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SU | RY | WJA | L | ABX

i need to use technical analysis to determine which of these 5 CDN stocks are likely to increase or decrease more than 1% after close this friday.

which do i long or short (or do nothing) and why?

what time frame setting do i use?


  • markdmarkd mod
    edited May 2015
    You could use weekly or daily time frame.

    The rule of thumb is, trade with the trend, because the odds favor the trend continuing - that's what a trend is - a period when the odds favor price moving more in one direction than the other (within that time frame, at least). If you trade with the trend rather than against it, you will be more often right than wrong.

    There are basically two trades in up trends - buying the retracement back to the trend line, or near it, and buying the breakout past a recent high. Vice versa for selling short in down trends.

    So draw trend lines on each chart.

    For down trend lines, connect several lower highs.

    For up trend lines, connect several higher lows.

    The connections don't haven't be exact. Not every chart has both trends, or any trend.

    A down trend is broken when you get a high significantly above it, and the break is confirmed by a higher low. If you get a lower low, you would redraw the down trend line to the most recent high.

    Vice versa for up trends.

    If there is no clear trend - you can draw both up trend lines and down trend lines, and neither gets broken - or both get broken - or, you can't draw up trend or down trend lines at all - then you are in a range. The recommendation there is to trade long when you get back to the last low, and trade short when you get back to the last high.

  • In addition to markd's answer, here is an answer to address part of your question:
    • Use Bollinger Bands to see volatility. Wide bands means the stock is more volatile. The more volatile, the more percent change the stock could experience - up or down.
    • Use Rate of Change. ROC(5) is a rolling 5 period Price Performance. If it stays above zero, then the 5 period price performance has been positive, more than 0.
    • Use a 5 or 10 daily period Standard Deviation to get an idea of the expected price movement.
    • Use a 5 daily period PerfChart to gauge the results.
  • hi markd, you're really good at this. i will go to the charts and do the annotations you suggest, although i only understand about half of what you're writing about. maybe it will become clearer when i look at the charts. im going to set it to show me line charts as i find candlesticks confusing. im pretty new to this. thanks very much for your patience.
  • so im watching the 5 CDN stocks. they are registered on the tsx and the nye. i would like to understand a bit more about which exchange to watch the stock on and why: the tsx or the nye. any idea where i might find some info to help me round out the answer to this?
  • If you are in Canada and trading with loonies, follow the tsx stocks. If you are in the US trading in dollars, follow the nyse stocks. If you trade a stock not in your own currency, then you have currency risk - that is, you are vulnerable to changes in the currency.

    For instance, if you are Canadian and you want to buy on the NYSE, you first have to convert your CDN dollars to US dollars (the broker would do this and charge you for it). Then when the trade is done, you have to convert the US dollars back to CDNs. If the exchange rate has changed in the meantime, you might get fewer CDNs back per dollar than you paid, so you make less on the trade than you expected. Of course, you might get more. If you want to study both currencies, plus the stock, you could make out. But that's more work than is necessary if you just trade the stock in your own currency in the first place.
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