Descending triangle

Ascending triangle

Symmetrical Triangle

Reverse Head and shoulders

Head and Shoulders

Double top or M top

Double top or M top is a chart pattern formed after an uptrend or a rally.
The profitable action to take is to sell when price breaks below the neck line.
After selling, the objective is to buy back when the price dropped as much as the amount from double top to the neck line.

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Double Bottom or W bottom

A double bottom is one of the most recognizable chart patterns. It typically resembles a "W" and forms after a downtrend. A double bottom forms as part of a consolidation process, in which one group of traders is liquidating a position as another group is accumulating. Typically, the left side of the W is formed as part of a larger downtrend. Once that low is set, the stock bounces higher before coming back to retest the first low. If the retest is successful, the chart begins to look like a "W". Once the "W" is formed, the stock must clear the neckline, which is typically in line with the center peak of the "W". It is important to note that a double bottom is not valid until the price closes above the neckline.

The entry point to buy is at the time price breaks the neck line.

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New Bull at Bursamalaysia?

The stock market is starting to show the symptoms of a typical bull market. Firstly, investors were not
afraid at all as the KLCI approached the 76.6 pts RSI yesterday, which helped the benchmark index to
stretch its gains within the overbought territory. Another very positive development is that this time, it
was the broader market which fueled buying sentiment on the KLCI component stocks instead,
eventually sending the key index higher by 10.06 pts.
We have said that it is not impossible for the key index to stretch the current uptrend. Although
the market has entered overbought territory, the KLCI could still rally further and carry the daily
RSI over the 80 pt-mark. We have seen this happen many times before in a typical bull market in
the past, especially when the weekly and monthly RSIs are far from being overbought.
Of course, the key technical indicator to watch out today is the daily RSI, which is now trading at the 79
pt-level. No doubt that the market is becoming more and more overbought, but the conviction and
confidence of buyers are also improving by the day since the breakout from the 100-day MAV line. This
type of market sentiment is essential at this stage to carry the KLCI further away from the 200-day MAV
line. Yesterday’s rally is the initial confirmation of a decisive violation of the 200-day MAV line.
Meanwhile, the near-term technical outlook of the KLCI remains firmly bullish. We are still eyeing
a strong support at the 200-day MAV line, which is now situated at the 959 pt-level. An additional
support is seen at the 936 pt-level, followed by the 925 pt-level. To the upside, continue to look for the
1,000 pt-level as the next formidable resistance

Blind men story and market analysts

This is just a story to justify why we need technical analysis to guide us in the information overloaded world of share investment.

It goes like this:-

There is a group of five blind men all having the first encounter with an elephant. The first man touched the elephant trunk and thought that the elephant is like a snake. The second man touched the elephant's tail and thought that the elephant is just a jungle vine. The third man encountered the elephant's leg and thought that the elephant is a tree. The fourth raised his hand and touched the elephant's ear and thought that elephant is a huge fan. The fifth man grabbed the elephant's tusk and thought that the elephant is a huge polished rod. When they sat down together for lunch, they started to relate their encounter with an elephant. On learning that they had all encountered but a single elephant, they were puzzled how each of them could have such a different impression of the same animal just like market analysts disagreeing with each others even all are analysing the same stock at the same point of time.

Because market analysts are very much like the blind men analysing the elephant , they only see the part they are trained to see. As such, every analyst suffers from narrow field of vision and misses the forest after examining his tree. One will look at earnings and, finding rapid earnings growth, forecast that the stock will go up. Second analyst, found that the same stock is over-valued due to the low book value and that same stock will go down. The first analyst placed great emphasis on growth of earning and the second analyst is looking for stocks trading at big discount to book value. Perhaps another pair of analysts comes along. One like a stock that is traded at high dividend yield and recommended a buy while the other saw that this same stock is not retaining enough profit for future expansion so recommend a sell. And yet another analyst comes a long and reject all the opinions on the stock because he was worried of the high gearing of that stock.

From a pure technical analyst point of view looking at fundamental of the stock is a futile exercise as they may be opposing views on the same stock. So he believes that all factors are reflected in the chart of the stock. By looking at the trend, pattern formation and oscillators etc he hopes to see the forest and not just a tree. And from that wide view he plans to catch all the monkey (money) in the forest.

This justifies the use of technical analysis.

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Have a good day!

What the Bleep is a Fibonacci?

The investing game is chock-full of esoteric lingo and obscure mathematical and technical analysis models. All too often, the unfamiliar terminology and the complexity of the models leave the neophyte investor perplexed.

I recently received an e-mail from an OptionsZone reader that exemplifies just this state of confusion surrounding one frequently mentioned technical analysis tool.

The reader asked the blunt question: "What the bleep is a Fibonacci?"

To answer this question properly, we have to go all the way back to 13th-century Italy. It was then that a brilliant mathematician named Leonardo Pisano, who was nicknamed "Fibonacci," identified a sequence of numbers that possessed an unusual relationship.

Here is the famous Fibonacci number sequence: 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, etc. The relationship between these seemingly unrelated numbers is that each term in the sequence is simply the sum of the two preceding terms. This relationship persists into mathematical infinity.

The unusual characteristic of this numerical sequence is that each number is approximately 1.618 times greater than the preceding number.

So much for the "what" of the Fibonacci, now we need to know how this sequence of numbers and the relationship between them is applied to an analysis of the financial markets.

Fibonacci Trading

Technical analysts use the relationship between every number in the Fibonacci series as the basis for identifying the common ratios used in price retracement studies.

When technical analysts look at price action through the Fibonacci prism, they identify two extreme points (usually a major peak and trough) on a stock chart, and then divide the vertical distance by the key Fibonacci ratios.

And what are those key ratios? They are 23.6%, 38.2%, 50%, 61.8% and 100%. Once these rations are identified, they signify potential areas of support and resistance. The question now is why did the aforementioned ratios become the key ratios?

Well, here is where the Fibonacci ratios become really esoteric. The theory here is that in nature, and in the financial markets, systems will tend to display numerical characteristics that resemble key Fibonacci patterns. Beehives, spiral galaxies, the human anatomy and, yes, the patterns in the equity markets, all display profound and unequivocally non-coincidental Fibonacci patterns.

Applied to the market, this technical tool is used to help identify critical points that cause an asset's price to reverse. It's also used to monitor the direction of a prior trend and how likely it is to continue once the price of the asset has retraced to one of the key ratios.

In the chart below provided by the Investopedia Web site, we can see how a Fibonacci retracement is plotted on a stock chart.

Here we see how a stock's price tends to change direction as it nears key Fibonacci support and resistance levels. The most famous of these ratios is 61.8%, which is also referred to as "the golden ratio" or "the golden mean".

This ratio is determined by dividing one number in the series by the number that follows it. For example: 8/13 = 0.6153, and 55/89 = 0.6179.

Does it Really Work?

Now I know what you might be thinking right now. Does this Fibonacci thing really work? The answer to that question is yes and no.

Yes, using Fibonacci retracement patterns along with other technical analysis tools can work by giving you the edge when it comes to identifying key resistance and support levels in a stock. But no, relying solely on a Fibonacci retracement pattern or any single technical analysis measurement as the Holy Grail of investing does not work.

So, now that you know what the bleep a Fibonacci is, you can now move on to other simple questions such as the origins of life on earth, the Big Bang and quantum mechanics.

Buy signals ... underconstruction

The following are buy signals.

1. Divergence with RSI

2. Divergence with MACD

3. Divergence with Stochastic

4. Crossing of 7-day and 3-day moving average... both 7-day and 3-day MA are heading lower and then buy when 3-day MA cuts above 7-day MA

5. Candle stick signal..
.a) morning star ...






b) Bullish harami









6. RSI <30? look at other oscillators as well.. overbought or oversold?

7. Reward risk ratio .. at least 2 to 1 0r 3 to 1

8. any known information

9. dividend paying ... what is the current yield?