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http://tutorials.topstockresearch.

com

Learn Technical Analysis with Examples &


Integrated Stock Screener

About this Site We aim to provide comprehensive


Technical Analysis of stocks starting from the most basic
concept to advance concepts of technical analysis along
with their trading strategy, real life examples and well
supporting community. What make us different from others
is that we do not limit it to theory but we have integrated
this section with stock screener of multiple geographical
location, so that our visitors get exposure to not only
theoretical examples but to real world behavior of stocks
when such patterns/indicators are observed, so that they are
better geared for trading decision in futures.
On daily basis we generate lots of pre-screened reports
based on standard indicators/patterns that help visitors to
gain good insight of stock patterns based on its previous
price movement to enable them to take some important
trading/investment decision.
Stock Analysis Stock analysis is a technique to measure
the pulse of the stock and determine the right price to enter
and exit stock with handsome return. There are two major
yet very contrasting approaches to do the same. They are
Technical Analysis/ Fundamental Analysis. Since we are
primarily into technical Analysis, majority of the tutorials
and screeners are based on it. But to bring it to perspective,
we have tried to provide introduction to both at Stock
Analysis Introduction.
Technical Analysis Technical analysis is a study of

historical price and volume of the stock to predict its future


behavior.
Technical analysts study these price movements and
identify formation of patterns that are formed repeatedly
and the behavior of price after formation of patterns. If
probability of price movement after this pattern, in certain
direction, is very high then, analyst can bet on the buying
or selling of the stock. There are three basic principle of
technical analysis. Price Discounts Everything, Price
Moves in Trends & History repeats itself.
Charts are most essential and powerful tool in Technical
analysis and owing to advancement in computer science
and easy online access to them via site like ours; it has
become handy for lot of part timer traders/investors also.
As we speak, Technical Analysis is a very mature form of
stock research and with that being the case, lots of research
is being done and lots of different sub streams have
evolved. Some uses technique like simple over
bought/oversold oscillator, while some uses more advance
technique to understand market cycle using Elliot waves.
Some draw simple closing price line chart to find support &
resistance, while some use momentum indicator to measure
trend and its strength, while some prefer to draw relatively
complex candlestick chart with multiple points like open,
high, low and close.
With this much of choice, novice users often get
overwhelmed and are not sure where to start and often run
away or make incorrect trading decision when try to use too

many of them with less experience.


One of the key to success is to select a few of them, they
could be simple ones like Moving Average, or a chart
pattern like double top, or simple oscillator like RSI, and
read and observe their behavior using our stock screener
and do some paper trading before start making consistent
analysis.
As this is vast topic, we split it into multiple sections and
they can be navigated from the menu but we suggest you to
learn more about basic of technical analysis first.
We think it is necessary to make a mention that it takes lot
of reading and experience to trade like a professional using
these concepts. So please take caution in taking important
trading decision.
Stock Analysis Introduction

Technical Analysis Tutorial


Stock analysis is a technique to measure the pulse of the
stock and determine the right price to enter and exit stock
with handsome return. There are two major yet very
contrasting approach to do the same. They are:
_BLACK
1.Fundamental Analysis

Fundamental Analysis is a study based on company


financial past results including sales, profit, operation,
general economic forecast, expected demand, profit margin,

sales forecast, debts, competition, management and many


other parameters. Based on these studies, analyst tries to
find right value (intrinsic value) of the stock. A buy or
investment decision is taken and when stock is trading
below right value and a sell decision is taken when the
stock is much above its fair value.
Since the focus of the site is on technical analysis we will
limit our scope on fundamental analysis to this level only.
Definition from Wikipedia "Fundamental analysis of a
business involves analyzing its financial statements and
health, its management and competitive advantages, and
its competitors and markets."
http://en.wikipedia.org/wiki/Fundamental_analysis
2.Technical Analysis

Technical analysis on the other hand do not believe in the


finding intrinsic value of the stock. They rather study
equity's price and volume movement to predict the future
direction of the stock price. Technical analysis in a
very simple definition is, study of charts to determine
patterns and use them to trade when such patterns has very
high probability of a stock movement in a certain direction.
_BLACK

Both these analysis uses very different ways to analyze


stocks and have been quite effective in producing good
results. Both these approach may not always give buy/sell
signal at the same time and may even give strong and
opposite signal on same stock. One study may indicate
strong buy where as other may give strong sell. Beginners

may get confused and are strongly advise to study both but
follow one, as mixing them could produce undesired
results.
Best of both world: Fundamental analyst look to
buy a stock when it is at attractive price (below fair
value) and when technical indicators also support
the call.

For Example: Based on fundamentals, the stock is over


priced and it suggests exit of the stock. But, upward trend
in the stock is very strong in such case it makes sense to
hold the stock till strength of the trend weakens and thereby
maximizing the profit.
Similarly, when undervalued stock is in downtrend then it
makes sense to wait for a lower level than buying the stock
at that price.
Learn Technical Analysis Basics with Examples

Technical Analysis Definition Technical analysis is a


study of historical price and volume of the stock to predict
its future behavior. Technical analyst study these price
movement and identify formation of patterns that are
formed repeatedly and the behavior of price after formation
of patterns. If probability of price movement after these
pattern, in certain direction, is very high then, analyst can
bet on the buying or selling of the stock.
Basic principles of Technical analysis Technical Analysis is
based on these three principles:
1. Price Discounts Everything: Technical analyst believe

in efficient-market hypothesis (EMH). This means the


current value of the stock, is fair value of the stock and has
correctly factored in all the information that could affect the
price of the stock at any given point of time.
2. Price Moves in Trends: Technical analyst believes that
share price moves in trends whether upward or downward
or sideways. And they will continue to do so in future.
They go by this assumption to trade in stocks.
3. History Repeats Itself: Technical analyst believe that
market movement in a certain situation would be similar to
its movement in the past. Or Investors in certain scenario,
even though they are irrational, will behave in similar way
as they behaved in past. These typical movements are
studied by analyst and are used to take advantage in trading
stocks for a given situation.
On Analyzing stock movement in greater details, technical
analysis helps to find two things.
1. Demand & supply. If technical indicators suggest that
there could be surge in demand then price may shoot up
and vice versa. Some indicators like Williams %R gauge
over bought and oversold conditions. If indicators suggest
sustained demand/supply, then stock moves in trend. Some
indicators like MACD & Moving Average helps to find
beginning of trend or end or reversal, while some like ADX
tells about trend strength, while some tries to find where
and how money is flowing.

2. Possible behavior of traders/investors in certain situation.


Price movement of shares tend to follow certain trends, this
is a result of traders tendency to react in certain way after
some news. These behaviors results in typical chart pattern.
Chartist carefully observes price and volume to see strength
or weakness of the trends and try to take advantage of
emotional decision taken by the parties. Similar market
cycle, accumulation/distribution and chart patterns like
triple top, resistance line are observed again and again.
Minimum Period for Technical analysis In contrast to
fundamental analysis, technical analysis can be applied at
any period of time from few minutes to many years. Owing
to shorter time interval, they have become extremely
popular with day traders and swing traders who trade may
trade several times a day or may trade in duration of few
trading days to few weeks to few month.
Learn Technical Analysis Basics with Examples: Part
II

Tools used in Technical Analysis Technical analyst


depending on their generation and experience various
techniques. Among popular once, are Charts, excel and
even some continue with pen & paper to do calculate intraday support and resistance using Pivot Point.
With sophistication of tools and advancement in computer
science and easy access to world of knowledge using
mobile internet, analyst tend to rely on tools and website

like ours to do charting or pattern finding. Charts are most


essential tool for the analysts of this generation and with
the advancement of technical analysis, charts have also
improved. Some of the commonly used charts are
1. Line Chart.
2. Bar Charts.
3. Candlestick Charts.
TopStockResearch.com provides range of charts from very
simple chart one month EOD line chart to complex
technical charts with moving average and other indicators.
It also provides option to the viewers to create their own
charts using interactive chart, chart to compare with other
stocks etc.

Typical Technical Indicators Quicker results, more agile


way of analysis and lesser requirement of
investment/infrastructure have encouraged lots of research
on this stream of stock analysis. Some of them have made
their findings to public while some have kept it as trade
secret. Result is plenty of choice of indicator and plenty of

tools, websites, for the traders to pick and choose their


favorite ones. Among the more common ones are
1. Trend Trading. Trends are friends. One of the most
common and most successful form of trading is trading
with trend. Key to success if to identify trend and start
trading till a trend reversal is observed. Some of the very
common ways to identify trend are Moving Average ,
MACD, Trend Strength indicator like ADX.
2. Support and Resistance. These are the point which forms
a very importance levels which stocks doesnt tend to
penetrate. Both support and resistance can be together as in
case of chart pattern channel, or a dynamic band like
Bollinger Bands. In other cases only support or resistance
may be present. They may be horizontal trend line or rising
trend line or dynamic line provided by Moving averages.
3. Breakout. Stocks when breaks out from support or
resistance, they tend to make huge movement and in that
direction.
4. Chart Pattern. These are formation of certain patterns
indicating reversal of trend like Double Bottom (W) or
continuation pattern like flag.
5. Candlestick Charts. They are more complex type of chart
plotted with open, high, low and Close. Since it contains
more information, it indicates trading pattern in that
interval. These can be as simple as single day pattern like
Hammer, to reversal pattern like Bullish Engulfing or trend

continuation pattern like Three White Soldiers.


6. Money Flow. Some Indicators rely on volume to find the
phase in market cycle like accumulation/distribution, and
how smart money is flowing. Indicators like ADI, CMF,
MFI utilizes volume to figure out money flow.
Applicability of Technical Analysis Since it studies price
volume history of the stocks, it can well be applied to other
financial instruments like Forex, Commodity etc.
Cautions Technical analysis is more of an art than science.
It requires lot of experience to trade using technical
analysis. In real life, the pattern formation may not be as
clear as theoretical examples.
Secondly, since they are purely based on past price
movement, and prior sequence of events, they do not
guarantee similar behavior in future. Therefore, it is very
important to keep a stop loss when playing in stocks.
Always use stop loss when relying only on technical
analysis.
Tutorials On Market Cycle

What is Market Cycle? The price of a stock never moves


in one direction and in one fashion. Observing charts of a
stock or any financial instruments shows that charts always
move in a zig zag manner whether its an uptrend or
downtrend or a sideways market market. On carefully
observing those zig-zag patterns reveals that they are not

just moving in an haphazard way, rather they are following


a
cycle
called
a
market
cycle.
It is very important for a trader to know the market cycle as
it will help in guiding the possible entry and exit points of a
trade.
Components
of
Market
Cycle:
All market follow the same cycle that is they go up, follow
peak, then go down and then form a bottom.This is called
as market cycle and after one cycle another cycle will
follow and this will go on. There are basically four phases
of Market cycle. They are:

1.Accumulation: Accumulation phase is formed at the


bottom or near the bottom of a chart. This is also known as
the oversold phase. Here the long term investor (smart and
experienced) enter in the market and start accumulating the

stock at the discounted price.They feel that the worst


bearish phase comes to an halt and sooner or later the bull
will take over the market. In accumulation phase the price
do not move much, rather it is neutral (flattened).
Accumulation gives traders signal to buy or long.
2.Mark Up: This phase starts when the neutral
accumulation phase will gives a breakout witnessed by an
increase in volume. Here other traders and investors jumps
in, following an uptrend. This phase is also witnessed by
the formation of higher highs and higher lows.
Mark up phase also gives traders signal to buy.
3.Distribution: This phase forms the top part of the cycle.
This phase is the saturation phase where bulls looses its
faith and bears takes over. This is also known as oversold
level. Here buyers gives over and seller comes into play
making the price falls. Distribution is witnessed by other
chart patterns like double top, head and shoulder etc.
Distribution gives traders signal to sell or short.
4.Mark Down: This is the last phase of the cycle and is
followed by fall in price till another accumulation phase is
reached. In this phase traders can watch formation of lower
highs
and
lower
lows.
Mark Down gives traders signal to sell or short.
Duration: Market Cycle may be as short as few minutes to
weeks and may last longer like few years. It depends on a
particular investor or trader what horizon he is looking at
and
comfortable
with
for
trading.
We also recommend to read How volume plays an
important role in finding different phase of market cycle
along with this text.

Tutorials on support and resistance with examples


and Strategies.
Support Basics Resistance Basics

Support and resistance are one of the important pillars of


technical analysis and stock analysts invariably use them as
one
of
their
key
technical
tools.
Support is a point below which stock price is unlikely to
fall below unless a significant development around the
stock takes place and resistance is a price beyond which
stock price is unlikely to rise in the selected time frame.
Why are these support and resistance formed?
Support and resistance are formed at points around high
supply or demand zone. If at support at 100 then in and
around that price there are lots of buyers ready to buy
causing the stock not to fall from that price perceiving it to
be cheap and same goes for resistance where lot of traders
would like to offload their positions considering that price
to be too high for the stock and good time to book profit.

These points can be static price like a psychological


number like 100 or 50, or even may be previous
highs/lows. Or they may even by a dynamic price with
Market movement. If the overall market is moving up,
support price may continue to move up and vice verse.
These points validity depends on trend they are in or the
time frame. Support and resistance exist for small interval
period like intraday to a multiyear time frame. So it is
important to identify them based on period where traders
are
performing
analysis
Minor Support & Resistance cause trends to slow or pause
while major Support & Resistance cause trend reversal
Parameters Determining strength of Support and

Resistance? A number of factors a trader may want to look


around to see the strength and to confirm it. They are:
1.Length: The longer the duration of Support or Resistance
the more reliable and stronger it is. Longer duration shows
more points, a price is hitting showing the positive
sentiments.
2.Height: The broader the distance between the Support
and
Resistance
the
more
powerful
it
is.
3.Volume: Higher volumes add strength to the Support or
Resistance. Higher volumes indicates more traders have the
same sentiment at a particular time frame.
What happens when Support or Resistance Breaks? The
market sentiments is not the same at all the times, as it
depends on a lot of factors, results in breakout of Supports
and Resistance. Support once broken acts as a resistance in
future while resistance broken act as a new support in
future. The longer the period the support/resistance line
holds before break, the stronger the reversal is.

Example of Support and Resistance


With Example

Shapes of Support and Resistance? If you look


at the chart patterns traders may come across
different levels of support and resistance. For
example in an uptrend it can be a sloping
upwards,or it can be a horizontal in case of
sideways etc. Therefore on the basis of that
Supports and Resistance is of two types. They are:
1. Horizontal Supports and Resistance (Equal Highs
and equal lows)
2. Slanting or diagonal Supports and Resistance
(Higher highs and higher lows or Lower highs and
lower lows)
3. More smoothened lines formed by moving
average.
4. Fixed price like pivot or Fibonacci retracement
levels.

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