Accounting 106

Group Reporting Notes

Topic: Indicators and Oscillators

A. Basics of technical Analysis Concepts

What is Technical Analysis?

Technical Analysis is a process used to examine and predict the future prices of
securities by looking at things like price movements, charts, trends and other factors. It
focuses on signals to delineate good investments and trading securities by examining
investment’s trends through its trading data and other statistical elements such as
financial charts.
Technically, traders that works with technical analysis assumes that all available
information is already factored into the current market price that represents the intrinsic
value of a certain product. Technical traders believe that the market movement is not
random, hence, market prices move in identifiable and repeatable patterns that can be
used to gain an edge in the markets.

Key point: Technical analysis is a method trader uses to forecast where they think the
price of the market may move. Through this analysis, traders identify potential “entry
and exit points” for any trading opportunities that their analysis highlights.

Momentum
Momentum measures the speed of the price changes or movements of a particular
stock or security. Simply put, momentum tracks and measures the rate of price increases
or decreases over a set period of time, usually taking into account both price and volume
information

Support and Resistance

 Support and resistance refers to price levels within a market where the potential
for a reaction is higher than other levels. It works in the principle that what happened in

the past, is likely to happen again in the future. So it’s possible to identify levels of
support and resistance by looking at the past price action and identifying where price had
a strong reaction. A key characteristic of support and resistance is once a level is broken,
it becomes the opposite of what it was before. This means that if a strong level of
resistance is broken and price moves past it, when price returns to this level, there is a
good chance that the level will act as a strong area of support for price and vice versa.

Breakout and Reversal

Reversal are patterns on a chart that signal an end to a current trend and a change
in direction of the security’s price. It is important for analysts to know if the
security’s price will change direction because it will allow them to either exit their
current position if they are holding it, or enter into a short position. On the other hand, a
breakout depicts a price move that exceeds a defined resistance level and proceeds to
sustain higher prices until the next resistance level is formed.  Breakouts are usually
accompanied with a surge in volume indicating motivated buying demand that surpasses
existing supply as prices rise.

Resources:
https://school.stockcharts.com/doku.php?id=overview:ta_101:ta101_part01
https://www.investorsunderground.com/stock-breakouts/
https://thedailycpa.com/fundamentals-of-technical-analysis-reversal-patterns/