What is technical analysis?
Technical analysis is reading the chart put simply. I like to use studies and indicators such as 200 day simple moving average, 200 day weighted moving average, exponential moving average, MACD(Moving average convergence divergence), RSI(Relative strength indicator) and money flow index. Below are a breakdown of those indicators, what they are and how I use them with various stocks and timeframes to determine a good entry point to go long with put credit spreads or sometimes even short with call credit spreads. (Warning I rarely use call credit spreads because the market is mostly bullish)
How to read the price action on the graph in the Stock Market
To start performing your own analysis you must learn how to decipher the graph. The chart is really made up of 2 axis, Price on the right and time on the bottom. You can edit the time frame and increments as well. The candle stick represents where the stock started the hour and where it ended. If there is a wick that repsents the range. If its a green candle stick the stock started the hour at the bottom of the stick and ended at the top, and the wick plus the entire stick represents where the stock traded. So open at the. bottom of the stock closed at the top. Traded in the range of the entire candle at some point during the time phrase you are reviewing. For more please review this YouTube video.
GREEN CANDLE STICK
Began the timeframe at the bottom of the stick closed at the top.
RED CANDLE STICK
Began the timeframe at the top of the stick closed at the bottom. Thats why its colored red.
CANDLE STICK WICK
The range. Add the entire stick plus the wick whether top or bottom and that's the range the stock traded in that time period.
SIMPLE MOVING AVERAGE
What is a simple moving average?
Its simple! Its just the averages of prices over a time period. The longer the time period the slower the average. I like to use 200 day simple. And couple it with 200 day weighted then throw in 15 day exponential moving average.
200 DAY AVERAGE
take the prices and averages them over 200 days.
Stock prices can be volatile. So being able to have a moving average like 200 day lets you see the big picture
UNDER AND OVER VALUED
You can compare the moving average to the candle stick to see how much distance is between the two. Sometimes, not all the time if the price is far from the moving average because of a big jump the next move is often back down.