Milo's TA discussion and sharing thread

[Sinkie]

Double Top

VIew a more detailed Double Top Chart Pattern Video. The Double Top technical analysis charting pattern is a common and highly effective price reversal pattern.

The chart below of Altria (MO) stock illustrates the Double Top reversal pattern:

First High: Bulls push prices upwards making new highs; however, these new highs are short lived and prices retreat.
Second High: Prices don't retreat for long because bulls make another run, making a similar high. Nevertheless, this is bearish, because bulls were unable to push prices higher; bears held their ground at the previous high level. The bears push prices back to support (Confirmation line); this is a pivotal moment - either bulls will make another push higher or bears will take control and push prices even lower, more than likely taking over for good.

Double Top Sell Signal
- Sell when price closes below the confirmation line.

Note that traders expect a significant increase in volume to accompany the confirmation line break; if there is very little volume when price pierces the confirmation line, then the move downward is suspect. Small volume usually means weak support of price movement (see: Volume).

Another similar chart pattern is the Head & Shoulders Pattern (see: Head & Shoulders). The opposite of the Double Top is the bullish Double Bottom (see: Double Bottom).

 

[Sinkie]

Flag

Watch a video on the Flag Chart Pattern as well as the related Pennant Chart Pattern.

The Flag pattern usually occurs after a significant up or down market move.

After a strong move, prices usually need to rest. This resting period usually occurs in the shape of a rectangle, thus the word "flag".

The Flag is considered a continuation pattern because after resting, prices will usually continue in the direction they did before.

The chart of eBay (EBAY) shows many Flag patterns:

Flag Buy Signal

When price has moved higher and prices have consolidated, creating a channel of support and resistance, a buy signal is given when prices penetrate and close above the upward resistance line.

Flag Sell Signal

Assuming prices previously moved downward, then after a period of price consolidation, a sell signal is given when price penetrates and closes below the support line.

For more information on the concept of support and resistance, (see: Support & Resistance). Another similar pattern discussed is Triangles (see: Triangles).

 

[Sinkie]

Windows (Gaps)

Windows as they are called in Japanese Candlestick Charting, or Gaps, as they are called in the west, are an important concept in technical analysis.

Whenever, there is a gap (current open is not the same as prior closing price), that means that no price and no volume transacted hands between the gap.

A Gap Up occurs when the open of Day 2 is greater than the close of Day 1. Contrastly, a Gap Down occurs when the open of Day 2 is less than the close of Day 1.

There is much psychology behind gaps.

Gaps can act as:
Resistance: Once price gaps downward, the gap can act as long-term or even permanent resistance.

Support: When prices gap upwards, the gap can act as support to prices in the future, either long-term or permanently.
Windows Example - Gaps as Support & Resistance

The chart below of eBay (EBAY) stock shows the gap up acting as support for prices.

Often after a gap, prices will do what is referred to as "fill the gap". This occurs quite often. Think of a gap as a hole in the price chart that needs to be filled back in.

Another common occurance with gaps is that once gaps are filled, the gap tends to reverse direction and continue its way in the direction of the gap (for example, in the chart above of eBay, back upwards).

The example of eBay (EBAY) above shows the gap acting as support. Traders and investors see anything below the gap as an area of no return, after all, there was probably some positive news that sparked the gap up and is still in play for the company.

The chart below of Wal-Mart (WMT) stock shows many instances of gaps up and gaps down. Notice how gaps down act as areas of resistance and gaps up as areas of support:

Gaps are important areas on a chart that can help a technical analysis trader better find areas of support or resistance.

For more information on how support and resistance work and how they can be used for trading, (see: Support & Resistance). Also, Gaps are an important part of most Candlestick Charting patterns; (see: Candlestick Basics) for a list of candlestick pattern charts and descriptions.

 

[Sinkie]

Head and Shoulders

Watch the Head and Shoulders Video and the Inverse Head and Shoulders Video.

The Head and Shoulders chart pattern is a heavily used and quite profitable charting pattern, giving easily understood buy and sell signals.

The chart of Home Depot (HD) below shows a Head and Shoulders pattern:

Head and Shoulders Components

Left Shoulder: Bulls push prices upwards making new highs; however these new highs are short lived and prices retreat.
Head: Prices don't retreat for long because bulls make another run, this time succeeding and surpassing the previous high; a bullish sign. Prices retreat again, only to find support yet again.
Right Shoulder: The bulls push higher again, but this time fail to make a higher high. This is very bearish, because bears did not allow the bulls to make a new higher or even an equal high. The bears push prices back to support
(Confirmation line); this is a pivotal moment - Will bulls make another push higher or have the bears succeeded in stopping the move higher.

Head and Shoulders Sell Signal

If prices break the confirmation support line, it is clear that the bears are in charge; thus, when price closes below the confirmation line, a strong sell signal is given.

Note that a downward sloping confirmation line is generally seen as a more powerful Head & Shoulders pattern, mainly because a downward sloping confirmation line means that prices are making lower lows.

Reverse Head and Shoulders

The opposite of the Head & Shoulders pattern is the Reverse Head & Shoulders pattern which is another strong pattern, this time a bottoming pattern.

Reverse Head and Shoulders Components

The reasoning behind a Head & Shoulders pattern is as follows:

Left Shoulder: Bears push prices downwards making new lows; however, bulls begin to return and push prices slightly higher.
Head: Price gains don't last long before bears return and push prices even lower than before; a bearish sign. Prices then find buyers at the new lower prices.
Right Shoulder: The bears push downward again, but this time fail to make a lower low. This is generally seen as bullish sign, bears were unable to push prices further down. Decision time occurs when the price is pushed higher back to support (Confirmation line); either bears will push prices back down or bulls will push prices higher, regaining control of the stock, future, or currency pair.

Reverse Head and Shoulders Buy Signal

When price closes above the confirmation line, a strong buy signal is given.

Usually an upward sloping confirmation line is seen as a more powerful Reverse Head & Shoulders pattern, mainly because an upward sloping confirmation line means that prices are making higher highs.

Volume analysis is important when using the Head & Shoulders chart pattern. How to incorporate volume into the study of the Head & Shoulders pattern is discussed next.
Volume and Head and Shoulders

When the confirmation line of a Head & Shoulders pattern breaks to the downside, a large amount of volume should occur as well.

The chart below of General Electric (GE) shows a sharp increase in volume when the confirmation line of the Head & Shoulders pattern was broken:

In addition to the sharp increase in volume, the gap down on the chart of GE also gave strong indication to sell when the confirmation line was pierced.

The same concept applies to a Reverse Head & Shoulders pattern, the break of the confirmation line should be accompanied by an increase in volume.

The chart below of Gold futures illustrates a rise in volume when the confirmation line was pierced:

The Head & Shoulders pattern is a highly effective classic charting pattern. Other similar chart patterns are the Double Top formation (see: Double Top) and the Double Bottom formation (see: Double Bottom).

 

[Sinkie]

Support and Resistance

For videos on Support and Resistance chart patterns, please see the Rectangle Chart Pattern Video and the Trendlines Chart Pattern Video.

Support and Resistance is one of the most important and fundamental part of technical analysis:

Support: Prices should rise after touching support.
Resistance: Prices should fall after hitting resistance.

An example of price respecting support and resistance lines is given next in the chart of the Semiconductor HOLDRS (SMH):

When support and resistance has been firmly established:

Buy Signal - Buy when price touches the support line

Sell Signal - Sell when price touches the resistance line.

Breaking Support & Resistance
Another fundamental concept of support and resistance is listed next and is shown in the chart below of Alcoa (AA) stock:

-If price breaks below support, then that support level becomes the new resistance level.
-If price breaks above support, then that resistance level becomes the new support level.

Support and Resistance are basic yet vitally important technical analysis tools.

On every time frame, intra-day, daily, weekly, and monthly, Support and Resistance levels are respected by traders. Knowledge of these levels helps keep a trader on the correct side of the market, thus helping the trader profit.

 

[Sinkie]

Triangles

For a more detailed description of the triangle chart pattern in a video format, see Symmetrical, Ascending, & Descending Triangle Chart Pattern Video. The Triangle is a continuation pattern using the concepts of support and resistance and price breakouts.

Generally, when prices make significant moves, they go through a period of resting. Usually with a Triangle pattern, the price consolidation period consists of higher lows and lower lows, forming the shape of a "triangle". When the resistance and support lines (see: Support & Resistance) begin converging, price will usually burst out of the consolidation area and resume trending in the direction that prices have been moving previously.

Triangle Breakout Buy Signal
The signal to buy is given when the resistance line is penetrated to the upside. The signal is generally stronger if prices have been in an uptrend prior to the upside breakout.

Triangle Breakout Sell Signal
A sell signal occurs when the support line is penetrated to the downside. Usually the sell signal is considered stronger if prices have been in a downtrend prior to the downside breakout.

Two other closely related variants of the Triangle pattern are the Ascending and Descending Triangle pattern; these two patterns are shown next.

Ascending & Descending Triangles
Two closely related variants of the Triangle pattern are the Ascending and Descending Triangle pattern; these two patterns are shown below in the chart of the 100 ounce Gold futures:

Ascending Triangle
An Ascending Triangle is viewed as being more bullish than the regular Triangle patterns. With an Ascending Triangle, higher lows are being made (bullish sign) and sometimes higher highs are being made (also a bullish sign).

Ascending Triangle Buy Signal
As with the regular Triangle formation, the Ascending Triangle gives a buy signal when the resistance line is penetrated to the upside. Also, the signal is generally stronger if prices have been in an uptrend prior to the Ascending Triangle and upside breakout.

Descending Triangle
The Descending Triangle is viewed as being more bearish than the regular Triangle patterns. When a Descending Triangle is formed, lower lows are being made (bearish sign) and quite often, lower highs are being made (generally seen as bearish).

Descending Triangle Sell Signal
With the Descending Triangle formation, a sell signal occurs when the support line is penetrated to the downside. Traders usually view the sell signal as being stronger if prices have been in a confirmed downtrend prior to the Descending Triangle formation and downside breakout.

The Triangle formation is an effective chart analysis tool for placing buy and sell orders. A similar chart formation is the Flag pattern (see: Flag).

 

[Seannie]

2011 they say 2012 will collapse, 2012 say 2013 collapse, now already Sept 2013 (next wk) and u saying 2014 will collapse. how about 2015 and 2016 ?

Markets will eventually collapse and grow stronger, so i dont really know your statement is out of jealousy (cos u didnt invest and make some $) or u say to feel good.

But I think u are just saying to feel good. Good luck hehe.

Im saying this out of goodwill for everybody to take cautions. Crash will come soon. I do not need to support or verify my statements. Time will tell. Assets like property, gold & share will suffer but does not necessary mean its end of world. Just remember what i have said & keep your cash well & safe under pillow after this year. If u really want to stay invested, equities is your best option becos stocks still have ups and downs. But property & gold go in a 10yr cycle. 10yr up 10yr dwn there is no in between. Unless u can suffer the pain for a decade. I wish all well.

 

[wahkao3]

Im saying this out of goodwill for everybody to take cautions. Crash will come soon. I do not need to support or verify my statements. Time will tell. Assets like property, gold & share will suffer but does not necessary mean its end of world. Just remember what i have said & keep your cash well & safe under pillow after this year. If u really want to stay invested, equities is your best option becos stocks still have ups and downs. But property & gold go in a 10yr cycle. 10yr up 10yr dwn there is no in between. Unless u can suffer the pain for a decade. I wish all well.

i intend to protect myself with a stop loss
You know how to create automatic stop loss on SGX?

 

[SpeedingBullet]

wah Sinkie... kow tow.. +1 for ur efforts

 

[supratentorium]

i intend to protect myself with a stop loss
You know how to create automatic stop loss on SGX?

Astute comment. A stoploss, an exit plan. The market can tank for all one cares, you are already out.

 

[wahkao3]

Hi everyone here, I did a test of the MACD trading system on SGX and here are the results. hope it will provide good insights on the strength and weakness on the MACD method if you were to actually put your own money and trade on its signals

MACD Cross over
- Entry condition :Buy upon Cross over of [ 12-day (EMA) less the 26-day EMA ] With [ its own 9 day EMA ]
- Exit condition :Sell upon Reverse Cross over of [ 12-day (EMA) less the 26-day EMA ] With [ its own 9 day EMA ]

 

[wahkao3]

Astute comment. A stoploss, an exit plan. The market can tank for all one cares, you are already out.

thanks
I am quite surprise a lot of ppl dont have exit plan.
An exit plan is much more important than entry plan!

 

[Seannie]

i intend to protect myself with a stop loss
You know how to create automatic stop loss on SGX?

Simple rule. Buy only at low prices. Dont chase when prices are already too high. If a stock is trending high, i hold long position. Once it start to descend, say bye to it temporary and buy in again when it resume upwards. Based on 70 days moving average. When looking at stocks look at the prices not at its value. Once a stock has been chased up, it becomes overvalued and its price will drop in time to come, esp when fundamentals are unable to support or justify its price. Dont just look at a soecified stock, you have to look at overall picture as well. If QE is being tapered, it will soon spelt the end of the money game. Stocks will start to drop. When interest rates are raised, the drop will become even bigger. Just be very cautious in your trading from now onwards till next year will be a very volotile market. $ will be made when u are able to capitalise on others' mistakes.

 

[wahkao3]

Simple rule. Buy only at low prices. Dont chase when prices are already too high. If a stock is trending high, i hold long position. Once it start to descend, say bye to it temporary and buy in again when it resume upwards. Based on 70 days moving average. When looking at stocks look at the prices not at its value. Once a stock has been chased up, it becomes overvalued and its price will drop in time to come, esp when fundamentals are unable to support or justify its price. Dont just look at a soecified stock, you have to look at overall picture as well. If QE is being tapered, it will soon spelt the end of the money game. Stocks will start to drop. When interest rates are raised, the drop will become even bigger. Just be very cautious in your trading from now onwards till next year will be a very volotile market. $ will be made when u are able to capitalise on others' mistakes.

Those are very good advice

I have a more basic problem:
- No discipline to cut loss. Too emotional. Scared to cut loss.
- No time to cut loss. When its time to cut loss, I might be occupied in a meeting or overseas.

The best solution would be an automatic stop loss. Unfortunately, most brokers do not offer this even when SGX officially allows such orders.

Do you have a good automatic stop loss solution you could share?

 

[Sinkie]

Those are very good advice

I have a more basic problem:
- No discipline to cut loss. Too emotional. Scared to cut loss.
- No time to cut loss. When its time to cut loss, I might be occupied in a meeting or overseas.

The best solution would be an automatic stop loss. Unfortunately, most brokers do not offer this even when SGX officially allows such orders.

Do you have a good automatic stop loss solution you could share?

Scare to cut loss then don't buy lor

No buy cannot lose

 

[wahkao3]

Scare to cut loss then don't buy lor

No buy cannot lose

I scared of going to job interviews does that mean I should not find a job?
Instead I practice hard to perfect my job interview skills.

I scared of taking exams does that mean I should not study?
Instead I practice 10 years series so that I can pass exam.

I scared of cut loss, I find a solution around this problem with automatic cut loss broker.

 

[WaSiSGKia]

I scared of going to job interviews does that mean I should not find a job?
Instead I practice hard to perfect my job interview skills.

I scared of taking exams does that mean I should not study?
Instead I practice 10 years series so that I can pass exam.

I scared of cut loss, I find a solution around this problem with automatic cut loss broker.

wat is automatic cut loss? meaning once the price falls below your pre-set price, it will auto sell for u?

 

[Sinkie]

I scared of going to job interviews does that mean I should not find a job?
Instead I practice hard to perfect my job interview skills.

I scared of taking exams does that mean I should not study?
Instead I practice 10 years series so that I can pass exam.

I scared of cut loss, I find a solution around this problem with automatic cut loss broker.

If you are scared of cutting lose, then you do enough homework and research on the stocks that you are buying the right stock and price so that you do not need to cut loss at all and even if it drops to below your stop loss price, you can still continue to hold on to it knowing its just temporary weakness..

 

[Dividends Warrior]

I have a more basic problem:
- No discipline to cut loss. Too emotional. Scared to cut loss.
- No time to cut loss. When its time to cut loss, I might be occupied in a meeting or overseas.

I dun have problems cutting loss.

I have the opposite problem. I have problem taking profits.

 

[WaSiSGKia]

I scared of going to job interviews does that mean I should not find a job?
Instead I practice hard to perfect my job interview skills.

I scared of taking exams does that mean I should not study?
Instead I practice 10 years series so that I can pass exam.

I scared of cut loss, I find a solution around this problem with automatic cut loss broker.

Y dont practise cut loss instead of finding a broker to help u cut loss? Wat if broker auto sells for u and the price rebounds back? U probably wont be blaming him but u sure feel sibei buay song wat..

If u dun feel buay song then might as well juz call in urself and cut it? U can see the market at the end of each day to decide the next trading day whether u should hold or sell...