A Fidelity Investments Webinar Series
Getting Started with
Technical Analysis
BROKERAGE: TECHNICAL ANALYSIS
BROKERAGE: TECHNICAL ANALYSIS
Defining
Technical Analysis
Charts, Chart
Best Practices
Types, and Chart
for Trend Traders
Construction
Basics of Trend
Analysis
Agenda
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Defining Technical
Analysis
BROKERAGE: TECHNICAL ANALYSIS
Fundamental Analysis &Technical Analysis
Two Common Types of Analysis
Fundamental Analysis Technical Analysis
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BROKERAGE: TECHNICAL ANALYSIS
Defining Technical Analysis
Definition
Technical analysis primarily studies historical
market data. It also:
• Focuses on the supply-and-demand dynamic
expressed via stock prices
• Visualizes shifts in supply-and-demand which can be
seen in chart patterns
• Accounts for the emotional aspects of the marketplace
• Quantifies the capital risk of trading and
investment decisions
• Does not try to predict the future
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BROKERAGE: TECHNICAL ANALYSIS
Defining Technical Analysis
Assumptions
• Prices in freely traded markets are determined by
the economic principles of supply-and-demand
• Price discounts everything
• Prices are nonrandom but not necessarily
predictable
• Prices have direction and tend to travel in
observable trends
• Behavior and history in the marketplace will
repeat itself
• Price patterns summarizing behavior are “fractal”
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Charts, Chart Types,
and Chart Construction
BROKERAGE: TECHNICAL ANALYSIS
Charts, Chart Types, & Chart Construction
Overview
Analyze price Easily visualize
behavior the patterns and
trends within data
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BROKERAGE: TECHNICAL ANALYSIS
The Value of Reversal Points
The longer the trend,
the more important Breakout
the reversal point Breakout
Above
Above
Peak C
Reversal point importance is Breakout
Peak B Peak C
Peak B
determined by the length of Above
Peak A
the trend before and after the Peak A
peak or trough.
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Basics of Trend
Analysis
BROKERAGE: TECHNICAL ANALYSIS
The Value of Trends
Technical analysis is based on the
principles of trends
Trends arise from the interaction
of buyers and sellers
Profit is made from a trend in prices
A trend’s direction is described by the relative
location of peaks and troughs
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BROKERAGE: TECHNICAL ANALYSIS
Uptrend
An uptrend has
successively higher
peaks and higher
troughs.
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BROKERAGE: TECHNICAL ANALYSIS
Downtrend
A downward trend
has successively
lower peaks and
lower troughs.
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BROKERAGE: TECHNICAL ANALYSIS
Sideways Trend
A sideways trend
is a period with
no clear direction
in prices.
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BROKERAGE: TECHNICAL ANALYSIS
Support and Resistance
Support
Horizontal line drawn
through troughs at the
same price level
Resistance
Horizontal line
drawn through peaks at
the same price level
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BROKERAGE: TECHNICAL ANALYSIS
Profiting from a Trading Range
Green points
are candles that
hit support and
resistance levels
on close.
Red are intraday
and do not close
at support and
resistance.
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BROKERAGE: TECHNICAL ANALYSIS
When Support Becomes Resistance
Once the price breaks
through support, that
support becomes
future resistance.
When the price
eventually rallies back
to that level, it hits
selling pressure
and reverses back
down again.
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Best Practices
for Trend Traders
BROKERAGE: TECHNICAL ANALYSIS
Entry Strategy
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BROKERAGE: TECHNICAL ANALYSIS
Exit Strategy
The trend line
crosses previous
troughs.
A trigger could
be a breakout
below the rising
trend line.
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BROKERAGE: TECHNICAL ANALYSIS
Important Information
Any screenshots, charts, or company trading symbols mentioned, are provided for illustrative purposes
only and should not be considered an offer to sell, a solicitation of an offer to buy, or a recommendation
for the security.
Investing involves risk, including risk of loss.
Technical analysis focuses on market action – specifically, volume and price. Technical analysis is only one
approach to analyzing stocks. When considering what stocks to buy or sell, you should use the approach
that you're most comfortable with. As with all your investments, you must make your own determination
whether an investment in any particular security or securities is right for you based on your investment
objectives, risk tolerance, and financial situation. Past performance is no guarantee of future results.
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