Home Trading Strategies How To Analyze Stocks (Technical Analysis)

How To Analyze Stocks (Technical Analysis)

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How To Analyze Stocks (Technical Analysis)

so in this section I’ll go into technical analysis for stock trading so one thing to point out is their technical analysis there is a lot of stuff a lot of information out there if you know things like pivot points RSI make the moving average support resistance trendline trend channel if candlestick payments and much much more and my goal right now over here is not to teach you everything about technical analysis I can do that instead what I’ll do is to focus alright to get you focus on the key areas of technical analysis that matters that’s all I’m going to do right to give you a strong foundation into technical analysis and then from then on if you’re an explorer further you have the tools the knowledge right to you know go about doing it okay so when you’re dealing with technical analysis right let’s say in stock trading right you know that fundamentals they are good right it helps you to filter down the list of stocks that you want to treat right focusing on you know companies with strong or good fundamentals technical analysis on the other hand can help you to time your entries telling you when to buy all right so tell fundamentals tells you what to buy technical analysis can tell you when to buy so when you are dealing with a technical analysis there are three broad categories that I want you to know is what I call the trend the area of value and entry trigger so let’s analyze them right in them so a trend right you’ve probably you know heard of a trend right so what is the trend a trend is simply right on your chart it looks like you know higher highs and higher lows like this okay let me just draw this right higher highs and higher lows so this is what we call an uptrend because you can see that the price right is making higher highs and higher lows and one thing to notice that when we are dealing with technical analysis when a stock is in an uptrend we want to be a buyer because we assume right that there’s a good chance that the stock would continue to train higher so this is a an example of an uptrend so the opposite of an uptrend right it’s a downtrend which looks like this it has lower highs and lower lows so when a stock is in a downtrend right we want to be selling we don’t to be buying because you know again right there’s a good chance that a stock will continue trending lower so one of the important principle then you want to take away there whenever you want to buy stocks right you want to buy stocks that are at least in an uptrend or at least right don’t buy stocks in the downtrend especially for trading right this is not investing where you know you’re gonna hold on for years and years in trading right you are going to enter the markets and you pretty much exit right in a I would say in a shot after a short walk depending on your timeframe but you won’t be holding stocks for a long time so again first fundamental rule of stock trading is again don’t buy stocks in a downtrend and one thing to share with you is that to define a trend right you can use the 200 period moving average right to help you know define the trend so let me share with you an example so the 200 period moving average is just an indicator you can get it on most chatting platform right just select 200 right and over here this black line is what we call the 200 period moving average so I’ve applied this to the daily timeframe on Amazon and you can see that right now the price of Amazon right this is the price or over here this movements this is the price of Amazon it’s above the 200 ma so when you see the prices above the 200 ma right it gives you a bias that hey you know I want to be buying only in this market because the market is in an uptrend okay and vice versa right if the price of right here the price is below the 200 ma then you can conclude that you know the market is weak right and you either want to be selling right or you know hold on to cash you’d want to be buying in a downtrend of course there are exceptions right especially traders who are you know more advanced in their trading methodologies you have more experience they can you know buy in a downtrend it can still make money but for you if you are still new to trading this this rule over here I will keep you on the right side of the markets more often than not okay this is not foolproof but hey you know it will keep you on the right side of the markets more often than not okay so this is what I talked about what we’ve discussed right in the Train next thing area of value so you know that train right tells you whether the stock is moving up higher or lower but just because a stock is moving up higher doesn’t mean you you buy immediately okay just because you see oranges in a supermarket it’s that’s selling right now you don’t buy the oranges immediately because maybe you know the oranges is overpriced maybe the oranges is selling like one orange for ten dollars you don’t buy one orange for ten dollars right because during a sale you can buy maybe three oranges for two dollars so you want wait when the price is an area of value for your oranges and this is the same for trading right you want to buy just because the stock price is high is in an uptrend no you want it to come to an area of value before you consider buying okay and it’s the same for trading so how do you sort of you know define what its value in trading so these are a few techniques that you can use support and resistance trendline moving average right I find that this tree they are there are pretty easy to understand and use there are more out there again but I would say this tree really is more than enough to get you started so let me explain know what are these different tools that you can use so support right you can think of support as a floor right where the price have difficulty you know going under like like a floor so you can see that over here okay I want you to think of this floor as a wooden floor means it can provide some support right to push the price higher but it’s made of wood so wood can also break so don’t think they know just because the price is coming to an area of support it will definitely bounce no you know wood wood can break it’s not titanium it’s not metal right it can break so that is how I want you to think of support so in this case right you can see that over here we have an area of support over here price bounce once rallied higher came back down under bounce the second time and really higher so you can see that support is an area it’s not a fine line on your chart so this depicts it pretty clearly you can see that over here this this whole area is an area of support it’s not just one line even though I draw it as a line because that’s my preference but you have to treat it as an area meaning that the price could come into an area of support and then bounce off away it could come deeper into the area of support and then reverse from there that is possible as well so remember support is an area on your chart treated like a piece of in a wooden plane okay the second thing that I want to share is trend line so trend line is like support right like support and resistance but the difference is that support is horizontal a trend line is what I call this diagonal okay so trend line is diagonal so you can see that again it’s an area this is the area over here and notice the price bounds here are the second bounds here and a tech bounds over here okay so this is again a trend line when you want to buy stock or gain gonna buy when the price is near an area of support you want to buy it right when the price is near the upward trend line right because this represents an area of value on your chance and the last thing to share is a moving average okay so you know that there are many types of moving average out there like for example earlier I share with you the 200 period moving average how we can help you define the long term trend however you know that’s not the only moving average you can use you can use the 20 50 or 100 and all this different moving every type they help you uh they have different purposes like for example I like to use the 50 ma okay which is what you see over here to help you to help me define an area of value so you can see that for this particular chart of my ki the daily timeframe the price tends to you know bounce of the 50 amino repeatedly for over the last few times so needless to say right if the trend is very strong it may not retrace back towards the 50 ma somebody might just bounce off the 10 or 20 ma you know continue trading higher if the trend is a healthy trend like what you are seeing right now right where the pull backs are more obvious it tends to find support and a 50 ma and if the trend is let’s say not very strong prettier it’s just weaker right you can even pull back to the hundred or 200 ma okay so again moving average is another training technique that you can use to be to define your area of value so one thing to note is that let’s say for example the stock right now it’s let’s say it’s trading and this highs over here okay you okay let me just give it an example how about the stock is at this highs over here let’s say the stock previously it has respected the 50 ma and now it just breaks out higher and got this slight price rejection at this point you don’t necessarily want to be buying over here why is that because remember you want to buy in an uptrend and from an area of value right now the price is not at this area of value which is at this 50 M over here so it’s much better right to be patient and let the price come to you come to an area of value and then you look to enter your tray so now the question is you know when exactly do you enter the Train right let’s say the market is in in an uptrend it’s an area of value you just buy it immediately no right because you can actually use something what I call an entry trigger to time your entry so entry trigger right I find that candlestick patterns they are very useful for this purpose okay and you can use you know reversal candlestick patterns like the hammer engulfing better and bullish engulfing bearish engulfing and shooting star and stuff like that so if you don’t understand right I’m just going to know run you through quickly write about candlestick patterns right and these are different reversal candlestick patterns which I find it is useful to know for your trading so how do you read it candlestick pattern so candlestick pattern right is a recap right it’s useful for an entry trigger to help you time your entry and to read a candlestick pattern is that you would usually see you know two types of candles it’s green or red so if the candle is green right this over here is the opening price okay and this over here is the closing price so this means the market the price open at this level when all the way up higher this is the high for the day for example let’s say you are looking at the daily timeframe this is the high of the day and then finally closing near the highs over here you can see this lower shadow this is called the wick lower wick all right this tells you the low of the day or the low of the candle okay so these are their only four things to known the high the open the high of the candle and the low of the candle so when you look at a bearish candle is the opposite right the open right now is on top okay and the close is below that’s why it’s bearish right because the the price right has actually closed lower for the day so now this candle is in great color again this is the high of the day and this is the low of the day so this is how you read candlestick pattern and moving on right there many differences I mean many different type of candlestick patterns out there but I find that a few that a wolf knowing rise for example the hammer and shooting star so let me just explain to you right so again this is a green candle okay you can see that the price opens over here right the open for green candle right bullish candle the open is always below the close so this is where the price open and when they open right notice that there is this long lower wick over here so what it tells you is that during the day the sellers actually came in and pushed the price down all the way down lower to this point somehow we know they couldn’t push the price lower anymore and the buyers came into control okay they’re on right steroids right and it pushed the price up all the way up higher and finally closing near the highs over here so what does this tell you this tells you that hey no buyers are stepping in right they have managed to you know take control from the sellers and push the price up closing above the open so this is a sign of strength I’m telling you that the buyers are in control and that’s why you get a candlestick pattern like this which what we call a hammer and hammer so on the other hand right a shooting star a shooting star is just the opposite of a hammer you can see that again this is candle is a it’s bearish is rate so the open is here right when the market open bias to control push the price up higher up to the heights of this this this this day over here suddenly the sellers you know say eh that’s enough that’s enough I’m coming in then it’s pump they smash the price lower all the way down to the lows over here and finally closing near the lows so this is the open this is the close this is the low and this is the high so again a shooting star if you read this right this is a sign of weakness because it tells you that the buyers can no longer in control the sellers are in control and that’s why they can you know push the price lower for the day okay so this is hammer and shooting star another couple of candlestick patterns that you should know right it’s not what we call the bullish engulfing and bearish engulfing so it’s very similar to him when shooting start just at this time around it’s in the form of two candlestick patterns right is there are two candlestick patterns two candlestick patterns whereas earlier you just saw it’s just one individual candlestick pattern but the message behind it is pretty much the same if you look at this one over here is what we call the bullish engulfing pattern right sellers to control and close near the lows over here right he opens here and close near the loose the next candle bias open near the lows and to control and push the price all the way up higher closing right even above right the prior candle high over here right this is a sign of strength showing any one sellers to control it push down the price lowering and suddenly the little buyers came in push the price up higher and finally closing near the highs so this is a sign of strength as it tells you that the buyers are in control on the other hand right bearish engulfing pattern is just the opposite right buyers on this first candle they are in control this is the opening price they come up all the way up higher and close near the hinds of the day remember what is this this is the high of the day and this is the low of the day then the subsequent candle this candle over here the sellers the open near the highs and suddenly suddenly I don’t know where they find a strain right maybe you know it took too much creating steroids and protein shake pum rightly smash the price lower and finally closing near the low of the day so this tells you that now the sellers are in control and this is what we call a bearish engulfing pattern okay so you can call the hammer shooting star bullish engulfing bearish engulfing as you know reversal candlestick patterns because they sort of you know help you time no market reversals or market turning points okay but you don’t just want to blindly trade them just because you see a bearish engulfing doesn’t mean you shot does doesn’t mean you see a bullish engulfing you buy immediately no you don’t do that right you want to use a few technical tools together right to increase the odds right of your trade working out which is what we’re going to discuss right now so I want to introduce to you what I call the Tay framework okay so this is a framework that I came up with so again we’re just gonna combine what you’ve learned so far number one is the trend so you recall earlier if the price is above the 200 period moving average chances are is in an uptrend and you wanna have a long bias meaning you want to be buying the stock on you don’t want to sell the stock okay if the market is above the 200 Emmy similarly if the price is below the 200 period moving average you wanna have a shot by us and if you cannot shot right at least you don’t want to be buying when the price is below the 200 period moving average okay so this gives you a bias to know whether you should be buy or whether I should stay on the sidelines meaning you know you still stay out of the markets okay because short selling is something that is it’s more advanced not all of you can you know short sell the stock market so again just just know where I’m coming from second name area of value we mentioned earlier just because the stock is in an uptrend doesn’t mean you want to buy just because there or in just selling in a supermarket doesn’t mean you buy that orange right if it’s one orange for $10 $100 I’m gonna buy her Ella I wouldn’t buy I’m a cheapskate on a Byron is you know two for three dollars one for five I mean five for one dollar maybe even I mean two for three dogs I’m three for two dollars or maybe five for a dollar I’ll buy when it’s a it’s cheap when it’s a when it’s a value to me okay because a not really a huge fan of orange right so it has to be a a value price before I buy those oranges and it’s the same for trading you don’t buy it just because the market is in an uptrend just because the price is high you wanna bite when it’s trading from an area of value an area of value can be defined as you know support resistance moving average trendline right stuff that we’ve covered earlier and then right then the last thing that we want to look at this entry trigger we want to look right and the price and tell us they don’t hate you know the buyers are now in control and now is it a safer time to enter the trade that’s how you know candlestick patterns can help you right where it shows you patterns like the hammer the bullish engulfing pattern it tells you that now the buyers have stepped in right and there’s a good chance the market could reverse higher so this is that a framework combining this tree right and you can actually have you know tradable right or trading opportunities are that you can trade off using technical analysis so here’s an example okay so you can see over here the price above the 200 ma so should you be buying or selling but I hope you say bye-bye yeah buying right you’ll be buying okay so now the price is above the 200 ma you should be buying do you buy it over here do you buy it over here or do you buy it over here I think we need see it’s something about training from an area of value that’s right area of value so where is an area of value on the chart so from the looks of it right you can see it over here previous support sorry previous resistance Mountain support and now become support and the price came into this area of support it’s great we have the uptrend we have an area of support the 13 we’re looking for to tell us that the buyers are now in control I think this looks like a bullish engulfing pattern yeah let’s take a bullish engulfing pattern hey hey you have it right up train area of value and a bullish reversal candlestick pattern so this right it’s a it’s a trading opportunity now you can take advantage off you can buy on the next Kendall’s open your stop-loss could go a distance below this low right and and you know hopefully you like the market moves all right in your favor from this this entry point so we’re not going to discuss too much about you know where to take profits and stuff like that because this is really just the beginners introduction to stock trading but I hope I gave you a good understanding a foundation right to know when to buy a stock okay so this is one example of the Tay framework another one over here you can see that again the price now above the 200 ma should you be buying or selling selling selling no buying right that’s right buying so where is the area of value in this case we notice that right hey this trend line seems to be an area of value right market bounced off here second time and on the turret M right it bounced off any form a hammer so look at this candlestick pattern notice the price over here open and this are the lows okay the below the low of the prior day came all the way down lower and then the sellers you know say hey that’s enough right that’s enough and it pushed the price all the way up higher closing near this highest of the day on top of it you’re trading or you’re buying in an uptrend and from this area of value on this trend line support okay so you can see that in this case right yep market that did went higher from here so one thing to share is that all the chance that I’m sharing with you right now they are cherry pick I repeat they’re cherry picks I’ve purposely picked those chance right that show see you winning trades because I find it it’s easier to explain the concept but when you’re trading in the live market right trust me there will be losers yes there will be losers right so I want you to prepare for it all right so the all these examples right it’s just to let you understand the concept easily right versus it’s much easier to explain but when you’re trading life okay however when you’re paper trading right there will be losses no matter how fantastic your analysis is no matter how good the fundamentals how good the technicals there was to be losses embrace it but don’t worry in the later section we’ll talk about risk management alright so that you know even if you have a loss right it’s not the end of the world yeah alright so that’s that’s later for now I still want to know share with you more examples right of this at a framework because it’s it’s powerful so let’s have a look okay and at a framework so this is the chart of Google or I can see over here Google and let’s see let me find it okay so you can see that again right this time around not this day if I just zoom only though the 200m e now X has an area of value so prior to this right I say they know 150 ma you know can X an area of value in this case write the trend of this this stock right it’s uh it’s not as strong right so it tends to find support right at this 200 ma 200 ma here and here as well again the concept is still the same right stock is in an uptrend it’s in an area of value and then what are we looking for what are we looking for well we can look for a candlestick pattern right as an entry trigger to enter the trade so in this case we have something what we call in this case right it’s again this is something like a hammer price right here now lower bias to controlling close near the highs over here now I can enter the next candle open over here right and go long meaning you buy the stock another opportunity over here I price came down from this hammer right this hammer and this 200 ma and an area of value in this case it might be a losing trade again this is a good example of a losing trade as the price just you know continuing lower the right might stop here and then reverse from here so this is really the reality of trading no matter how good the setup is right there will be losses okay so let’s have a look at an another example how about this see us gee okay weekly timeframe so this time around I just pull out a 50 ma okay so notice over here this is the chat of cosd wholesale cop is the weekly timeframe and again right no it doesn’t matter what time frame you’re trading with the weekly daily the 15 minutes right the concepts right in stuff can be applied the same so in this case like Costco Wholesale cop can see that it’s been respecting the e-50m a right if I pull out the 200 ma I can guarantee you that the price is above the 200 ma as well alright so just get out a 200 ma notice that the price is above the 200 ma so you want to be a buyer so now where it’s an area of value to trade from okay so area of value could be the 15 week moving average prices you know bounce once twice thrice four times and let’s say right you you miss this move over here and over here you’re this huge spike over here again this is a bullish reversal right price open near the open-ended lows okay came down at this point and around 117 dollars at one point before the biased finally stepped in push price and close near the highs over here so yeah this is a huge huge right bullish reversal candlestick pattern you may or may not trade it right but in this case alright the market the price did when higher from here but this is a very huge bullish reversal candlestick pattern gained the concepts it’s the same trend area of value entry trigger let’s have a look at one more show is something that is a familiar with us Facebook okay Facebook okay in this case are again the price above the 200 ma let’s say no it bounced off the 50 ma quite a number of times here one twice and over here three times that’s that time so over here I can see that how the candlestick pattern is useful to have you time your entries that notice over here right there really isn’t any valid entry trigger right this is not a hammer or a bullish engulfing this over here is not necessarily a bullish engulfing I think it’s more of a piercing pattern I would say this canned over here right is the closest to a bullish engulfing buy right theoretically a bullish engulfing issued the low so I should be below the prior care the lost somewhere here and any engulfs the previous candle and enclosed near the highs right I’ll say this is the closest because again the range of the candle is large showing new conviction from the bias right in this case I would say this would be the closest to a bullish engulfing although it’s not really right a textbook bullish engulfing but if you can read price action right you know that over here this one is a sign of strength we have volatility contraction meaning the market went quiet for a while and on this candle boom right buyers came into control and you know closed near the highs over here right so anyway this is a an example of a normally a textbook example but showing you that from an area of value right and then waiting for a candlestick reversal candlestick pattern to cool long sometimes you may not get the exact textbook set up for example and that’s where your price action reading of the markets would come into play all right another one I would say is more straightforward would be this one over here so this one over here a price okay so one thing to share again right the 50 ma the area of value it’s never aligned on your chart it’s always an area so you can see it over here it pretty much breached below the 50 ma and then on this can no form a hammer and then close back above the 50 ma right giving you a bullish hammer to go along to buy okay so this is another point I want to share with you right there your area of value in a chart it’s always an area so I hope this are this gives you a few examples art of the Tay framework that I’ve just shared with you so as a recap right here’s what you’ve learned so far we have you know covered quite a bit number one we talked about trend right you want to be buying in an uptrend and selling in a downtrend if you can’t sell in downtrend you cannot show at least you know don’t buy in a downtrend stay in cash number two we spoke about area of value right you to want to buy just because the stock is in an uptrend you want it to come to an area of value okay one thing to mention is that for me personally I don’t always treat from any in the area of value and sometimes I do treat breakouts but that is another topic altogether but for you for you right now for starters right now say it’s much you know it’s better to be trading from an area value right buying it when things are cheap and area value can be in the form of support and resistance moving average trendline right we share quite a number of examples earlier that his entry trigger right using candlestick patterns right to help you time your entry to show you that you know when the buyers are now in control or the sellers are now in control right so candlestick patterns gives you clues right to let you know who is in control and finally all right we combine all this three different so-called principles if you wanna call it right just three different aspect of technical analysis and develop it into at a framework that you can use to find trading opportunities in the stock markets you

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