Indicators

Smeal Technical Analysts

When I'm bearish and I sell a stock, each sale must be at a lower level than the previous sale. When I am buying, the reverse is true. I must buy on a rising scale. I don’t buy long stocks on a scale down, I buy on a scale up. -Jesse Livermore

Agenda • A look at the markets & review • Introduction to indicators o Moving Averages o MACD

What pattern do you see here?

• Symmetrical triangle forming • How would you trade this? What confirmation would you look for?

• AAPL 60 Min • Decreasing volume leading up to the apex of the triangle and a significant increase when it breaks out

• Intra-day SPY – What sort of pattern do you see?

• Symmetrical Triangle Breakout • Price target reached

Moving Averages • Moving averages are simply the average price of the security over a certain period of time • Tend to act as support and resistance • Trend identification • Many indicators are built on this concept • Traders have their own preferences as to the period, I use 20,50,200 • Simple moving averages are equally weighted, however exponential moving averages weight the most recent price higher than older ones which reduces lag

Support and Resistance

Trend Identification

Donchian Channels • Donchian channels are created by plotting the highest and lowest closing price in a specified period (This uses 10)

Donchian Channels • Donchian channels are used to identify breakouts. Typically you would buy when the stock closes above the channel

Turtle Traders

• Filter: long if the 50 period SMA is above the 350 period SMA and short if the 50 is below the 350 • Entry rule: enter position when the price trades above or below the 20 period donchian channel • Exit rule: close position when the price touches the 10 period donchian channel

MACD • Calculated by subtracting the 12 day EMA from the 26 day EMA.(Yellow Line) A signal line is also calculated by plotting the 9 period EMA of the MACD (Blue Line)

Crossovers Occurs when the trigger (yellow) passes through the signal (blue) line

Divergences Occurs when the price is moving in the opposite direction of the MACD histogram. Indicates that a trend is ending

MACD Example

Sector Assignments Choose a technical indicator and create a presentation that describes that indicator. Also, analyze a stock in your sector using the indicator and other methods we have discussed during our meetings. • How does the indicator work? • What does it tell us/what signals can you take from it? • Does it work well with another indicator (confirmation)? • Use the indicator to analyze a stock and share your analysis with the group

List of Indicators - Research Stochastic Oscillator Relative Strength Index (RSI) StochRSI Williams %R Bollinger Bands Average True Value (ATR) Average Directional Index (ADX) TRIX Parabolic SAR Accumulation/Distribution Line Ultimate Oscillator Keltner Channels Zig-Zag Market Internals (VOLD, TICK, TRIN, Breadth)