Technical Analysis: The Complete Resource for Financial Market Technicians PDF
Preview Technical Analysis: The Complete Resource for Financial Market Technicians
About This eBook ePUB is an open, industry-standard format for eBooks. However, support of ePUB and its many features varies across reading devices and applications. Use your device or app settings to customize the presentation to your liking. Settings that you can customize often include font, font size, single or double column, landscape or portrait mode, and figures that you can click or tap to enlarge. For additional information about the settings and features on your reading device or app, visit the device manufacturer’s Web site. Many titles include programming code or configuration examples. To optimize the presentation of these elements, view the eBook in single-column, landscape mode and adjust the font size to the smallest setting. In addition to presenting code and configurations in the reflowable text format, we have included images of the code that mimic the presentation found in the print book; therefore, where the reflowable format may compromise the presentation of the code listing, you will see a “Click here to view code image” link. Click the link to view the print-fidelity code image. To return to the previous page viewed, click the Back button on your device or app. 2 T A ECHNICAL NALYSIS THE COMPLETE RESOURCE FOR FINANCIAL MARKET TECHNICIANS THIRD EDITION Charles D. Kirkpatrick II, CMT Julie Dahlquist, Ph.D., CMT 3 Publisher: Paul Boger Editor-in-Chief: Amy Neidlinger Executive Editor: Jeanne Levine Editorial Assistant: Kristen Watterson Cover Designer: Chuti Prasertsith Managing Editor: Kristy Hart Senior Project Editor: Betsy Gratner Copy Editor: Gill Editorial Services Proofreader: Sarah Kearns Indexer: WordWise Publishing Services Compositor: Nonie Ratcliff Manufacturing Buyer: Dan Uhrig © 2016 by Pearson Education, Inc. Publishing as FT Press Old Tappan, New Jersey 07675 This book is sold with the understanding that neither the author nor the publisher is engaged in rendering legal, accounting, or other professional services or advice by publishing this book. Each individual situation is unique. Thus, if legal or financial advice or other expert assistance is required in a specific situation, the services of a competent professional should be sought to ensure that the situation has been evaluated carefully and appropriately. The author and the publisher disclaim any liability, loss, or risk resulting directly or indirectly from the use or application of any of the contents of this book. For information about buying this title in bulk quantities, or for special sales opportunities (which may include electronic versions; custom cover designs; and content particular to your business, training goals, marketing focus, or branding interests), please contact our corporate sales department at [email protected] or (800) 382-3419. For government sales inquiries, please contact [email protected]. For questions about sales outside the U.S., please contact [email protected]. Company and product names mentioned herein are the trademarks or registered trademarks of their respective owners. All rights reserved. No part of this book may be reproduced, in any form or by any means, without permission in writing from the publisher. Printed in the United States of America First Printing October 2015 ISBN-10: 0-13-413704-3 ISBN-13: 978-0-13-413704-9 Pearson Education LTD. Pearson Education Australia PTY, Limited Pearson Education Singapore, Pte. Ltd. 4 Pearson Education Asia, Ltd. Pearson Education Canada, Ltd. Pearson Educación de Mexico, S.A. de C.V. Pearson Education—Japan Pearson Education Malaysia, Pte. Ltd. Library of Congress Control Number: 2015946164 5 To Ellie—my precious wife, long-term love, companion, and best friend. —Charlie To Richard, Katherine, and Sepp. —Julie 6 Contents Part I: Introduction 1 Introduction to Technical Analysis 2 The Basic Principle of Technical Analysis—The Trend Chapter Objectives How Does the Technical Analyst Make Money? What Is a Trend? How Are Trends Identified? Trends Develop from Supply and Demand What Trends Are There? What Other Assumptions Do Technical Analysts Make? Conclusion Review Questions 3 History of Technical Analysis Chapter Objectives Early Financial Markets and Exchanges Modern Technical Analysis Current Advances in Technical Analysis 4 The Technical Analysis Controversy Chapter Objectives Do Markets Follow a Random Walk? Fat Tails Large Unexpected Drawdowns Proportions of Scale Can Past Patterns Be Used to Predict the Future? What About Market Efficiency? New Information Are Investors Rational? Will Arbitrage Keep Prices in Equilibrium? Behavioral Finance and Technical Analysis Pragmatic Criticisms of Technical Analysis What Is the Empirical Support for Technical Analysis? Conclusion 7 Review Questions Part II: Markets and Market Indicators 5 An Overview of Markets Chapter Objectives In What Types of Markets Can Technical Analysis Be Used? Types of Contracts Cash Market Derivative Markets Swaps and Forwards How Does a Market Work? Who Are the Market Players? How Is the Market Measured? Price-Weighted Average Market Capitalization Weighted Average Equally Weighted (or Geometric) Average Conclusion Review Questions 6 Dow Theory Chapter Objectives Dow Theory Theorems The Primary Trend The Secondary Trend The Minor Trend Concept of Confirmation Importance of Volume Criticisms of the Dow Theory Conclusion Review Questions 7 Sentiment Chapter Objectives What Is Sentiment? Market Players and Sentiment How Does Human Bias Affect Decision Making? Crowd Behavior and the Concept of Contrary Opinion 8 How Is Sentiment of Uninformed Players Measured? Sentiment Indicators Based on Options and Volatility Polls Other Measures of Contrary Opinion Unquantifiable Contrary Indicators Historical Indicators Unusual Indicators How Is the Sentiment of Informed Players Measured? Insiders Sentiment in Bonds Treasury Bond Futures Put/Call Ratio Treasury Bond COT Data Treasury Bond Primary Dealer Positions T-Bill Rate Expectations by Money Market Fund Managers Gold Sentiment Conclusion Review Questions 8 Measuring Market Strength Chapter Objectives Market Breadth The Breadth Line or Advance-Decline Line Double Negative Divergence Traditional Advance-Decline Methods That No Longer Are Profitable Advance-Decline Line to Its 32-Week Simple Moving Average Breadth Differences Breadth Ratios Breadth Thrust Summary of Breadth Indicators Up and Down Volume Indicators The Arms Index Volume Thrust with Up Volume and Down Volume Ninety Percent Downside Days (NPDD) 10-to-1 Up Volume Days and 9-to-1 Down Volume Days Net New Highs and Net New Lows New Highs Versus New Lows High Low Logic Index Hindenburg Omen 9 Using Moving Averages Coppock Curve Number of Stocks Above Their 30-Week Moving Average Very Short-Term Indicators Breadth and New Highs to New Lows Net Ticks Conclusion Review Questions 9 Temporal Patterns and Cycles Chapter Objectives Periods Longer Than Four Years Kondratieff Waves, or K-Waves Population Waves 17–18-Year Alternating Stock Market Cycles Decennial Pattern Periods of Four Years or Less Four-Year or Presidential Cycle Election Year Pattern Seasonal Patterns January Signals January Barometer January Effect Events Conclusion Review Questions 10 Flow of Funds Chapter Objectives Funds in the Marketplace Money Market Funds Margin Debt Funds Outside the Security Market Household Financial Assets Money Supply (M1 & M2) Money Velocity Yield Curve Bank Liquidity 10
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