Technical Analysis Experiment

If you are used to see stock charts from the movies you may be confused looking at the charts used in this blog: In this article I will explain the bare minimum to understand what you are seeing, in later articles I will explain in detail every element of the chart. First of all: where is the price line? The chart that we use for   technical analysis  (but we should call it statistical analysis   of the price progression ) are an evolution of the line charts.  This is how a line chart looks like: It is done connecting with a line the price point of every single time frame. For example if the time frame is a day you can have a point at the price of the stock for that day and then connect every point: This is good but not the best: every time frame, let's say every day, the prices move up and down, how can you make a decision about which price use as point for the day?  You can use the closure price or the average or the weighted average ...

The european index is clearly in a new positive trend: it broke the red channel with high volumes after a MACD Divergence bouncing on the sma200.  Usually when it breaks a long channel it should have a pullback on it or near it with smaller volumes. Instead this time it had lateral movement with low volumes under a long trend line (the gray one).  This can be read as a weak pullback meaning the beginning of a strong positive trend. The trend is positive so we have to wait the lower part of the green channel to buy. Now that is passed over the gray trend line we can risk a to buy a   small  lot with a stop just below the gray trend line or below the green channel, and wait the lower part of the channel and bigger confirmation from the volumes to put a bigger lot on the market. 

Referring to this post The prices closed over the sma50 well inside the long channel. Too bad we have not good volumes sourced to better qualify the movements.

The volumes in this last three positive days of have been low while during the break of the green channel they were strong and rising. Statistically this is just a bounce during a negative movement.

Bitcoin prices have gone outside the red channel. Volumes do not confirm this break yet but the volumes I see on this graph are not the actual volumes of the totality of bitcoins exchanged. If the prices goes over the yellow SMA50 it is a buy signal with stop inside the red channel. If they choose the up way what we just saw was a mid trend flag and the target is over 6.000 as supposed in this older post . If the prices will confirm this break we can suppose the new channel to be as wide and sloped as the old one. It is dashed because it must yet be confirmed.

No particular signals from EURUSD.  The prices are in the lower area of the bullish channel, buy with stop outside the channel, target the higher part.

(Read  the previous posts about AAPL) The prices gapped down the gray trendline forming a island reversal figure. That is a strong reversal figure. They reached the first target at 150.00$, the second one is at the dotted line around 141.00$

After a MACD Divergence the prices broke the red channel with high volumes and went to test the gray trendline. We can expect a pullback near T1 where we should buy or a strong acceleration after breaking the gray trendline.  Either way stop a bit inside the red channel.

Following this post AAPL went under the sma50 and testing the gray trendline. Sell with stop inside the green channel. The gray is a long standing trend line, first it was a resistance, then a support, it also has been gapped up in the past. If this is an inversion it can go straight to the targets of 150 (head and shoulder seen in the last post) or try a pullback to test the lower trend line of the green channel as a new resistance.

Referring  this post  the sell signal has been confirmed: The target is the lower part of the green channel. Edit: tbh  on a better view considering the volumes (low) and the shadows tracing the gray trendline the signal is not there, yet:  Edit 2 : here it is!

This is a great time to enter the market on AAPL: it is in the lower part of the bearish channel testing the support (point 1 in figure). In this situation usually we buy with target the higher area of the channel and with stop loss some area outside the resistance, in this case we have the sma 20 right there and a month long trend line just below, if there was not the MACD Divergence this would have been a no brainer operation: buy with target as the green arrow, stop loss on the point 2. BUT We have a MACD Divergence that usually happens before a change of trend and a little head and shoulder (figure 2) with the shoulder at the same level of the trend line 1. So buy small lot but be prepared to sell a full lot if the price goes under the point 2. That is a bearish reversal with first target the target of the head and shoulder, around 150 and second target the dotted line.

Sell as soon as the price breaks the gray with target the lower part of the channel. MACD Divergence gives us the green light to try a small sell against the trend: never fight the trend. At this point the most probable movement are the prices breaking the gray to get around the lower part of the channel to then rise up, ignoring the macd divergence (small divergence) OR the price breaking the gray and than breaking the lower part of the channel; sometimes when they end a long trend they do a fake fast break on the upper part with small volumes: that would be another signal of inversion. Larger view

The prices are testing the resitance of the bearish channel.  If prices breaks up  the resistance in T1 that is a good spot to buy, if they don't it is a good spot to sell. Either way the stops are minimized near the prices at the other side of the T1 trendline. If the prices break up in T1 we are seeing a continuation flag and the target is the one in the picture between 5.500 and 6.500.

We saw a strong reversal pattern on BTC/USD: a head and shoulder with a MACD divergence on the two shoulders. Once the prices broke the shoulder they did not even had a pulback but went 5 days later directly on target. Dear reader from the future: see this post  to read the suggested speps or follow the  articles about Bitcoin  to see how moved after this. Good luck to the Experiment!

In a bullish trend the prices had a divergence with the MACD and after a while they dropped out of the trend canal. They got a strong support at the level of 3.000 (look at volumes), 3.000 is also the 38.2% retracement of Fibonacci. Buy if prices break the T1 with target roughly at 6.500. This looks like a mid trend flag: a continuation figure.  Again: the strong volumes at 3.000 / 38.2% Fibonacci should confirm this view. As usual wait for the prices to confirm the theory at T1. A less likely path would be the prices to bearish break T2: in that case wait for the pullback test on 3.000 before selling. If they break T2 given the strong resistance and volumes at that level it could be a strong e fast breakage, maybe too fast to be able to operate on it.

MACD divergence usually apperas before a change in the trend. Wait for the prices to go back in the T1 zone and look for the test: because of the MACD divergence prices may break the support. Buy only if the test on the support is positive, otherwise look the break of the support for a pullback. If the pullback is positive that become a good area to sell.

T1 and T2 are test zones: the price should go down to T1 and there have a pullback on the old bear channel. IF the pullback is positive T1 is a good buy spot and the new trend will be bullish. The change of trend have been anticipated by the MACD, the prices have broken the channel and now they are testing a strong support (3500) with MACD and Stocastic in overbought. So: prices should go to T2 and from there if the test is positive BUY. A more risky operation is selling now: it is an operation versus the current trend, and NEVER FIGHT THE TREND.