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.

Charting Jim Cramer’s “Up Stocks” for 2020

On Thursday, November 19th, Mad Money host Jim Cramer shared his year end list of “up stocks.”

“I expect these 10 up stock winners to keep winning as we approach the end of the bizarre year that was 2020”

Jim Cramer

The stocks mentioned were:

AMZNNOWOKTAPYPLRNG
ROKUSQTGTTSLATWLO

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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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Look for Tightening Price Action Preceding a Breakout

The concept of tightening price action, lower highs and higher lows, along with volume declining, will often lead to a breakout that follows in the direction of the prior trend.

William Jiler in 1962 referred to this as a coil. Mark Minervini, in his book Trade Like a Stock Market Wizard, describes similar price action which he refers to as volatility contraction pattern (VCP). It is also known as a symmetrical triangle.

In this post I’ll show historical examples as well as recent breakouts and current setups. My focus here is on daily and weekly charts. With that said, take some time and look at various intraday charts, the same concepts apply.

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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.

If you’d rather not get wrapped up with the specifics, you can follow me on Twitter where I’ll post as soon as we have a FTD.

Many thanks to Mike Webster for clarifications and updates.

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David Ryan on the Telltale Signs of a Correction

On a recent IBD Investing podcast, Irusha Peiris and David Ryan walked through a number of clues that may indicate we are heading into a correction. The chart of QQQ was used as many of recent leaders can be found in the Nasdaq 100.

I annotated a chart of the key points and added some additional notes as it relates to the moving averages and RS Line.

It’s important to note, these same principles apply regardless of the index, so I’d recommend keeping this information handy for future reference.

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