Technical indicators have become more important than Fundamentals. With the proper use of technical indicators investors are able to determine what stocks to buy or sell and when. The most important aspect of technical indicators are the PARAMETERS.
Support Levels Resistance Levels
Moving Averages Bollinger Bands
Linear Regression LinesMACD
Volume Bars Balance of Power *
Stochastics Price Rate of Change
Time Segmented Volume * Relative Strength
Money Stream * Wilders RSI
VOLUME
It is very important to remember that volume goes with the trend.This
means it is normal for volume to increase along with prices and to decrease as
prices decline.
When volume is going with the trend i.e.. moving in the direction of the price
it is telling us one thing and one thing only, the prevailing trend is healthy as
far as this relationship is concerned.
When prices are declining, it is normal for volume to decline aswell .This
means downside breakouts from price patterns often occur with relatively
low volume.
If volume expands as prices decline, this emphasizes the bearishness of the
breakout, since it represents greater enthusiasm of sellers.
As with all upside breakouts, volume is key.It must expand on the breakout
to indicate enthusiasm and therefore a change in the supply and demand in
favor of demand.
MOVING AVERAGES
A moving average is the sum of whatever you are examining (closing prices of a stock) for a number of days (20, 30, 50,100, or 200) then divided by the total number of days.
Example
$56.06 + $59.31 + $56 + $55.56 + $56 + $57 and $56.26 = $393.93
Now divide $393.93 by 7 (total number of days) = $56.27 average price.
SIMPLE vs. EXPONENTIAL
Simple Moving Average:Less of a reaction allowing for a slower and more affective signal.
Exponential Moving Average:More reactive causing a faster and less affective signal.
Different time frames are used during different market conditions. The shorter the moving average the faster the movement will be.
VOLUME with a M.A.
Often you’ll find that investors will add a moving average to the volume to alert them when the volume has increased above its daily average. This can be an early sign of a positive or negative break out. The moving average time frame varies with each investors objectives and the market conditions.
