Technical indicators?

Question

Can i carry out chart pattern analysis (trend lines, head & shoulders, triangles etc etc ) to technical indicators such as MACD, RSI etc. From what i have seen so far ( i am a newbie to T.A btw) these kind of pattern analysis is only applied to the stock chart and not to indicators.

Thanks.

Answer 1

but where is the question!

Answer 2

You can, but they are really only technical indicators and therfore secondary to price and volume. Plus trend lines is about all you'll find. You rarely the other types of patterns you mention in oscillating indicators because they are oscillating and therefore do not move infinately up and down sufficiently to create head and shoulders or triangles.

I'll tell you how I use the indicators you mention:

RSI:

I look for simply overbought (over 70) and oversold (under 30). I look for them in stocks with good uptrends buying in at 30 or below and reducing positions over 70.

MACD.

I look for crossovers of the fast line over the slow line. In good uptrending stocks an MACD bullish crossover with fastline coming up and under the slow line is a good secondary buy signal. The reverse (down and over) is a good secondary sell. Notice secondary.

Finally 'divergences' in both these indicators can be good 'watch out' signals prior to big moves. By this I mean the price is moving up but the RSI is moving sideways to down, and the MACD is bearishly crossing over. This happens a lot before major turns but it is a preempts the move and isn't always right. Obviously the opposite happens in down-trending stocks finding the bottom.

I discuss technical topics on my blog. You may find it interesting since you are learning. It is gmoolah.blogspot.com. I have taken a holiday break and plan to restart on Monday, but their are plenty of posts to read in archives. I also discuss signals on my watchlist when I see them.

I have traded for 6 years, now making a good portion of my income do it. I mostly focus on resource stocks (mining, drilling, energy, etc). I also watch a few others. When the resource stock bull market ends, I don't know when this will occur, I'll change my focus.

Happy trading.

Answer 3

Hi Fox

Everything is described in those books:

Market Wizards by Jack D. Schwager;
Technical Analysis by Jack D. Schwager;

Comprehensive Course on The Wave Principle by A.J. Frost and Robert Prechter;

Candlestick Charting Explained- Timeless Techniques for Trading Stocks and Futures by Gregory L. Morris;

Trading Chaos – Applying Expert Techniques to Maximize Your Profit by Bill M. Williams;
New Trading Dimensions by Bill M. Williams
Trading Chaos II by Bill Williams – Maximize Profits with Proven Technical Techniques by Justin Gregory-Williams and Bill M. Williams

If you have any question please do not hesitate and apply by pm or e-mail.

Also I could introduce you to brokerage company in Austria that allows to trade from the same account as currency pairs (forex) as metals, commodities and cfd on chares. Total 500 instrumentas available; spread from 1 pip.

Good luck!