ELLIOTT WAVE

A flat correction differs from a zigzag in that the subwave sequence is 3-3-5, as shown in Figures 1 and 2. Since the first actionary wave,

Fibonacci studies: arcs, fans, retracements, and time

Overview: Leonardo Fibonacci was a mathematician who was born in Italy around the year 1170. It is believed that Mr. Fibonacci discovered..

Indicator

The Negative Volume Index (“NVI”) focuses on days where the volume decreases from the previous day. The premise being that the “smart money” takes positions on days when volume decreases

Basic Technicals

MACD technical analysis MACD technical analysis stands for moving average convergence/divergence analysis of stocks.

Fundamental Analysis

Doubling Stocks Review: Is this a scam? If you are looking for the truth about doubling stocks this is a necessity. One always thought there was something wrong with a doubling of stocks.

Wednesday, December 28, 2011

Difference between stock split and bonus?

Recently a question was posted to explain the Difference between stock split and bonus
Since its a Topic which everybody should understand,I am giving a detailed analysis on the subject.
First before Giving Any Difference lets know the Similarity.

Assume a Share is trading at Rs 100 and it issues 1 bonus Share for every one share held or it spilts the stock in two.Theoretically it will trade at Rs 50 after bonus or Split.practically it may trade at Rs 40 or Rs 60Depending on market conditions in Both Cases no of Shares will Double and net worth will remain the Same.

A bonus is a free additional share that is given to you without changing any face value. A stock split is the same share split into two.so think like this you have 100 rs and then you are taken that 100 rs and given 2 Fifty Rupees , you might have 2 counts now but the worth is same as 100 rs , but in case of Bonus you are given a extra 100rs .

In a stock split, the number of shares increases but the face value drops. The face value never changes for a bonus shares.

Tuesday, December 20, 2011

Candlestick Bullish Reversals

There are dozens of bullish reversal candlestick patterns. I have elected to narrow the field by selecting the most popular for detailed explanations. Below are some of the key bullish reversal patterns with the number of candlesticks required in parentheses.

*Piercing Pattern
*Bullish Harami
*Hammer
*Inverted Hammer (1)
*Morning Star
*Bullish Abandoned Baby (3)

Before moving on to individual patterns, certain guidelines should be established:


1.Most patterns require bullish confirmation.
2.Bullish reversal patterns should form within a downtrend.
3.Other aspects of technical analysis should be used as well.

Bullish Confirmation
Patterns can form with one or more candlesticks; most require bullish confirmation. The actual reversal indicates that buyers overcame prior selling pressure, but it remains unclear whether new buyers will bid prices higher. Without confirmation, these patterns would be considered neutral and merely indicate a potential support level at best. Bullish confirmation means further upside followthrough and can come as a gap up, long white candlestick or high volume advance. Because candlestick patterns are short-term and usually effective for only 1 or 2 weeks, bullish confirmation should come within 1 to 3 days after the pattern.

Existing Downtrend
To be considered a bullish reversal, there should be an existing downtrend to reverse. A bullish engulfing at new highs can hardly be considered a bullish reversal pattern. Such formations would indicate continued buying pressure and could be considered a continuation pattern. In the Ciena example below, the pattern in the red oval looks like a bullish engulfing, but formed near resistance after about a 30 point advance. The pattern does show strength, but is more likely a continuation at this point than a reversal pattern.

The existence of a downtrend can be determined by using moving averages, peak/trough analysis or trendlines. A security could be deeme in a downtrend based on one of the following:

1.The security is trading below its 20-day exponential moving average (EMA)
2.Each reaction peak and trough is lower than the previous.
3.The security is trading below its trendline.

These are just examples of possible guidelines to determine a downtrend. Some traders may prefer shorter downtrends and consider securities below the 10-day EMA. Defining criteria will depend on your trading style and personal preferences. Other Technical Analysis Candlesticks provide an excellent means to identify short-term reversals, but should not be used alone. Other aspects of technical analysis can and should be incorporated to increase reversal robustness. Below are three ideas on how traditional technical analysis might be combined with candlestick analysis.


1.  Support: Look for bullish reversals at support levels to increase robustness. Support levels can be identified with moving averages, previous reaction lows, trendlines or Fibonacci retracements.Juniper Networks (JNPR) advanced from 75 to 175 in less than two months. The stock retraced about 50% of this 100 point advance and formed a large bullish engulfing pattern around 125. This pattern was confirmed with two subsequent advances above the down trendline.

2.  Momentum: Use oscillators to confirm improving momentum with bullish reversals. Positive divergences in MACD, PPO, Stochastics, RSI, StochRSI or Williams %R would indicate improving momentum and increase the robustness behind a bullish reversal pattern.

3.  Money Flows: Use volume-based indicators to access buying and selling pressure. On Balance Volume (OBV), Chaikin Money Flow (CMF) and the Accumulation/Distribution Linecan be used in conjunction with candlesticks. Strength in any of these would increase the robustness of a reversal.For those that want to take it one step further, all three aspects could be combined for the ultimate signal. Look for bullish candlestick reversal in securities trading near support with positive divergences and signs of buying pressure.

A number of signals came together for Compaq (CPQ) in early July. After a steep decline in late June, the stock formed a series of spinning tops near support at 25. A bullish engulfing pattern formed in early July and this was confirmed three days later with a strong advance above 27. The 10-day Slow Stochastic Oscillator formed a positive divergence and moved above its trigger line just before the stock advanced above 27. Although not in the green yet, CMF showed constant improvement and moved into positive territory a week later.

Monday, December 19, 2011

Trend Line Break

Trend Line Break

Trend Line Break is a reversal chart patterns, where a stock in an up trend, breaks out of a support trend line and a stock in a down trend, breaks out of a resistance trend line. This is a very basic, simple, time tested chart pattern, which with an addition of a trend following indicator, gives an excellent result.
Pattern Formation

First learn to draw Trend Lines. Draw resistance trend lines in a down trend and support trend trend lines in an up trend. When ever a trend line broken out by the moving stock price, we get trading opportunity.

Volume invariably rises at the break out point, which indicates a strong trade.

See how all the trades are profitable. This being an up trend, taking long trades at the break out of resistance trend lines, gives more profitable trades.

Trend line breaks

Trend line breaks are counter trend trades, because they expect the price to continue in its new direction (against the previous trend). For an upward trend line (and an upward trend), a trend line break would be a short trade, where the trader sells at a price near the trend line, and then buys at a price below the trend line. For a downward trend line (and therefore a downward trend), a trend line break would be a long trade, where the trader buys at a price near the trend line, and then sells at a price above the trend line.
Trend line breaks are not usually traded independently, but are combined with other trading information, such as price movement or volume information

How to trade?
Trade minor trend breakout in the direction of an intermediate trend or trade intermediate trend breakout in the direction of a major trend. Use an indicator to go with a trend. Wait for the break out bar to close. Then only sell below the low of the support breakout bar and buy above the high of the resistance breakout bar.

Wednesday, December 14, 2011

Market volatility changes can warn of impending trend changes in price

Market volatility changes can warn of impending trend changes in price.  Option and futures premiums increase due to an increase in volatility.  There are two major Indices that track volatility.  The first is the VIX or Volatility Index.  Developed in 1993, the CBOE's volatility index is a measure of volatility of the US equity market.  The VIX is calculated by taking the weighted average of the implied volatilities of eight OEX calls and puts with an average time to maturity of 30 days.  Most often it is considered a contrarian indicator, where high reading are considered oversold territory and low readings are overbought.  Notice as well that volatility measures often move inversely to the price trend of major indices. 

Rising volatility often confirms expectation of declining markets and corresponds with downward moving prices.  Falling volatility often accompanies rising markets and supports a bullish outlook in near term.  These are only indications but can be used to help build supporting evidence of price trend.  A confirming VIX reading supports price trend indications present in the markets.  A VIX that is not confirming price trend may suggest that the price trend is suspect. 

Volatility usually moves inversely to price trends.
The second measure of volatility found in the market place is the CBOE Nasdaq Volatility Index.  One use in tracking volatility for option traders is in recalculating option price projections based on projected changes in volatility.  Determining the current volatility and extrapolating future possible values of volatility allows option traders to use option pricing systems like the Black Schoels to calculate possible price projections for an option given an expected volatility. 

A declining volatility level over time suggest that bullish sentiment exists in the markets for the longer term price trend.  A rising volatility level over time carries bearish sentiment.  Tracking volatility allows a glimpse of what traders feel are the possibilities of price trend in the near term.  Falling values in volatility suggest a bullish bias.  Rising volatility levels suggest a bearish bias.