Where have all the good times gone? Nowhere. These are truly halcyon days for individual investors. Never have we luxuriated in a wealth of immediately available investing tools.
Without flashing a dime anyone can plug into endless online research. Anyone with a brokerage account has access to a huge tool box of metrics, screeners, and yes charts.
Pathways into investing differ. Yet often the “technical” side of equity and market analysis is left to one side. Charts can look like gibberish to the uninitiated. That’s where STOCKjAW is going. Look at the “daily” chart of Twitter(TWTR).
04-16-18, Daily. Double top formation, fall below 50d SMA, trend reversal = SELL.
- The dreaded “double top” pattern. This is TWTR breaking trend and falling below its’ flattening 50d sma. This is a “SELL.”
The yellow rising line above is of course the 50-day simple moving average. The line below that is the 200-day SMA. The above chart is a “candlestick” chart. Green candles represent days the stock gained value, and red days it lost.
The top of a green candle is the positive close, and the bottom of red candles the closing price on losing days. the “wick’ extending in both directions represents the intraday price range. Other types of charts exist, such as “point and figure” and “line.” Candlestick charts are perhaps the best for those new to technical analysis. That was easy.
Investors typically occupy one of three camps. Fundamentalists,technicians, or both. Learn both. You’ll be paid daily for doing so.
Comprehending charts means breaking it down piece-by-piece. Having been introduced to investing through the fundamentals side, we now are finding incredible things lying right at our fingertips.
Those incredible “things” are known as leading indicators.” Those are better than “trailing indicators.” Who likes to be told after the fact that what happened really happened?
04-16-18, Weekly. Broken trend, descending 50wk, down hooking MACD = SELL.
- TWTR weekly chart. 4-16-18. The weekly chart clearly displays the plunging MACD, as well as a nicely rising 200wk line.
Technical analysis or “Charting” creates a precise calibrated visual representation of price action. Those pictures of price action clearly display “trends,” “patterns,” and when those break down.
Looking further at the bottom of this weekly chart we glimpse the blue/red MACD indicator. The MACD is a short to medium range trend indicator. The MACD for TWTR is a hockey stick hooked down. That’s not a fundamental metric.
Fundamentals tell their story in words and numbers–“metrics” like EPS and net margin. Charts are pictographs also telling a story in movement and pattern. We need both to form any truly insightful grasp on direction and health.
Why worry about all that mess? Because such precise calibrated visual representations can be rigorously studied to reveal where your stock, or an index, is headed, before you go there. We like knowing where we’re heading. How much is that worth?
In the final analysis,charting often clearly displays for investors the active dynamics controlling their stock price. The fundamentals for Twitter are now strong, and strengthening. Yet the story of TWTR right now, is down. Why? Because the charts tell us so.
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