Technical Analysis Explained: The Successful Investor's Guide to Spotting Investment Trends and Turning Points (Martin J. Pring, 1980)

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  • Branches of technical analysis
    1. Sentiment indicators
    2. Flow-of-funds indicators
    3. Market structure indicators
  • Trend
    • Primary: 9 months - 2 years as a reflection of investors' attitudes.
    • Intermediate: 6 weeks to 9 months.
    • Short term: 2 to 4 weeks.
    • Intraday trend: daily
    • Secular trend: over a very long period.
    • Peak and trough: the high and low over a period (most basic to identify trend)
  • Dow theory
    • The average discount everything
    • The market has 3 movements
    • Lines indicate movement
    • Price/volume relationships provide background
    • Price action determines the trend
    • The averages must confirm
  • False breakouts (whipsaw)
    • Wait for 3% of the boundary to confirm the breakout.
  • Saucer and rounding top ususally will go an complete arc.
  • Outside bar (for reversal), e.g. engulfing
    • Wider the bar, stronger the signal.
    • Sharper the rally, more significant the bar.
    • More bars encompassed, better the signal.
    • The greater the accompanying volume, the strong the signal.
    • The further the close price to opposite direction the better.
  • Inside bar (for reversal), e.g. harami
    • The sharper the trend preceeding the better.
    • The wider the first bar the better.
    • The smaller the inside bar the better the signal.
    • Volume should be noticeably smaller.
  • Two-bar reversal e.g. tweezer
    • Preceded by a presistent trend.
    • Both bars of almost same height.
    • The open and close should be near the extreme.
    • Expansion of volume.
  • Key reversal bar e.g. Kanagroo tail
    • Price open strongly in prevailing trend.
    • Trading range is wide relative to preceding bars.
    • Price close near previous close.
    • Volume climactic.
  • Trend line
    • Sharp angle of ascent or descent is more likely to result in a consolidation than reversal.
    • Exhaustion: false breakout.
  • Moving average
    • There is no perfect average. It is a trade-off as either catching the trend late with lesser profit or too early that is a false breakout.
  • Variations of RSI
    • Chande momentum oscillator (CMO): unsmoothed.
    • Relative momentum index (RMI): smoothed and accentuates the fluctuation.
  • Some indicators
    • Know Sure Thing (KST)
    • Rate of Change (ROC)
    • Directional Movement Indicator (DI)
    • Average Directional Index (ADX)
    • Parabolic Indicator
    • Chaikin Money Flow
    • Arms Index
  • Support and resistance
    • It halts temporarily when there is a concentration of demand or supply.
    • Estimation
      • Round numbers
      • Previous peaks and troughs
      • Trendlines and moving averages
      • Emotional points (gapping)
      • Retracement points (Fibonacci, Gann fans)
  • Volume
    • Go with the trend.
    • Reflects buyers and sellers.
    • Heavy volume with little price change indicates accumulation.

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