Introduction to Stocks and Technical Analysis

Introduction to Stocks and Technical Analysis

• Major Indices

• S&P 500 – Large Cap (SPX~SPY)

• Dow Jones 30 – Industrial Average (DJX~DIA)

• NASDAQ 100 – Electronic Trading (NDX~QQQ)

• RUT 2000 – Small Cap (RUT~IWM)

• Symbol nomenclature

• 4 character symbols correspond to the NASDAQ

• 3 or less character symbols correspond to the NYSE and AMEX

Symbol nomenclature

the character in any symbol:

• D – New

• E – Delinquent in required filings with SEC

• F – Foreign

• J – Voting

• K – Nonvoting

• Q – Bankruptcy Proceedings

Chart types

• Line charts (graphs the close of each bar)

• Candlestick charts

• OHLC charts (Open, high, Low, Close)

Simple moving averages are calculated by dividing the sum of the close N days back and dividing by the number of data points Most widely used Moving Averages by Professionals are

• ____day

• ____day

• ____day

• Exponential moving averages put more weight on recent days than previous days

• Bollinger Bands are used to gauge conditions of overbought and oversold, most widely used settings are 20,2 which means we will use a 20 day simple moving average as the center and go 2 standard deviations to either side from the center to create the Bollinger Bands

Oscillators are also used to gauge oversold/overbought situations they include

• RSI

• Stochastic Oscillators (Slow)

• The MACD (Moving Average Convergence/Divergence) measures the separation between exponential moving averages, giving us a good idea of the trend and it’s strength

• Volume .It gives us an idea of sentiment, ideally volume will go up on up days in an uptrend and vice versa on downtrends

Example of stochastic + macd + volume

Trend patterns

More examples

Where do they bounce back to do a pull-in? They usually bounce where they have bounced before – blue circles What are the target prices? Targets are parallel to support or resistance, loser than support or resistance – yellow lines