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

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