9 - PULLBACK (RETRACE)

After strong a stock going up or down for some days, basically stock will fall back.
That condition is called pullback or retrace.


So, pullback or retrace means a falling back of a price from its high or low.

fig. 16

More examples on the stock chart:

fig. 17

fig. 18

8 - SUPPORT & RESISTANCE

Support line is a level where price indicates to go up because buyer (demand) is greater than seller (supply).

fig. 12

While resistance line is a level where price indicates to fall down because buyer (demand) is less than seller (supply).

fig. 13

Support and resistance represent key junctures where the forces of supply and demand meet. In the financial markets, prices are driven by excessive supply (down) and demand (up). Supply is synonymous with bearish, bears and selling. Demand is synonymous with bullish, bulls and buying. These terms are used interchangeably throughout this and other articles. As demand increases, prices advance and as supply increases, prices decline. When supply and demand are equal, prices move sideways as bulls and bears slug it out for control. (from stockcharts)

fig. 14

How to determine support line?
Support line can be drawn horizontally with the previous lows.

How to determine resistance line?
Resistance line can be drawn horizontally with the previous highs.

fig. 15

7 - TREND - UPTREND, DOWNTREND, SIDEWAYS

Definition of trend:
The general direction of a market or of the price of an asset (from investopedia).


There are three type of trends:
- Uptrend (see fig. 8)
- Downtrend (see fig. 9)
- Sideways or trendless (see fig. 10)

fig. 8

fig. 9

fig. 10

Here is how to determine the trend:
- uptrend: connect the low to high, high to higher low, higher low to higher high, higher high to higher low and so on (see fig. 11A)
- downtrend: connect the low to high, high to lower low, lower low to lower high, lower high to lower low and so on (see fig. 11B)
- sideways / trendless: connect the low to high, high to equal low, equal low to equal high (see fig. 11C)

fig. 11A, 11B, 11C

6 - TIME FRAME (TIME PERIOD)

During the analyzing, we have to consider which time frame that we are going to use.

Here are list of the time frame (see fig. 7):

- 1 minute: it's called one minute chart

- 5 minutes: it's called five minutes chart

- 60 minutes or 1 hour: it's called hourly chart

- 1 day: it's called daily chart

- 1 week: it's called weekly chart

- 1 month: it's called monthly chart

- 1 year: it's called yearly chart

fig. 7

Daily chart is the most common one that analyst use.

Time frame is divided into:

- Short term: less than 1 month

- Medium term: 1 month to 6 months

- Long term: more han 6 months

So, what's the different between all of those time frame and which one to use for the analyzing?

In the shorter time frame, the entry signal and exit signal will come sooner than the longer time frame.

If we are going to trade for a short term, then we will use no longer than daily chart.

If we are going to invest for a mid term to long term, then we will use weekly and monthly chart.

In conclusion, there is no the best time frame chart to use.

Every time frame has its own benefit.

5 - CANDLESTICK CHART CONSTRUCTION

The highest price and the lowest price is connected with a vertical line between the opening price and the closing price (see fig. 6).

Candlestick chart is powerful tool for giving entry and exit signals.

Every pattern has it's own name and a story to tell between the war of demand and supply.

A short story of candlestick chart:

It was founded by the Japanese, called Munehisa Homma during rice trading in the early 16th century.

He dominated the market on those days.

Then, in 1990, candlestick chart was introduced by Steve Nison to the Western.

fig. 6

4 - BAR CHART CONSTRUCTION

The opening price is always on the left, while the closing price is always on the right.
The highest price and the lowest price is connected with a vertical line between the opening price and the closing price (see fig. 5).

fig. 5

3 - CHART INTRODUCTION - part 2

There are three most common charts:

1. Line chart (see fig. 2)

The construction of line chart: is connecting every closing price.

fig. 2

2. Candlestick chart (see fig. 3)

Every bar chart consists of 4 prices.

They are: opening price, highest price, lowest price and closing price.

For you information, candlestick chart has many patterns.
Every pattern tells the story of demand versus supply or buyer versus seller.

fig. 3

2. Bar chart (see fig. 3)

The construction of bar chart is just the same as the candlestick's chart. 

Every bar chart consists of 4 prices.

They are: opening price, highest price, lowest price and closing price.

The different is in the pattern.

fig 4

2 - CHART INTRODUCTION

fig. 1

fig. 1B

Definiton of chart: 

is a graphic that consist of the historical data from time to time.

A chart consists of major trend, secondary trend and minor trend (see fig. 1 and fig. 1B).

It is the most primary tool.

1 - ANALYSIS

There are some ways to analyze the stocks market, forex market, commodities market and other securities.

First, technical analysis is a security analysis discipline for forecasting the direction of prices through the study of past market data, primarily price and volume. (from wikipedia)
The person who applies technical analysis is called technicalist or chartist.

Second, fundamental analysis of a business involves analyzing its financial statements and health, its management and competitive advantages, and its competitors and markets. (from wikipedia)
The person who applies fundamental analysis is called fundamentalist.

But on this blog, we will focus on technical analysis.