Stocks4 - Technical Analysis

Front 1

"Technical Analysis" is the study of ______

Back 1

Price. NOT Fundamentals

Front 2

What is the general definition of "support" and "resistance"?

Back 2

Areas stock has bounced up or down from @ least twice

Front 3

Up, Down, Sideways are examples of _____.

What technical indicator is commonly used for this?

Back 3

TREND.

Moving Average.

Front 4

"The ____ is our Friend"

Back 4

TREND

Front 5

In a "short term" trend what do the price bars represent?

In general, how long is this?

Back 5

DAILY price bars

Few days to a few weeks

Front 6

In an "intermediate term" trend what do the price bars represent?

In general, how long is this?

Back 6

DAILY price bars

6 Weeks - 9 Months

Front 7

In a "long term" trend what do the price bars represent?

In general, how long is this?

Back 7

WEEKLY price bars

>= 1 year

Front 8

What is the best chart to view a "long term" trend?

Back 8

5 year chart

Front 9

Explain how "Trend" and "Support and Resistance" are "Tied Together"?

Back 9

TREND helps you determine WHERE support and resistance are

Front 10

What is an important indicator, but is more important in some situations over others?

Back 10

VOLUME

Front 11

In an upward trending stock, how important is it to focus on volume?

Back 11

Not so much

Front 12

What is needed for a "breakout"?

Back 12

ABOVE average volume

Front 13

Why is volume important in a sideways trending stock?

Back 13

If a stock is trending sideways for a period of time, VOLUME is what "breaks it out" of that trend and helps it start a new trend in an upwards direction

Front 14

You want to trade in the direction of the dominant trend ans stay away from "what" when t he trend is clearly down?

Back 14

Stay away from buying stocks OR

Call options when the trend is trending down

Front 15

What does the "stochastics" indicator measure?

What does it help you determine?

Back 15

-Measures a stocks bullish or bearish SENTIMENT

-Whether buyers (bulls) or sellers (bears) are dictating current trading in the stock

Front 16

What does MACD measure?

2 reasons why special

Back 16

Measures SHORT-TERM MOMENTUM

1. Tends to be the first of the indicators to give a buy or sell signal
2. Gives an early warning as to when a trend is losing momentum

Front 17

What does VOLUME show?

What is it a combination of?

Back 17

# of shares that trade each day

Combination of both buy orders and sell orders

Front 18

What is high volume relative to?

What does this show?

What tends to begin with large volume surges?

Back 18

-Average Volume

-Shows when institutional money is buying heavily (if stock is going up) or selling heavily (stock is going down)

-Significant Uptrends and Downtrends

Front 19

Knowing how to read support and resistance indicators can help protect you from what?

-Support and resistance areas help you so what?

Back 19

-Buying just before the stock hits a peak and comes back down

-Trading ranges more clearly and forecast stock movement accurately

Front 20

True or False...
Blindly following buy and sell indicators is considered following the rules?

Back 20

FALSE!

Front 21

In general, why do you want to avoid buying stocks with very low average volume?
(2 reasons)

Back 21

1. These stocks are more prone to manipulation

2. Have a higher failure rate on buy signals

Front 22

In general, before entering a stock on buy signals, we want to look for average volume to be above ______?

Back 22

100,000

Front 23

On the 1m, 3m and 6m and 1y charts, each bar represents what?

Back 23

the open, high, low and closing price for one trading day

Front 24

On the 5y and 10y charts, what does each bar represent?

Back 24

The open, high, low and closing price of an entire week of trading.

Front 25

Who are the one day, 5 day and 10 day charts for?

-What do they represent?

Back 25

DAY TRADERS

-Just a few minutes of time

Front 26

What are the buy signal rules for an upward trending stock that grades well in phase 2?

Back 26

Uptrending stock = 3 green arrows

When the most recent arrow on each individual indicator is green on an uptrending stock

Front 27

What are the buy signal rules for an sidewards trending stock that grades well in phase 2?

Back 27

sideways = 3 green arrows AND a volume surge.

Front 28

Why does a sideways moving stock need a volume surge in addition to the 3 green arrows needed for an uptrending stock?

Back 28

Needs confirmation of big money coming into the stock, which is shown by a volume surge.

This MUST happen before the signal can be considered valid

Front 29

What is the definition of a "solid" phase 2 score?

Back 29

1. F/E score >= 3.25

2. Price Pattern >= 2.5

Front 30

what is the definition of a "strong industry group?"

Back 30

1. Stable or increasing group rank of >=70
OR
2. Group chart not in a downtrend during the past 2 to 3 months

Front 31

Strong Institutional Support is indicated by what? 2

Back 31

1. Volume surge >= 1.5
OR
Accumulation/Distribution (Acc. Dist Current) score of >=60

Front 32

How do you make money when the market is going down?

Back 32

Learn to trade PUT OPTIONS!

Front 33

Good money management involves what 4 factors?

Back 33

1. Buying the correct nuumber of stock shares/option contracts

2. Diversifying your capital across the number of stocks in different industry groups

3. Letting your winners run

4. Keeping your losers small

Front 34

Poor money management involves what 4 factors?

Back 34

1. Sizing portions incorrectly

2. Putting too much money into one trade

3. Selling strong buy signals too quickly

4. Sitting on your losers "hoping" they will rally back upward

Front 35

____ + ____ =
Consistent Performance

____ + ____ =
Poor Performance

Back 35

Great System, GOOD Money Management

Great System, POOR money mangement

Front 36

What is a STOP ORDER?

Back 36

A protective order placed below the current stock price that automatically sells the stock if the price of the stock falls to or below the price you have specified

Front 37

When placing a stop order with most brokers, are you charged initially?

How about when you cancel or modify the order?

Back 37

NO

Usually without cost

Front 38

When are you charged on a STOP ORDER?

Back 38

You are only charged a regular commission if the stock falls below the specified price and the system actually executes your order

Front 39

WHY are STOP ORDERS used?

Back 39

Every now and then, bad news comes out on a stock, and the stock falls very rapidly or gaps below the price, for a loss

With a STOP ORDER, you can get out at the best available price once the stock penetrates taht sell stop price.

Usually, this type of fast, downward move is the kick-off to a much larger downward thrust, and you want to be out of the stock - even if it is at a lower price than what you specified

Front 40

How do you create a STOP ORDER?

Back 40

In the ORDER section in TOS, you will see market, limit, stop, stop limit, trailstop, MOC, LOC.

Select STOP from the drop down menu

Front 41

Why should you use a REGULAR STOP ORDER rather than a STOP LIMIT?

What type of situations?

Back 41

A REGULAR STOP ORDER becomes a market order as soon as th stock falls to or through the price you've specified.

A STOP LIMIT ORDER turns into a limit order and sells ONLY at the specified price or higher when the stop level is hit.

Thus, a limit order will keep you in the stock even if really bad news occurs and the price rapidly falls through teh sell stop price specified or gaps below it.

You want to be out of the stock in these situations, so use regular stop orders

Front 42

STOP ORDERS vs STOP-LOSS orders?

Back 42

= the SAME thing!

Front 43

Where you place the sell stop determines what?

Back 43

-How many shares you should buy AND
-Ultimately determines the risk of your trade

Front 44

Where should you consider placing your stop sell orders?

Back 44

3% below recent support

Front 45

What are the 2 methods you can use to determine where to place your stop order?

Back 45

1. Place your stop order 3% below the lowest price at which your stock traded during the 2 weeks prior to the buy signal

2. Place your stop order 3% below other support you have identified on the chart

Front 46

What's a quick tip to compute approx stop order prices?

So, for a stock near $50, the stop order is going to be where?

Back 46

-For every $10 in stock price, the stop order is going to be 30 cents BELOW the recent low.

-About $1.50 below the recent low.

Front 47

What 2 things must you Know BEFORE determining the appropriate number of shares to buy?

Back 47

1. The buy signal price

2. The price at which you'll be placing your stop order

Front 48

How many shares should you buy?

Back 48

Buy only enough shares so that if the stock hits yoru initial stop order, yoiu can live with the loss----
the amount you can handle losing every now and then without losing sleep over it.

Front 49

When it comes to determining how many shares to buy, what's a good rule to follow?

Back 49

Never lose more than 1% to 2% of your TOTAL ACCOUNT VALUE on any one trade.

This DOES NOT meanput only 1% to 2% of your account into each play.

It means buy only enough shares so that if the stock hits your stop order, you lose only 1%-2% of your total account value

Front 50

When can you be more liberal with the 2% rule?

When should you use it?

When should you use the 1% rule?

Back 50

LIBERAL when you have an account with < $10,000

Start using the 2% rule when your account grows to $20K to $30K.

When you get a much larger account, start using the 1% rule.

Front 51

When do all buy signals appear?

Back 51

1. After a stock has PULLED BACK- stopped going down, and then started to RALLY.

Front 52

In Method One, of where to place your stop loss, what are you identifying?

Back 52

SHORT TERM SUPPORT - the low price JUST PRIOR to the buy signal

Front 53

Explain a scenario in which you should place your initial stop order, 3% below the lowest price the stock dropped to during the 2 weeks prior to the buy signal.

Back 53

If the stock fits all the criteria for a strong buy signal, has just made a low, and is now showing 3 green arrows, the stock will most likely NOT drop below its recent low in the near future.

Front 54

Most recent low before the buy signal $17. easiest way to calculat ethe stop order price?

Back 54

LOW * .97

17* .97 = 16.49 stop price

Front 55

On more volatile stocks, explain how method 1 (for calculating stop loss) compensates for additional risk.

-However, with ________, your risk profile is essentially the same, regardless of how volatile the stock iss

Back 55

-By forcing you to buy fewer shares than you would in non-volatile stocks.

PROPER POSITIONING

Front 56

Which method of determining where you put your stop loss, gives you more "wiggle room"? Why?

Back 56

METHOD 2.

Because you are placing your stop order 3% below other support you have identified on the chart, instead of below the price at which the stock traded in the last 2 weeks.

For a sideways moving stock, an a buy signal breaks out above the resistance level, a higher support level is likely present in the trade. Remember, resistance, once broken commonly acts as support.

Front 57

How do you determine your ACCEPTABLE LOSS?

Back 57

TOTAL ACCOUNT VALUE *
RISK %

Front 58

Once you know the buy price and the stop order price, how do you determine correct position size?

Back 58

1. Determine your ACCEPTABLE LOSS =
TOTAL ACCOUNT VALUE * RISK%

2. DETERMINE YOUR RISK =
BUY PRICE - STOP PRICE

3. POSITION SIZE =
ACCEPTABLE LOSS + RISK

Front 59

What is another alternative to determining your correct position size if you don't want to buy the stock?

Back 59

BUY THE CALL OPTION on the stock

Front 60

If you buy the "$20 call option" on a stock that's trading on a price of $19.50 per share, what does this mean?

To do this, what do you have to do?

Back 60

You have the right to buy the stock at $20 per share at any time on or before the expiration day.

You only have to pay the price, which is a fraction of the actual stock.

Front 61

Let's say a $20 call option is on URBN that expires in 3 months is selling for $1.35 per share. The stock is priced at $19.50 per share. Why would you do this?

Back 61

You only have to pay the price, which is a fraction of the actual stock price

Front 62

What is the “Dow”

Back 62

Overall gauge of the market