RE:PUNJABI It all depends on your investment style. If you are a buy & hold investor do proper due diligence. Read all the financial statement & analyst reports. You have to learn to read the balance sheet & understand the important ratios. Go through PP presentation on the website & all the documents. If you have time visit SEDAR too. Then compare t his company with similar & better oil companies. You have to follow & understand the commodity prices & its impact on oil stocks & future outlook for oil. Use technical analysis to buy & sell. You have to know about moving averages, support & resistance. Learn about RSI & stochastic. Learn to reduce your position when the stock is very overbought. Never get emotionally attached to any stock. Be very objective. All stocks have weakness find more about the weaknesses than the strengths. Find out the worst case scenario & see if you have a plan to deal with. Preserve your capital. Learn to lock in your profits. You will never get poor taking profits.
If you want to trade the stock then you still have to know the fundamentals, some do not care. I disagree with them. Find out the trading pattern. Learn to read the tape. Which no one does these days. When you live with the stock & constantly monitor it you will start to see the trading pattern & other things which will help you in decision making. Learn technical analysis. There are some good free websites. Buy or borrow good basic books from the library about technical analysis. Get a good trading platform. Most brokers offer them for free to the traders. Your platform should have good charting & multiple level 2 by price & order. If your are trading a dual listed stocks. Then run US level 2 which is not very reliable. Most orders are invisible. Just to see where the momentum is coming from or which country is leading in the direction.
If you have no trading experiences then take it very slow. You can lose all your money very fast. Do not use your money for trading. Use an education website for assimilated trading till you can figure out the trading style that may work for you. Do not use the money which you cannot afford to lose. Never ever use margin. Always keep a reverse to get out of a bad situation. Trading is not for everyone. Most retail traders lose money. Go though my previous posts on stockhouse I have talked about some of these things in my recent posts. Just click on Punjabi. Go to My Bullboard posts click on more bullboard posts & you can see all my old posts.
1. Map the Trends
Study long-term charts. Begin a chart analysis with monthly and weekly charts spanning several years. A larger scale map of the market provides more visibility and a better long-term perspective on a market. Once the long-term has been established, then consult daily and intra-day charts. A short-term market view alone can often be deceptive. Even if you only trade the very short term, you will do better if you're trading in the same direction as the intermediate and longer term trends.
2. Spot the Trend and Go With It
Determine the trend and follow it. Market trends come in many sizes – long-term, intermediate-term and short-term. First, determine which one you're going to trade and use the appropriate chart. Make sure you trade in the direction of that trend. Buy dips if the trend is up. Sell rallies if the trend is down. If you're trading the intermediate trend, use daily and weekly charts. If you're day trading, use daily and intra-day charts. But in each case, let the longer range chart determine the trend, and then use the shorter term chart for timing.
3. Find the Low and High of It
Find support and resistance levels. The best place to buy a market is near support levels. That support is usually a previous reaction low. The best place to sell a market is near resistance levels. Resistance is usually a previous peak. After a resistance peak has been broken, it will usually provide support on subsequent pullbacks. In other words, the old "high" becomes the new low. In the same way, when a support level has been broken, it will usually produce selling on subsequent rallies – the old "low" can become the new "high."
4. Know How Far to Backtrack
Measure percentage retracements. Market corrections up or down usually retrace a significant portion of the previous trend. You can measure the corrections in an existing trend in simple percentages. A fifty percent retracement of a prior trend is most common. A minimum retracement is usually one-third of the prior trend. The maximum retracement is usually two-thirds. Fibonacci retracements of 38% and 62% are also worth watching. During a pullback in an uptrend, therefore, initial buy points are in the 33-38% retracement area.
5. Draw the Line
Draw trend lines. Trend lines are one of the simplest and most effective charting tools. All you need is a straight edge and two points on the chart. Up trend lines are drawn along two successive lows. Down trend lines are drawn along two successive peaks. Prices will often pull back to trend lines before resuming their trend. The breaking of trend lines usually signals a change in trend. A valid trend line should be touched at least three times. The longer a trend line has been in effect, and the more times it has been tested, the more important it becomes.
6. Follow that Average
Follow moving averages. Moving averages provide objective buy and sell signals. They tell you if existing trend is still in motion and help confirm a trend change. Moving averages do not tell you in advance, however, that a trend change is imminent. A combination chart of two moving averages is the most popular way of finding trading signals. Some popular futures combinations are 4- and 9-day moving averages, 9- and 18-day, 5- and 20-day. Signals are given when the shorter average line crosses the longer. Price crossings above and below a 40-day moving average also provide good trading signals. Since moving average chart lines are trend-following indicators, they work best in a trending market.
7. Learn the Turns
Track oscillators. Oscillators help identify overbought and oversold markets. While moving averages offer confirmation of a market trend change, oscillators often help warn us in advance that a market has rallied or fallen too far and will soon turn. Two of the most popular are the Relative Strength Index (RSI) and Stochastics. They both work on a scale of 0 to 100. With the RSI, readings over 70 are overbought while readings below 30 are oversold. The overbought and oversold values for Stochastics are 80 and 20. Most traders use 14-days or weeks for stochastics and either 9 or 14 days or weeks for RSI. Oscillator divergences often warn of market turns. These tools work best in a trading market range. Weekly signals can be used as filters on daily signals. Daily signals can be used as filters for intra-day charts.
8. Know the Warning Signs
Trade MACD. The Moving Average Convergence Divergence (MACD) indicator (developed by Gerald Appel) combines a moving average crossover system with the overbought/oversold elements of an oscillator. A buy signal occurs when the faster line crosses above the slower and both lines are below zero. A sell signal takes place when the faster line crosses below the slower from above the zero line. Weekly signals take precedence over daily signals. An MACD histogram plots the difference between the two lines and gives even earlier warnings of trend changes. It's called a "histogram" because vertical bars are used to show the difference between the two lines on the chart.
9. Trend or Not a Trend
Use ADX. The Average Directional Movement Index (ADX) line helps determine whether a market is in a trending or a trading phase. It measures the degree of trend or direction in the market. A rising ADX line suggests the presence of a strong trend. A falling ADX line suggests the presence of a trading market and the absence of a trend. A rising ADX line favors moving averages; a falling ADX favors oscillators. By plotting the direction of the ADX line, the trader is able to determine which trading style and which set of indicators are most suitable for the
current market environment.
10. Know the Confirming Signs
Include volume and open interest. Volume and open interest are important confirming indicators in futures markets. Volume precedes price. It's important to ensure that heavier volume is taking place in the direction of the prevailing trend. In an uptrend, heavier volume should be seen on up days. Rising open interest confirms that new money is supporting the prevailing trend. Declining open interest is often a warning that the trend is near completion. A solid price uptrend should be accompanied by rising volume and rising open interest.
"11."
Technical analysis is a skill that improves with experience and study. Always be a student and keep learning.
- John Murphy
Definitions:
Leonardo Fibonacci was a thirteenth century mathematician who "rediscovered" a precise and almost constant relationship between Hindu-Arabic numbers in a sequence (1,1,2,3,5,8,13,21,34,55,89,144,etc. to infinity). The sum of any two consecutive numbers in this sequence equals the next higher number. After the first four, the ratio of any number in the sequence to its next higher number approaches .618. That ratio was known to the ancient Greek and Egyptian mathematicians as the "Golden Mean" which had critical applications in art, architecture and in nature.
Stochastics - an oscillator popularized by George Lane in an article on the subject which appeared in 1984. It is based on the observation that as prices increase, closing prices tend to be closer to the upper end of the price range; conversely, in down trends, closing prices tend to be near the lower end of the range. Stochastics has slightly wider overbought and oversold boundaries than the RSI and is therefore a more volatile indicator. The term "stochastic" refers to the location of a current futures price in relation to its range over a set period of time (usually 14 days).
Relative Strength Index – RSI
This indicator is one of the more popular ones in trading despite being relatively new. RSI measures momentum by comparing the extent of the stock’s recent gains and losses by transforming this info into a number between 0-100. Many traders confuse this indicator with relative strength between two stocks. RSI has nothing to do with that though the name implies it.
Most Used Settings
RSI is formed by using the average gain/loss over a predetermined period which J. Welles Wilder recommended a period of 14. This is probably the most used setting and since the invention of RSI we have been introduced to intraday trading so we are seeing many different settings. Scalpers might use a lower setting of 7 periods but you have to figure out what your trading style is and then back test the setting to see what is best.
RSI is plotted as a number between 0-100 with overbought and oversold levels at 70 and 30. Wilder recommend these levels but I have seen many traders preferring 80-20. This will result in fewer but higher odds trades.
Probably the most used technique when using relative strength index is a crossover of 50, either to the upside or downside. When above 50, the stock has a bigger average gain then average losses but the opposite is true when RSI is under 50.
Another great use of this technique is the overbought/oversold levels. Many traders will be looking to enter the trade at these levels if it’s with the trend. It is important to take notice of the trend as RSI can stay either overbought or oversold for an extended period of time.
Many traders also use the overbought and oversold levels for either tightening their stops or taking profit.