We've had quite
a few requests to expand on some of the
points that were featured in our last newsletter.
So this month's newsletter will focus on
how to apply different indicators based
on the type of chart you are using. The
example given is a trending chart.
Overview
The use of trendlines
is one of the most important concepts in
technical analysis. They can be applied
in both trending and range bound situations.
Along with other indicators, trendlines
can show convergences and divergences that
provide additional information about the
trend.
Trend-based indicators
(which includes trendlines) work well in
trending situations but have a potential
to create a wipsaw when used in range-bound
situations. Trend indicators include bands
and moving averages, but are also represented
in the oscillators (example: MACD).
Overbought/oversold
indicators are very effective in a range-bound
chart, but tend to be less effective on
trending charts. They still have a purpose
when combined with trendlines to provide
convergences and divergences. Overbought/oversold
indicators are in the oscillators category
of indicators.
Strength indicators
tend to reveal good examples of convergences
and divergences which can help warn of a
change in trend. Strength indicators are
much like overbought/oversold indicators.
Fundamental analysis
provides you with "fundamental"
information about companies in comparison
to similar companies.This includes information
about economic factors that could influence
their performance (share value). Fundamental
analysis can give you indications about
whether or not a particular company is sustaining
positive growth.
For
more information on the basics of fundamental
analysis click here.
For
more information on more indicators click
here
The example
chart: Indu - Dow Jones Industrial Average.
What
have these indicators shown?
In short, the
application of these indicators in the above
example has demonstrated that the uptrend
is not over yet. (no sell signals) It is
still far into the trend, as seen by all
the indicators (hold, too late for a buy)
and currently there are no clear signs of
an impending trend reversal.
Read more about
them here:
Trendlines,
Moving
averages,
Bollinger
Bands,
MACD,
Stochastics,
Momentum.
Note:
All the charts
featured in this newsletter were captured
from StockTools. Learn
more about our software products here.
ChartFilter
Tips
Have a look
through our index lists and we are sure
you will find something new for your trading
strategies.
- Dow
Jones - NYSE
- AMEX
- NASDAQ
- TSE/TSX
-
Need more education?
Check out the
main education page.
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