Technical Analysis

Historical studies have shown that chart patterns are consistently repeated over time. Technical analysis is the art of recognizing specific patterns that are key to growth investing.

How to Trade Like an Investing Champion – Annotated Chart

Investor’s Business Daily recently hosted a webinar How to Trade Like an Investing Champion. The moderator, Irusha Peiris, was joined by U.S Investing Champions David Ryan (1985, 1986 and 1987) and Mark Minervini (1997). This is an excellent webinar to get insight into how these award winning traders analyze both the market and stock setups.

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Divergence and True Market Leaders

One sign of a potential true market leader is when there is a divergence of the stock’s price action versus the overall market. In this post I’ll show several examples where the S&P 500 was moving down while a stock was moving up, preceding a large gain over the coming months.

As with any technical or fundamental indicator, divergence is no guarantee of upward price movement. However, as you’ll see, divergence may be foretell a winning stock, one that can make a significant move higher.

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Closing Range vs True Range – What’s the Difference?

One way to help judge supply and demand for a stock is to pay attention to the closing range, which indicates where a stock closed within the price range for the day/week/month. Closing near the high indicates buyer demand for the stock. When near the bottom of the range, there was more selling than buying.

Closing Range Considerations:

• The closing range indicates where in the range (day/week/month) a stock closed.
• Higher in the closing range, buyers were in charge. More sellers than buyers when lower in the range.
• A closing range of 40%+ is supportive action.
• Even if a stock closes down for the day, if the closing range > 40%, that is still considered a sign of strength.

The true range takes into account the previous daily or weekly close. This provides another perspective as it relates to the current action, accumulation or distribution as well as the overall trend. The examples below will provide more specifics.

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Follow-Through Day Tutorial with Examples

When there is a market correction, it’s important to wait for a confirmation that an uptrend is underway before scaling back in. A follow-through day is the signal we are looking for.

Below is a short tutorial on how to determine when a follow-through day (FTD) has occurred. This includes the required rally days prior to an FTD as well as early signs a failure may occur. You’ll also find several annotated charts showing an index low, how to track the prerequisite rally and pinpointing where an FTD begins.

Many thanks to Mike Webster for clarifications and updates.

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