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Technical Analysis

🔍 What Is Technical Analysis

Technical analysis uses historical price data and chart patterns to predict future market behaviour. Unlike fundamental analysis (which evaluates a company’s intrinsic value), technical analysis is all about price action, momentum, and timing trades.

Introduciton-to-Technical-Analysis.pdf

📊 Reading Candlestick Charts

Candlestick charts provide 5 key data points:

  • Open

  • Close

  • High of Day (HOD)

  • Low of Day (LOD)

  • Direction of movement (bullish or bearish)

Each candlestick represents a fixed time (e.g., 1 day, 1 hour, etc.). Longer timeframes usually offer more reliable trends.

tradingview.com for real-time candlestick charts.

⚓ Support and Resistance

  • Support = historical buying zones (price bounces up)

  • Resistance = historical selling zones (price bounces down)

  • Once broken, these levels often flip roles.

🕯️ Common Candlestick Patterns

technical_analysis_charts.png

1. Hammer

  • Green candle, long lower wick

  • Indicates bullish reversal

2. Shooting Star

  • Red candle, long upper wick

  • Indicates bearish reversal

3. Bullish Engulfing

  • Large green candle completely engulfs prior red candle

  • Signals buyer dominance

4. Bearish Engulfing

  • Large red candle completely engulfs prior green candle

  • Signals seller dominance

🡺 More patterns here

📈 Common Chart Patterns

1. Head and Shoulders

  • Indicates trend reversal from uptrend to downtrend

  • Inverse pattern signals reversal into an uptrend

2. Double Top & Double Bottom

  • Double Top = Bearish (two peaks)

  • Double Bottom = Bullish (two troughs)

🡺 Learn more chart patterns

📉 Key Technical Indicators

1. RSI (Relative Strength Index)

  • Measures momentum (0–100 scale)

  • Overbought: above 70

  • Oversold: below 30

  • Divergence between RSI and price can signal trend reversals.

2. MACD (Moving Average Convergence Divergence)

  • Uses EMAs (12-period & 26-period) to track trend momentum

  • Crossovers indicate potential buy/sell signals

3. Bollinger Bands

  • Based on SMA and standard deviation

  • Bands contract = low volatility

  • Bands expand = high volatility

  • Best for identifying breakouts or "squeeze" conditions

💡 Final Tips

  • Combine 3–5 indicators for higher probability trades

  • Always use stop-losses

  • Patterns are not always reliable, use confluence

  • Technical analysis works best when multiple signals align

    Further reading

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