Week 2

Support & Resistance

A support level is level where the price tends to find support as it is going down. This means the price is more likely to “bounce” off this level rather than break through it. However, once the price has passed this level, by an amount exceeding some noise, it is likely to continue dropping until it finds another support level.

wikipedia.org Support_and_resistance

support-resistance

 

A resistance level is the opposite of a support level. It is where the price tends to find resistance as it is going up. This means the price is more likely to “bounce” off this level rather than break through it. However, once the price has passed this level, by an amount exceeding some noise, it is likely that it will continue rising until it finds another resistance level. wikipedia.org Support_and_resistance

 


 

Moving Averages

A Moving Average is a widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random price fluctuations.

A moving average (MA) is a trend-following or lagging indicator because it is based on past prices.

The two basic and commonly used MAs are the simple moving average (SMA), which is the simple average of a security over a defined number of time periods, and the exponential moving average (EMA), which gives bigger weight to more recent prices.

The most common applications of MAs are to identify the trend direction and to determine support and resistance levels.

http://www.investopedia.com/terms/m/movingaverage.asp

 


 

Moving Average Crossover

This is the stock price crossing above a certain moving average, or one moving average crossing over another.

 


 

MACD

The MACD indicator is basically a refinement of the two moving averages system and measures the distance between the two moving average lines. MACD is an acronym for Moving Average Convergence Divergence.

www.incrediblecharts.com/indicators/macd

 


 

MACD Histogram

The signals from the MACD indicator tend to lag price movements. The MACD Histogram attempts to address this problem by plotting the distance between MACD and its signal line. Because of this, the histogram signals trend changes well in advance of the normal MACD signal, but is less reliable and should be confirmed by other indicators.

www.incrediblecharts.com/indicators/macd_histogram.php

 


Momentum

Momentum measures the rate of change in closing prices and is used to detect trend weakness and likely reversal points. It is often underrated because of its simplicity.

High Momentum readings (positive or negative) occur when a trend is at its strongest. Lower readings are found at the start and end of trends.

Overbought and oversold levels are set separately for each security, based on the performance of the indicator over past cycles.

www.incrediblecharts.com/indicators/momentum.php

 


 

RSI Relative Strength Index

The Relative Strength Index compares upward movements to downward movements over a selected period.

It is formulated to fluctuate between 0 and 100, enabling fixed Overbought and Oversold levels.

Set the Overbought level at 70 and Oversold at 30.

Buy when RSI falls below the 30 level and rises back above it.

Sell when RSI rises above the 70 level and falls back below it.

 


Stochastic Oscillator

Used to track market momentum, attempts to gauge supply and demand.

  • Stochastic Oscillator above 70 it indicates overbought.
  • Stochastic Oscillator below 30 it indicates oversold.

Read More www.incrediblecharts.com/indicators/stochastic.php

 


Twiggs Momentum Oscillator

A new momentum oscillator developed by Colin Twiggs for Incredible Charts. Its primary purpose is to identify fast trending stocks using the stock screener. It can, however, be successfully used to generate buy and sell signals in a similar fashion to other momentum oscillators.

Read More www.incrediblecharts.com/indicators/twiggs_momentum_oscillator.php