Technical Trading

Strategies
Profiting from Market Timing

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 Scope of Learning

Reinforcing the Basics

Trading along Trends
Working through Up Trends
Scraping through Consolidations
Enduring through Declines
Rules to Trade by…
 Part One
Reinforcing the Basics
 Reinforcing the Basics

Looking into Trends

1. Identify your Trend (check support/resistance)
UP – Higher Highs and Higher Lows
DOWN – Lower Highs and Lower Lows
Consolidation – Not any of the above

2. Sketch out appropriate Trendlines;

readjust when necessary then follow its cue.
Up Trendlines – must be drawn by connecting higher
lows or bottoms to determine the rising demand base.
Down Trendlines – must be drawn by connecting lower
highs or tops to outline the presence of overhanging supply.
 Reinforcing the Basics

Support and Resistance

Resistance

Reversal of Roles
Resistance now
acting as Support
Support
 Reinforcing the Basics

Trends and Trendlines

Up Trendline

Down Trendline
 Reinforcing the Basics

Magnitude and Duration

This principle states:
“It takes time for price to move towards its intended target.”
… any exaggeration must be eventually paid for in time and/or price.
50
(1) Correction in Time 45
40
(Magnitude)

35
30
(2) Correction in Price
Price

25
20
Time
15
(Duration)
 Part Two
Trading along Trends
 Trading along Trends
The Trading Routine:
When choosing a potential stock candidate (after
screening it fundamentally), it is always good
practice to technically evaluate how much upside
one would have compared with its downside.

1)Looking for a Perfect Entry

2)Establishing your Exit
3)Estimating your Technical Risk-Reward
 Trading along Trends

The Perfect Entry

Breakout from Consolidations A successful support bounce

from Up Trends

Breakout Moves Up Trend: Support Bounce

 Trading along Trends
Looking for Price Targets
When choosing a potential stock candidate (after
screening it fundamentally), it is always good
practice to technically evaluate how much upside
one would have.

a)Trendline Projection
b)Range in a Price Channel
c) Height of its current Area Pattern
d)Distance to its next Support/ Resistance
 Trading along Trends

Looking for Price Targets

B D
A

C
 Trading along Trends

Establish your Exit

Breakdown from Consolidations A break below Trendlines

Breakdown Conditions Up Trendline Break

 Trading along Trends

Price Targets and Triggered Exits

You must develop the ability to patiently stay with
winning trades to allow them to develop… give it
time to create the profits you expected if not more.

Take some profits only at these situations:

a)Once price targets are hit
b)Take windfall profits after a price surge
when momentum runs dry (particularly
in low-liquid stocks)
c) Once ‘Price Stops’ are triggered
 Trading along Trends

Price Targets and Triggered Exits

 Trading along Trends

Using Price Stops (cut loss points)

When holding a position through a trend it would be
prudent to follow it with a protective tool called a
‘Price Stop’. Once this price is violated, one must
liquidate or lighten current positions to safeguard
the value of positions.

Place stops at key support points:

a)Last Reaction Lows
b)Consolidation/Pattern Lows
c) Intermediate Trendlines or Mov. Ave
 Trading along Trends

Using Price Stops (cut loss points)

 Trading along Trends

Estimating your Risk vs Reward

A key component in being a successful investor is to
determine your risk versus reward level and use
that optimum ratio to guide your investment
decisions.

Remember:
a)Look for opportunities of 1:3+
b)Selling too soon may inhibit your ratio
c) You have a plan – follow it!
 Part Three
Working through Up Trends
Working through Up Trends

Eyeing the Bull

•Bull Market – an up trending market showing a
pick up in demand, fed by positive economic or
earnings growth potential.
•Drive – starts and drives a Bull market and
depicts a protracted and composed upward
swing. Comprises about 85%-90% of a Bull
swing.
•Run – marks off 10%-15% of a Bull Swing that
shows an accelerated advance that usually
leads into a ‘Buying Exhaustion’ and precedes
a major corrective event.
Working through Up Trends

The Long Winding Yellow Brick Road

In an Up Trend:
Your Mission:
Look for Buying Opportunities and Hold
Tools for Profit:
Up Trendlines, Upward Channels,
Supportive Zones, Large and Small Area
Pattern Breaks, and Positive Momentum
Signals
Working through Up Trends

The Drive and the Run

un
R
The
D r i ve
The
Working through Up Trends

The Drive Look for Buying

Opportunities
and Hold
1) Support Bounce
from Trendlines or
Channels
2) Area Pattern
Breaks
1) Rectangles
2) Triangles
3) Wedges
3) Positive
Momentum
1) MACD
2) Moving Ave
(65-day +)
Working through Up Trends

The Run
Look for Quick
Trading
Opportunities
1) Support Bounce
from Accelerated
Trendlines
2) Small Area
Pattern Breaks
1) Flags &
Pennants
2) 3-day
Pullbacks
3) Support bounce
from Smaller
Moving Ave (16-
32-day MAs)
Working through Up Trends

Spotting Probable Short Term Highs

Although one should stick to trend move as long as
possible; prudence may sometimes be the better
part of valor.
Watch out for :
a)Double Tops
b)One or Two Day Reversals
c) Volume Bursts and Dry ups
d)Extreme spreads to your Short term
Moving Averages
Working through Up Trends

Spotting Probable Short Term Highs

•Double Top – a chance for
prices to recover, but
failing to durably make a
higher high. Confirmed by
a break of its recent low.
Double Top

•One or Two Day Reversal

– shows a strong day
being totally consumed by
selling, if not registering a
loss, towards the end of
day.
 Working through Up Trends

Spotting Probable Short Term Highs

One Day Reversal

Double Top &

Volume Bursts
 Part Four
Scraping through Consolidations
Scraping through Consolidations

Playing Fair and Square

•Consolidation – a period of rest where prices nest
into to rebuild demand or reinforce supply. Allows
the company’s fundamentals to catch up with a
price trend.
•Area Patterns – consolidation zones that may
eventually ‘continue’ a trend or ‘reverse’ it.
•Support/Resistance – these indicators
become your best friends.
Scraping through Consolidations

How to Milk a Stone

In an Sideways Trend:
Mission:
Range Trade: Look to buy off Support and
Sell towards Resistance
Tools for Profit:
Support and Resistance, Boxes and Boxes,
Oscillators
Scraping through Consolidations

Range Trading Look to Buy near

support and Sell
closer to
Resistance
• Support Bounce from
Resistance wide ranges or Boxes
• Stay out of thinly
spread patterns and
simply wait for a
breakout.

Support • The sudden dry up or

explosion of volume
may trigger the
breakout or
breakdown.
 Part Five
Enduring through Declines
Enduring through Declines

Market Phases
•Bear Market – a declining market trend where
heaviness in supply is shown, fed by a
discouraging economic outlook or weak earnings
estimates.
•Dive and Corkscrew - starts and drives a
Bear market and depicts a sudden downward
swing (Selling Climax) followed by a protracted
decline. This comprises about 60-70% of a
Bear swing.
•Base out - marks off 30-40% of a Bear Swing
that shows a slowdown in deterioration and a
gradual introduction of accumulation.
Enduring through Declines

The Endless Void

In an Down Trend:
Your Mission:
Look for Shorting Opportunities and Hold
Short or Stay Out altogether
Tools for Profit:
Down Trendlines, Downward Channels,
Resistance Zones, Area Pattern
Breakdowns, and Negative Momentum
Signals
Enduring through Declines

The Dive, Corkscrew and Base out

The
D
ive
Co
rk
sc
re
w
Base Out
Enduring through Declines

The Dive Look for Selling

(Shorting)
Opportunities and
Hold
1) Resistance Recall
from Down
Trendlines or
Channels
2) Area Pattern Breaks
1) Major Tops
2) Des. Triangles,
Rectangles, Rev
Pennants
3) Negative Momentum
Enduring through Declines

The Corkscrew Look for Selling

(Shorting)
Opportunities and
Hold
1) Resistance Recall
from Down
Trendlines or
Channels
2) Area Pattern Breaks
1) Rectangles &
Triangles
2) Wedges
3) Negative Momentum
Enduring through Declines

The Base Out Treat as a Large Area

Pattern
1) Gradual shifts of
Accumulation may
be made
2) A Play on Support
and Resistance may
hold
3) Area Patterns
1) Rounding or
Triple Bottoms
2) Cup and Handle
Enduring through Declines
The Base Out Treat as a Large Area
Pattern
1) Gradual shifts of
Accumulation may
be made
2) A Play on Support
and Resistance may
hold
3) Area Patterns
1) Rounding or
Triple Bottoms
2) Cup and Handle
 Part Five
Rules to Trade by…
 Rules to Trade By…

The Raging Bull

1. Look for Opportunities to Buy, then Hold
2. In a Bull Run, be more aggressive and look for
smaller patterns but control your trading
volumes.
3. Strap yourself in and look to take profits only
after targets are hit.
4. Keep yourself protected by utilizing protective
stops and trailing it along a trend.
5. Be Aware of potential topping out gestures.
 Rules to Trade By…

Consolidating Market
1. Look for Opportunities to Range Trade.
2. Temper your expectations; targets may or may
not be hit.
3. Trade only if you must; more people lose in
consolidations than trending markets.
4. Wait for breakouts if possible.
 Rules to Trade By…

The Big Bad Bear

1. Look for Opportunities to Sell, or Sell Short if
possible then Hold.
2. In a Dive, do not bargain hunt. Wall streets’
graveyards are filled with people who were right
too soon.
3. If you cannot Short, then tie your hands behind
your back and wait.
4. Allow a Base Out pattern to show to prove to
you that demand has finally re-appeared –
giving you the fighting chance you need to
withstand the ominous claws of the Bear.
 THANK YOU!
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