TURNING POINTS & TRENDS
Turning points are spotted through fundamentals or technical analysis or by studying the general economic indicators of a market. Most importantly one must monitor the trends on the "Volume and the Price"
*Volume – tells you whether the market participants are buyers or sellers of the stock.
*Price – tells you which direction the stock is moving(up or down).
If the number of shares traded is high and the prices are also moving higher-
that’s a positive signal. You are probably looking at a large group of people investing heavily in that stock.
If the number of shares traded is high and the prices are coming down – that’s should ring the alarm bells. You are probably looki
ng at investors backing out from that stock.
Slow pace in buying means that there are not many sellers for the stock, which is a good sign. It also indicates
that the price is almost at it’s peek and a further up move is unlikely immediately however since the sellers are in short, the stock might move higher after a certain amount of time.
A relatively big volume increase during the price advance with lower volume on the pullback (
when the stock price briefly fluctuates) indicates
a continuing uptrend. The lower volume during the pullback indicates that there are not enough sellers in the market to drive the stock down.
A big buying volume without the price going higher indicates
distribution, which means resistance. A big seller is likely in the market. There is no way to tell yet if the buyers will win this battle and are able to drive the price higher, or if they will give up and the stock eventually reverses.
A slow and steady movement upward with consistent volume
indicates continuing upward momentum. There might be a buyer in the market who is steadily buying shares while trying to not attract too much attention.
To conclude; Tracking on price and volume for a few days will give you a general idea on the direction of the market and with some data and practice, you can spot the warning signs that a change in direction or trend is about to occur. It is also wise to look at the 52 week chart just to evaluate the 52wk lows and highs.
TECHNICAL ANALYSIS
GapsFor wazua members, you must have read comments from others about "
gaps" and have read statements such as ".
.these gaps have to be filled"
. So GAPS are area(s) on a price chart in which there were no trades. It is easy to see gaps if you take candle stick charts.(theres a topic on wazua on candle sticks someone had offered to discuss them a while back). Forexample if the high of a stock yesterday was 80 and low was 50 and today the high was 100 while the low was 75, so when a chart showing highs and lows is drawn it will indicate a discontinuity, termed as a ‘Gap’ in technical theory. Interestingly gaps get filled in a short time that is the price will come back to fill the price gaps that were not taken previously. There are several types of gaps (homework - read about them from the web).
ChartsThere are 2 types of charts (i) continuation - suggests that prior trend will continue (ii) reversal - suggests that the prior trend will reverse upon completion of the pattern.
TrianglesThere are three types of triangle patterns – symmetrical, descending and ascending, which are constructed by converging trend lines.
A symmetrical triangle is formed when two similarly sloped trend-lines converge, typically
suggests a continuation of the prior trend.
A descending triangle, which is formed when a downward sloping trendline converges towards a horizontal support line,
suggests a downward trend after completion of the pattern.
An ascending triangle, which is formed when an upward sloping trendline converges towards a horizontal resistance line,
suggests an uptrend after completion of the pattern. There other methods of technical analysis that are used to establish trends eg bottoms, tops etc. but these are the most common
For fundamental analysis read post#528 by @ngapat he's laid it down well and clear
Anyone with more infor feel free to share
And thanks to @CDE and @streewise, Kazi iendelee.
Next topic - Value Investing (time for those buffet quotes)
"There are only two emotions in the market, hope & fear. The problem is you hope when you should fear & fear when you should hope: - Jesse Livermore
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