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TECHNICAL ANALYSIS

Charting Techniques

by Leo Quinitio

www.pse.com.ph

Random Walk Theory
Author Burton Malkiel "A Random Walk Down Wall Street“ top-seller finance book
Stock price changes have the same distribution and are independent of each other, so the past movement or trend of a stock price or market cannot be used to predict its future movement.

Followers think that the market cannot be outperformed without assuming additional risk.
Critics say stocks actually form trends at length and it is possible to beat the market through careful study of buying & selling points.

It is impossible to outperform the overall market through expert stock selection or market timing. making it impossible for investors to either purchase undervalued stocks or sell stocks for inflated prices. . and that the only way an investor can possibly obtain higher returns is by purchasing riskier investments.Efficient Market Hypothesis It is impossible to "beat the market" because stock market efficiency causes existing share prices to always incorporate and reflect all relevant information. Stocks always trade at their fair value on stock exchanges.

is evidence that stock prices can seriously deviate from their fair values.Efficient Market Hypothesis A cornerstone of modern financial theory Believers argue it is pointless to search for undervalued stocks or to try to predict trends in the market through either fundamental or technical analysis. . which by EMH is impossible The 1987 stock market crash when the Dow Jones Industrial Average (DJIA) fell by over 20% in a single day. Warren Buffett has consistently beaten the market over long periods of time.

Balance Sheet Solvency Ratio FUNDAMENTAL ANALYSIS Cash Flows .

TECHNICAL ANALYSIS .

e. stocks/markets) Traditional economic + Business concepts = value of investment Examination of the above variables is called Valuation process Proponents believe that the market’s judgment of an issue’s fundamentals are determined by supply and demand variables that are already reflected in prices. . environmental & other factors Study of past market data such as prices + volume = predict future price movements (I.INVESTMENT ANALYSIS Fundamental Analysis Technical Analysis Method of forecasting future price movements of a security based on political.

INVESTMENT ANALYSIS Fundamental Analysis View from financial statements Technical Analysis View from charts Best employed for long term investing Best employed for short term trading Data utilized come out periodically Tends to focus on a specific sector Data utilized come out daily Focused on what “must” happen Focused on what happens .

VALUATION PROCESS Fundamental Analysis Technical Analysis Top Down Approach Bottom-up Approach Considers condition affecting Economy Financial Markets Industry Company .

VALUATION PROCESS Fundamental Analysis Technical Analysis Works best if all investors are logical and could separate emotions from investment decision Will succeed if the analyst finds overlooked data in identifying undervalued securities Works best in determining market sentiment and factor it in the creation of investment or trading decisions .

next week or next year? DON’T AIM TO PREDICT PRICES CONSISTENTLY & ACCURATELY Technical analysis is the answer!? NO! YES! AIM TO REDUCE RISKS & IMPROVE PROFITS Technical Analysis will improve investing? Make sensible investment decisions .EXPECTATIONS Should I buy today? What will the prices be tomorrow.

such as past prices and volume. . with charts as the primary tool.DEFINITION The study of prices. A method of evaluating securities by analyzing statistics generated by market activity.

Evolving quickly such that techniques today may be rendered incomplete or obsolete tomorrow.DEFINITION Once viewed as arcane or mystical but today it is part of every major investment or trading decision. Used as the basis for automated trading. .

ADVANTAGES Portability Price based trade or investment planning Does not require knowledge of many mathematical formulas .

DISADVANTAGES May not be used to predict future price action Not easy to use with IPOs May miss 20-25% of the movement It has a tendency to create self fulfilling prophecies Subjectivity .

A chart is a picture A picture is worth a thousand words… or probably a thousand dollars .

bonds. commodities. indices. Technical analysts believe that the historical performance of stocks and markets are indications of future performance. futures.Technical analysts do not attempt to measure a security's intrinsic value. options) . but instead use charts to identify patterns that can suggest future activity. mutual fund. Equally applicable on any security or tradable financial instrument (stocks.

In a shopping mall Fundamental analyst: will go to each store. Decision would be based on the patterns or activity of people going into each store. . study the product and then decide whether to buy it or not Technical analyst: will watch people go into the stores.

HUMAN ELEMENT Humans are not easily quantifiable nor predictable Many investment decisions are based on irrelevant criteria The price of a security is a consensus of at least two humans The price depends on human expectations .

HUMAN ELEMENT The breadth of market participants guarantees an element of unpredictability and excitement .

Why Do Prices Fluctuate? .

MARKET PSYCHOLOGY Each investors would have his or her own opinion about a certain security or any other object for that matter .

MARKET PSYCHOLOGY THE PRICE IS RIGHT GAME cellphone .

MARKET PSYCHOLOGY THE PRICE IS RIGHT GAME Cellphone Five years depreciated .

MARKET PSYCHOLOGY THE PRICE IS RIGHT GAME Cellphone previously owned by Hayden Kho .

MARKET PSYCHOLOGY MY CHOICE GAME Designer shoes .

MARKET PSYCHOLOGY MY CHOICE GAME Designer shoes .

MARKET PSYCHOLOGY MY CHOICE GAME Designer shoes .

MARKET PSYCHOLOGY MY CHOICE GAME Designer shoes .

MARKET PSYCHOLOGY MY CHOICE GAME Designer bags .

PRACTICAL MARKET PSYCHOLOGY
Logical: buyers want to buy at the lowest price possible

Competitive: buyers raise their bids in order to attract sellers

Emotional: buyers tend to be euphoric when price increases

PRACTICAL MARKET PSYCHOLOGY
Logical: sellers want to sell at the highest price possible

Competitive: sellers tend to lower their offer price in order to attract buyers

Emotional: sellers tend to panic when price drops

MARKET CYCLE
High price will urge sellers’ to cash-in

Euphoria sets in

More sellers compete to attract buyers
Panic sets in

Price becomes too cheap to be ignored by buyers

News of increasing price spreads, price gains momentum

More buyers compete to attract sellers

MARKET CYCLE Distribution .

History tends to repeat itself . Price moves in trends 3.BASIC ASSUMPTIONS 1. The market discounts everything 2.

ORIGINS Dow Jones Theory 1890 Basic Principles of Dow Theory: 1. intermediate or secondary (waves). tertiary (ripples)] 3. Averages discount everything 2. Market trends [primary (tide). Bull and bear markets 4. Volume goes with trend . Lines (tight sideways band) 5. A trend continues until it is reversed 7. Averages must confirm 6.

EVOLUTION (WEST) Dow Theory 1890s Elliot Wave 1938 Classical Charting .

EVOLUTION (EAST) Japanese Charting 1800s (Meiji Period) Kagi 1870s Candlesticks Renko Equivolume Ichimoku Heikin-Ashi .

ELLIOT WAVE Ralph Nelson Elliot The Wave Principle published in 1938 Based on Fibonacci ratios “golden ratio” = Nature's Law — The Secret of the Universe .

ELLIOT WAVE New out More people join Consolidation Profit taking Bargain hunting .

ELLIOT WAVE Excess Distribution Big move Big move Despair Accumulation .

ELLIOT WAVE short or truncated corrective impulse Top of wave 1 biggest wave Below bottom of wave 4 .

. it gives you an objective means of determining the probability of a future direction for the market.ELLIOT WAVE The Elliott Wave Principle does not provide certainty about any one market outcome. Instead.

CLASSICAL CHARTING Chart Composition Chart Types Chart Trend Channels Chart Patterns & Formations Chart Indicators & Oscillators .

The highest price traded for the period. The point where there were more sellers than buyers.The lowest price traded for the period.The first price traded for the period. Close – The last price traded for the period. . Low . An important consensus as all interested parties were able to “sleep on it”. High . Most often used price for analysis. The relationship of the open and close prices is considered most significant by technicians. The point where there were more buyers that sellers.CHART COMPOSITION Price Fields Open .

CHART COMPOSITION Price Fields

Volume – The number of shares traded during the period. Bid – The price a buyer is willing to pay Ask – The price a seller is willing to accept

CHART COMPOSITION Axis

Y= price X= time

Price range Time line

CHART COMPOSITION Grid Scaling

Arithmetic (or Linear)

CHART COMPOSITION Grid Scaling Semi Logarithmic .

CHART COMPOSITION Grid Scaling Arithmetic Scaling Semi-log Scaling .

CHART TYPES Line Chart .

CHART TYPES

high low

Pole Chart

CHART TYPES

Bar Chart

CHART TYPES
DAY 1 DAY 2 DAY 3 DAY 4 DAY 5 DAY 6 DAY 7 DAY 8 DAY 9 DAY 10 DAY 11 DAY 12 DAY 13 DAY 14 DAY 15 DAY 16 DAY 17 DAY 18 DAY 19 DAY 20 OPEN 6.00 6.00 5.90 5.80 5.90 5.90 6.00 6.10 6.30 6.70 6.70 6.70 6.70 6.70 6.70 6.70 6.70 6.70 6.80 6.80 PCOR HIGH LOW 6.00 6.00 6.00 5.90 5.90 5.90 5.90 5.80 5.90 5.80 6.00 5.90 6.10 6.00 6.10 6.00 6.70 6.30 6.80 6.60 6.70 6.60 6.80 6.70 6.70 6.60 6.70 6.70 6.80 6.70 6.70 6.70 6.80 6.70 6.80 6.70 6.80 6.80 6.70 6.70 CLOSE 6.00 6.00 5.90 5.90 5.90 6.00 6.00 6.00 6.60 6.70 6.70 6.70 6.70 6.70 6.70 6.70 6.70 6.70 6.70 6.70

Bar Chart Plotting Exercise

CHART TYPES Bar Chart Plotting Exercise .

CHART TYPES Point & Figure Chart .

20 5.20 Point & Figure Chart Plotting Exercise .20 5.10 5.40 5.90 4.40 5.20 5.CHART TYPES EDC CLOSE 5.00 5.40 5.40 5.40 5.30 5.30 5.60 5.20 5.20 5.80 5.00 4.20 5.

3 5.50 5.80 x x x x x xo oxoxo ox ox o x o 5.5 5.8 X X X X X XO OXOXO OX OX O O Point & Figure Chart Plotting Exercise .20 5.2 5.40 5.CHART TYPES 5.30 5.00 4.4 5.60 5.10 5.9 4.1 5.90 4.6 5.0 4.

CHART TYPES Candlestick Chart .

50 5.30 5.30 5.80 4.20 5.50 5.20 5.30 5.30 5.85 Candlestick Chart Plotting Exercise .20 5.20 5.20 5.20 5.90 4.20 5.90 4.40 5.95 5.30 5.80 4.40 5.30 5.00 5.95 5.95 4.40 5.85 5.40 5.80 4.90 4.95 4.95 4.95 4.30 5.00 5.00 5.10 5.40 5.30 5.20 5.00 5.90 4.95 4.80 4.20 4.20 5.80 5.90 4.10 4.80 4.40 5.85 5.40 5.20 5.00 4.00 4.50 5.20 5.CHART TYPES DAY 1 DAY2 DAY 3 DAY 4 DAY 5 DAY 6 DAY 7 DAY 8 DAY 9 DAY 10 DAY 11 DAY 12 DAY 13 DAY 14 DAY 15 DAY 16 DAY 17 DAY 18 DAY 19 DAY 20 4.90 4.40 5.50 5.10 4.30 5.20 5.85 4.60 5.50 5.10 5.00 5.40 5.20 5.60 5.10 5.30 5.60 5.10 5.30 5.40 5.95 4.

CHART TYPES Candlestick Chart Plotting Exercise .

CHART TYPES volume Equivolume Chart .

xClose) o Highest value in the set xLow = Min(Low.CHART TYPES Modified Formula xClose = (Open+High+Low+Close)/4 o Average price of the current bar xOpen = [xOpen(Previous Bar) + Close(Previous Bar)]/2 o Midpoint of the previous bar xHigh = Max(High. xOpen. xClose) o Lowest value in the set Heikin-Ashi (average bar) Chart . xOpen.

CHART TYPES Candlestick converted to Heikin-Ashi Heikin-Ashi (average bar) Chart .

CHART TYPES high high close open close open low low Anchor Chart .

CHART TYPES Thick lines are drawn when price breaks above the previous high price (>4%) and is interpreted as an increase in demand Thin lines are used to represent increased supply when the price falls below (>4%) the previous low Kagi (Focus) Chart .

CHART TYPES Constructed by placing a brick in the next column once the price surpasses the top or bottom of the previous brick by a predefined amount Renko (brick) Chart .

CHART TRENDS CHANNELS & LINES Plotting Support & Resistance .

CHART TRENDS CHANNELS & LINES Establishing Trends (channels & range) .

the more significant it becomes .CHART TRENDS CHANNELS & LINES Establishing Trends (channels & range) The more times a trend line is tested.

CHART TRENDS CHANNELS & LINES Trend Acceleration or Deceleration Angle of trends: Weak Healthy Overheated .

it becomes the new resistance .CHART TRENDS CHANNELS & LINES When support is broken.

it becomes the new support .CHART TRENDS CHANNELS & LINES When resistance is broken.

breakouts & breakdowns Trend Plotting Exercise .CHART TRENDS CHANNELS & LINES Identifying trends.

CHART TRENDS CHANNELS & LINES Historical support and resistance Historical Support & Resistance Plotting Exercise .

CHART TRENDS CHANNELS & LINES Historical support and resistance Historical Support & Resistance Plotting Exercise .

CHART TRENDS CHANNELS & LINES Historical support and resistance Historical Support & Resistance Plotting Exercise .

61.2%.6%. 38.8% and 100% .CHART TRENDS CHANNELS & LINES Retracements & Reversals Obtained by drawing a trendline between two extreme points and then dividing the vertical distance by the key Fibonacci ratios of 23. 50%.

8. 89. 55. 5. etc Any given number is approximately 1. 21. 13. 1. 2.CHART TRENDS CHANNELS & LINES Retracements & Reversals Fibonacci Numbers 1. 3.618 times the preceding number Each Fibonacci number is approximately 62% of the next higher number. 34. 38 is the inverse of 62 . 144.

CHART TRENDS CHANNELS & LINES Fanlines 100% 62% 50% 38% 0% Retracement & Reversal Plotting Exercise .

CHART TRENDS CHANNELS & LINES Arcs 100% 62% 50% 38% 0% Retracement & Reversal Plotting Exercise .

CHART TRENDS CHANNELS & LINES Pitch Forks tines handle X tines X X Retracement & Reversal Plotting Exercise .

CHART PATTERNS & FORMATIONS Reversal Patterns Rounding Bottom Saucer Top .

CHART PATTERNS & FORMATIONS Reversal Patterns Double Bottom Double Top .

CHART PATTERNS & FORMATIONS Reversal Patterns Triple/multiple Bottom Triple/multiple Top .

CHART PATTERNS & FORMATIONS Reversal Patterns Reverse Head & Shoulders Head & Shoulders .

CHART PATTERNS & FORMATIONS Reversal Patterns Spike Bottom Spike Top .

CHART PATTERNS & FORMATIONS Continuation Patterns Rising Tops Falling Tops .

CHART PATTERNS & FORMATIONS Neutral Patterns Usually accompanied by decreasing volume Wedge/Symmetrical Triangle .

CHART PATTERNS & FORMATIONS Neutral Patterns Ascending & Descending Triangles Broadening (Megaphone) Formation .

CHART PATTERNS & FORMATIONS Continuation Patterns Flags & pennants .

CHART PATTERNS & FORMATIONS Continuation Patterns Flags & pennants .

CHART PATTERNS & FORMATIONS Continuation Patterns Flags & pennants .

CHART PATTERNS & FORMATIONS Candlestick Continuation Patterns Three White Soldiers Three Black Crows .

CHART PATTERNS & FORMATIONS Candlestick Reversal Patterns Bullish Engulfing Bearish Engulfing .

CHART PATTERNS & FORMATIONS Candlestick Reversal Patterns Bullish Harami Bearish Harami .

CHART PATTERNS & FORMATIONS Candlestick Reversal Patterns Doji Star Dark Cloud Cover .

CHART PATTERNS & FORMATIONS Candlestick Reversal Pattern Morning Star .

CHART PATTERNS & FORMATIONS Candlestick Nuetral Patterns Sushi Roll .

CHART PATTERNS & FORMATIONS Continuation & Exhaustion Gaps Exhaustion gap Runaway (or measuring) gaps Breakaway gap .

CHART PATTERNS & FORMATIONS Continuation & Exhaustion Gaps Island Reversal .

EXERCISE .

EXERCISE .

EXERCISE .

EXERCISE .

VOLUME HISTOGRAMS Volume spikes may indicate large scale entry or exit of money .

VOLUME HISTOGRAMS Steep price increases not supported by volume are usually dangerous .

CHART INDICATORS & OSCILLATORS Indicators are essentially calculations based on the price and the volume of a security and measures factors such as money flow. volatility and momentum . trends.

CHART INDICATORS & OSCILLATORS Indicators are used as a measure to gain further insight into to the supply and demand of securities Also used to confirm price movement and the probability that the given move will continue Can also be used as a basis for trading as they can form buyand-sell signals .

CHART INDICATORS & OSCILLATORS Oscillators = indicators that are plotted within a bounded range fluctuate into overbought and oversold conditions based on set levels based on the specific oscillator usually 30 and 70 .

more useful during trending periods Predictive.CHART INDICATORS & OSCILLATORS Leading Lagging Confirmatory. strongest during periods of sideways or nontrending trading ranges Users need to be careful to make sure the indicator is heading in the same direction as the trend Better to have less entry and exit points Usually gives late entry and exit points Many buy and sell signals that make it better for choppy nontrending markets .

Two of the most well-known leading indicators are the Relative Strength Index (RSI) and the Stochastics Oscillator .CHART INDICATORS & OSCILLATORS Leading indicators are those created to proceed the price movements of a security giving predictive qualities.

CHART INDICATORS & OSCILLATORS Stochastic Oscillator The Stochastic Oscillator compares where a security’s price closed relative to its price range over a given time period. Graphic Representation %K Line = main line (solid line) %D Line = moving average of %K Line (dotted line) Variables • %K Periods = time period used in calculation • %D Periods = time period used in calculating moving average .

38 x 100 .Lowest Low in %K Periods 37.Lowest Low in %K Periods x 100 Highest High in %K Periods .CHART INDICATORS & OSCILLATORS Stochastic Oscillator Today’s Close .5 = 41 .38 46 .

CHART INDICATORS & OSCILLATORS Stochastic Oscillator Interpretation: • Buy when %K or %D lines fall below oversold level • Sell when %K or %D lines rise above overbought level • Buy when %K line rises above %D line • Sell when %K line falls below %D line • Look for divergences .

CHART INDICATORS & OSCILLATORS Stochastic Oscillator .

CHART INDICATORS & OSCILLATORS Stochastic Oscillator Negative divergence .

CHART INDICATORS & OSCILLATORS Stochastic Oscillator Positive divergence .

Bollinger bands and MACD Useful during trending periods but not during non-trending periods Tend to focus more on the trend and produce fewer buy-and-sell signals .CHART INDICATORS & OSCILLATORS Lagging indicators are those that follows price movements and have less predictive qualities Well-known lagging indicators are the moving averages.

longer term moving average Signal line = 9-day exponential moving average . which help to measure momentum in the security MACD = shorter term moving average .CHART INDICATORS & OSCILLATORS This indicator is comprised of two moving averages.

CHART INDICATORS & OSCILLATORS .

which occurs when the direction of the price trend and the direction of the indicator trend are moving in the opposite direction Two types of divergence .CHART INDICATORS & OSCILLATORS Indicators are used to form buy and sell signals are through crossovers and divergence Indicators are also used through divergence.positive and negative. Positive divergence occurs when the indicator is trending upward while the security is trending downward .

CHART INDICATORS & OSCILLATORS When to use what indicator/oscillator? Study the Directional Movement Indicator (DMI) 1978 J. . Welles Wilder Measures the strength of a prevailing trend or whether movement exists in the market + DI. 14 ADX trading days .DI.

GNP. inflation. These basically deal with economic information such as interest rates. premium on stock index futures. bull/bear ratio. tells us what security prices should do. money supply. GDP etc. In large markets. studies may be done on odd lot boards.are deeper studies on price such as price/volume indicators. Tells us what investors expect prices to do.are studies on investor expectations based on price. the number of call/put ratios.provide insights on external monetary conditions affecting a security’s price. breadth index. corporate debt. Sentiment Indicators . .CHART INDICATORS & OSCILLATORS Monetary Indicators .Tells us what prices are actually doing. Momentum Indicators .

BLENDING TECHNICAL & FUNDAMENTAL ANALYSIS (also INTERMARKET ANALYSIS) • TA may confirm a FA finding • FA is useful in identifying which security to invest in • TA is useful for timing the investment • Volume trends give additional insights to your research • Tracking short term movements • Tracking reactions over time .

DISADVANTAGES OF BLENDING It's History! A simple chart cannot provide the investor with crucial longterm fundamental information such as the future direction of cash flows or earnings per share. .

DISADVANTAGES OF BLENDING The Crowd is Sometimes Wrong It is possible that a stock that's being accumulated en masse this week may be under heavy distribution the next. stocks that are being heavily sold this week may be under accumulation in the weeks to come. . Conversely.

DISADVANTAGES OF BLENDING Charts Don't Typically or Consistently Forecast Macro Trends Charts also are generally unable to accurately forecast macroeconomic trends. Example. it is nearly impossible to look at a major player in the oil and gas sector and decipher definitively whether OPEC intends to increase the amount of oil it pumps. . or whether a fire that just started at a shipping facility in Venezuela will affect near-term supplies.

. while another person might see it and conclude that there is still more downside to be had. a certain amount of subjectivity comes into play. Some may see a chart and feel that a stock is basing.DISADVANTAGES OF BLENDING There is Subjectivity When it comes to reading a chart.

EXAMPLES OF BLENDING .

EXAMPLES OF BLENDING .

EXAMPLES OF BLENDING .

reward •Draw a strategy: how much to invest & when to enter/exit • Manage your strategy . patterns currently affecting price movement • Check volume histogram & choice indicator/s • Compute risk vs.IMPROVED TRADING/INVESTING Creating a System • Information reaches you • Check fundamentals of the security • Look at the chart. start with the big picture • Try to relate known incidents w/ price action • Make references for current prices vs historical price • Zoom in to current price performance • Identify trends.

MACD) . sell. hold. etc. bar. RSI. other strategies) .Indicators/oscillators used (stochastics.Type of Chart (line. combination. EMA.Volume window (simple or with histogram) Optional: . candlestick.) .TECHNICAL REPORTING THE TECHNICAL JABBER HEADER: .Author CHART IMAGE (Single.Overlays . equivolume.Name of Stock . SMA. double or triple window) SUMMARY RECOMMENDATION: (hard or soft buy.

TECHNICAL REPORTING BODY Big Picture .Study of patterns . positions. configurations) .Study of major trends . overbought or oversold levels.Study of indicators/oscillators (positive or negative convergence.Historical overview (general observation) .Study of volume . divergence.Study of fan lines and retracements .

Possible scenarios (probable.Strategic recommendations (medium to long term activity) .Confirmatory or predictive configurations Prognosis .TECHNICAL REPORTING TAIL Close up . adverse) .Current trend .Accumulation or distribution points .Tactical recommendations (short to medium term activity) .

SOURCES OF CHARTS IN THE PHILIPPINES: • The PSE Website: www.com.ph • Bloomberg/Thomson Reuters •Technistock & other vendors • Trading participants/ Brokers • Other charting software .pse.

. 1996 •Beyond Candlesticks: New Japanese Charting Techniques Revealed. 1995. Murphy.RECOMMENDED READING: •Technical Analysis from A to Z. 1994 . Achelis. Steven B. 1995 •The Visual Investor: How to Spot Market Trends. John J. 2001 •Technical Analysis: Predicting Price Action in the Market. Steve Nison. . A Wiley Finance Edition. Elli Gifford.

3. For reference mention Joseph Li 5.CHARTING SOFTWARE & DATA: Contacting the data provider (Payment required): 1. Go to: http://financemanila. 4.net/forum/ 2. Look for the person with the name “dragon” (administrator of this site). Pay for the data services. Register. normally emailed mid afternoon. Send “Private Message” (PM) indicating that you want to subscribe to the “End of Day” (EOD) data service. .

Click “Quotation Report” (left hand side of the PSE site) 3.ph/ 2. Go to http://www. Upload the data in your favorite charting software. Open Close fields.pse. High.com. Click on the applicable day 4.CHARTING SOFTWARE & DATA: Obtaining free data (if you have the time to make one). 1. 7. Low. Volume. . Edit the data in Excel or any software capable of editing the date leaving only the symbol. Save the data. 5. 6. Cut and paste the data on excel or any software capable of editing.

Other charting software options: •Supercharts •Telechart •Amibroker .1 (www.CHARTING SOFTWARE & DATA: Recommended charting software: Metastock Version 10. Add-ons available.equis.com) one-time purchase cost of approximately $500 for the basic program.

com.com.com.GAMBLING VS INVESTING Opportunity! 80/20 50/50 70/30 60/40 55/45 50/50 lgquinitio@pse.ph.ph . mavalino@pse.ph. leo_quinitio@yahoo.

com.TECHNICAL ANALYSIS Charting Techniques by Leo Quinitio www.ph .pse.

CHART COMPOSITION Grid 0 100 200 300 400 500 600 700 800 900 1000 |______|______|______|______|______|______|______|______|______|______|______l______l Convenient for plotting large numbers can plot a great many more years than is possible on a linear scale Arithmetic grid Its use would be limited by its lack of detail Equal line segments represent multiples by a constant factor 1 10 100 1000 |___________________|___________________|__________________| 100 101 102 103 Logarithmic grid .

CHART COMPOSITION Grid If we were to divide each broad segment into nine segments and let the ticks represent the years from 1 to 10. this is how it would look: Each broad segment is subdivided in the same way 100 101 102 103 Each tick within a broad segment represents a multiple of 10 over the corresponding tick in the previous segment.48 log (40) = 1.00 log (20) = 1. 10 to 100. in the segment 100 to 101 the first mark equals 2. For example. the first mark equals 200 The uneven spacing is because you are working with the logarithmic function of these actual numbers not the numbers themselves log (10) = 1.78 log (70) = 1.60 log (50) = 1.85 log (80) = 1.90 log (90) = 1.95 . In the segment 101 to 102 the first mark equals 20.30 log (30) = 1.70 log (60) = 1. and 100 to 1000. and in the segment 102 to 103.

which is equal to that between 40 and 80 .CHART COMPOSITION Grid Similarly the segment between 10 and 30 is equal to that between 30 and 90 Notice that the line segment between 10 and 20 is equal to that between 20 and 40.

SUMMARY Comparison of Investment Analyses Chart Composition Chart Types Chart Trend Channels & Lines Chart Patterns & Formations Definition Advantages & Disadvantages A Study of Market Psychology Basic Assumptions Origins & Evolution Chart Indicators & Oscillators Blending Technical & Fundamental Analyses Elliot Wave Classical Charting Technical Reporting .

CHART INDICATORS & OSCILLATORS SMA EMA WMA Time series. triangular variable .