science with many sophisticated tools to forecast price movements. -
If you are talking about futures markets, yes. For the stock markets, the companies can theorectically sell more shares.Originally posted by charlize:Yes but do you agree that when the buyers buy something, someone has to sell it to them?
Buyer buys 1 lot of DBS = Seller sells 1 lot of DBS.
Again, prices go up because of the WILLINGNESS to buy at a higher price. Buyer will still equal seller. More people wanting to buy but not willing to pay a higher price will not move prices at all.
Ok, ok.
This will be my last post for this thread.
Up to you if you think I am talking crap. -
Sell to whom?Originally posted by casino_king:If you are talking about futures markets, yes. For the stock markets, the companies can theorectically sell more shares.
Buyer right? -
CB, make me post in here again.
Fuck.
No more.
I'm out. -
actually to sidetrack there should be enuf shares on the market for any 1 counter to buy or sell, reasoning is because many fund managers keep majority of their shares they bought at IPO for div play, and many just "lend" back these shares to SGX to earn interest to increase investment earnings as well rather than just sitting on the shares.
What SGX does is that it re-lends the shares to anybody wanting to "short" in other words SGX becomes a market maker for shortseller, so if somebody needed to "short" 1000 lot of DBS shares it would need to borrow from SGX but to prevent SGX from being "caught-out", the settlement of short positions is T+0 that means sameday just in case the original owner of that share block suddenly needed to unload in a hurry and didn't want to lend to SGX anymore. -
To play very safe and never lose a cent...put your money in fixed deposits and earn interest
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Yes that is correct. At the end of the day, amount of bought shares=amount of shares sold. You were not clear in your earlier post.Originally posted by charlize:Yes but do you agree that when the buyers buy something, someone has to sell it to them?
Buyer buys 1 lot of DBS = Seller sells 1 lot of DBS.
Again, prices go up because of the WILLINGNESS to buy at a higher price. Buyer will still equal seller. More people wanting to buy but not willing to pay a higher price will not move prices at all.
Ok, ok.
This will be my last post for this thread.
Up to you if you think I am talking crap.
Correct, and for that willingness to occur, there must be a large pool of buyers competing with limited sellers right?
Thanks for your contribution again. -
Actually no. They create more shares to sell and if no buyers at a certain price, they keep it and sell next time.Originally posted by charlize:Sell to whom?
Buyer right? -
According to the listing manual, at least 30% of a company's share must be in the hands of the public. A counter is liable to be suspended if less than 10% are in the hands of the public.Originally posted by KumSioJui:actually to sidetrack there should be enuf shares on the market for any 1 counter to buy or sell, reasoning is because many fund managers keep majority of their shares they bought at IPO for div play, and many just "lend" back these shares to SGX to earn interest to increase investment earnings as well rather than just sitting on the shares.
What SGX does is that it re-lends the shares to anybody wanting to "short" in other words SGX becomes a market maker for shortseller, so if somebody needed to "short" 1000 lot of DBS shares it would need to borrow from SGX but to prevent SGX from being "caught-out", the settlement of short positions is T+0 that means sameday just in case the original owner of that share block suddenly needed to unload in a hurry and didn't want to lend to SGX anymore.