Technical Analysis: Understanding Market Trends, Support, Resistance and Chart Patterns, Lecture notes of Investment Management and Portfolio Theory

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Principles

Market action discounts everything

• All information is already reflected by prices

Prices move in trends

• Markets trend up, down, or sideways (flat)

History trends to repeat itself

• Investors collectively repeat the behavior of the investors that

preceded them

Candlestick

DOW THEORY

The market has three

trends

- Up trend, Down trend and

Sideway

- A trend has 3 parts: primary,

secondary

and minor

November December2003 February March April May June July August September October November 2004 February March April May June V

SET (591.480, 614.990, 591.480, 614.990, +32.4800), pp (Dow 30) :: Retrace (2 Plots) *, pp (Dow 30) :: Fibonacci Ladder *, pp (Dow 30) :: Fibonacci Ladder *

Uptrend

Sideways Trend

• Time on a chart where prices lay flat or move

within a well - defined trading range. (or we

call that range bounce)

Can profit from the

clear lines of support

and resistance, which

allows them to manage

their risk.

What is support & resistance ???

• Support is the level at which demand for the stock is strong enough to keep the stock from dropping any further
• Resistance is the price level at which the selling pressure is strong enough to prevent the stock from rising further

Support and Resistance

Support and Resistance

Introduction to Chart Patterns

Chart Patterns - Head and Shoulders Top (Reversal)