The Trend

The Benefits of Combining Fundamental and Technical Analysis

Over the last 22 years, I’ve heard countless arguments for and against fundamental and technical analysis. While neither is perfect, they both have strengths we can capitalize on.

Fundamental analysis shows us what’s under the hood.

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An Easy Way to Spot Pivots in Stocks

One of the best ways to make money on the Street is by spotting excessive bouts of fear and greed. 

In fact, that’s how some of the most famous investors made their money.

In short, they were buying when others were scared, and selling when others got too greedy. They were exploiting the very psychology of herd mentality.

And we can do much of the same.

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Oil Prices: Two Ways to Spot Pivot Points

Oil is a fickle beast.

Throughout 2017, oil prices have rallied and stumbled more times than most of us care to remember thanks to global supply and demand issues.

All thanks to supply-demand imbalances, and hope.

However, there are two ways to spot when and where oil could pivot and turn.

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Gap Trading Fundamentals

All of a sudden, there’s a gap in the chart of your favorite stock.

Surprise news, earnings, something unexpected caused a bout of extreme optimism or pessimism that resulted in the move.

Look at Palo Alto Networks (PANW), for example.  In early June 2017, shares closed at $118.59.  However, shortly after the close, news of a massive cyber attack began hitting headlines.  Orders come flooding in overnight.  The next day, the stock opens at $140.

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Fibonacci Trading Made Easy

No one ever said technical analysis was easy.

But over time, with practice, the easier it becomes.

For months, we’ve introduced you to several technical tools. However, the one we get the most questions about are Fibonacci retracements. To many, this took is considered complex and outdated. But to be very honest, it’s not complex at all once you practice with it.

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Three of the Greatest Momentum Oscillators

It’s always interesting listening to fundamental and technical analysts argue.

Just as fundamental investors like to laugh at technical analysis, technicians laugh at the absurdity of investing just on fundamentals. It’s a never-ending, laughable fight.

Fundamental analysis shows us what’s under the hood, and whether or not an asset is over- or underpriced, as compared to the competition. In fact, Warren Buffett, Baron Rothschild and Sir John Templeton subscribed to this school of thought and made a fortune. They seeks to uncover the intrinsic or true value of an asset, and is dependent on future sales, earnings, and estimates. It’s pain-staking research at times.

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How to Properly Identify Support and Resistance Levels

Make no mistake, technical analysis is just as important as fundamental analysis, and some of the most influential traders in history have made fortunes by proprely applying technical analysis in their trading methodologies.

Let's take a look at how technicians have learned from Jesse Livermore:

“The price pattern reminds you that every movement of importance is but a repetition of similar price movements, that just as soon as you can familiarize yourself with the actions of the past, you will be able to anticipate and act correctly and profitably upon forthcoming movements.”

 

 

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Why the MACD is an Essential Technical Analysis Tool

We’re often told that technical analysis is a waste of time.

Traders are often told to ignore it altogether.

“Technical analysis is fundamentally flawed,” says Forbes.

“Technical analysis is stupid,” blared The Motley Fool.

But it’s just not true. In fact, technical analysis is just as important as fundamental analysis.

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Trading with the 50 Day and 200 Day Moving Averages

When it comes to technical analysis, one of the necessities for success is the moving average.  In fact, for years, I’ve personally relied on two of them – the 50-day and even the 200-day moving averages.

Each is powerful because they give us a view of a stock’s trend, as well as a look at where we may find support and resistance along the way.  For example, if I find a stock that historically bounces every time it hits its 50-day moving average, I’m likely to buy on a test of that moving average. 

That’s because, as they say, the trend is your friend.

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Technical Analysis: The Importance of Money Flow

When it comes to trading, one of the best ways to tell how strong or weak a stock may be is by paying attention to the Money Flow Index (MFI).

In its simplest terms, money flow is another momentum indicator that indicates strength of money flowing in and out of a stock. If the flow of money into the stock is weak, we’ll begin to see MFI trend down. But as money flows into a stock, we can see this happening when MFI trends up.

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Why You Must Confirm a Death Cross

By now, you’re well aware of how to find trends using simple moving averages, such as the 50- and 200-day moving averages.   But you should also know how to potentially spot when a trend could stop dead in its tracks, or birth a new trend.

All we have to do is wait for a crossover to do so.

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Using Fibonacci in Technical Analysis

No one ever said technical analysis was easy.

But over time, with practice, the easier it becomes.

For months, we’ve introduced you to several technical tools. The one we get the most questions about, though, are Fibonacci retracements.

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Channel Trading: Three Patterns You Need to Watch

To many, technical analysis is useless.

But as we’ve proven countless times, such analysis is essential, especially when you’re trying to gauge the strength and weakness of momentum with support and resistance. 

One of the best indicators to understand is the channel, defined as two parallel trend lines within a tight trading range. The upper line connects the price peaks in the channel while the lower line connects the price lows. 

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How to Spot Potential Breakout Opportunities

Great traders will always go where the action is. 

Volatility, momentum, new highs, and liquidity are some of the key traits they’ll look for. Other times, there’s a fundamental reason for the break, including news, or event that’ll draw even more traders in.

Just what is a breakout, though?

 

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Chart Patterns: Flags and Pennants

Traders are often told to ignore technical analysis. “Technical analysis is fundamentally flawed,” says Forbes. “Technical analysis is stupid,” blared The Motley Fool.

“The poor reputation of technical analysis is well deserved. It’s their own fault really,” commented Following the Trend.

But it’s just not true. In fact, technical analysis is just as important as fundamental analysis because it helps us understand the psychology of traders driving the stock.

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Three of the Most Consistent Candlestick Patterns

When Munehia Homma first created candlestick charts in they 1700s, he had no idea it’d change the way we look at stocks 300 years later.

To him, candlestick charting was meant for the rice trade.

He’d record the opening day’s price of rice, the low and the close. And over time, he’d begin to see price patterns in his recordings, mapping out repetitive signals in the price bars.

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It Pays to Watch for Engulfing Candlesticks

To the average trader, candlestick patterns are a bunch of crosses and oblong shapes with odd names, like the three black crows, or the abandoned baby bottom. 

Some traders choose to ignore them.  Others understand that it gives a clear illustration of the war between the bulls and the bears.  In fact, every time you look at a candle you can see who is ahead, who is falling behind, and whether or not the war has come to a standstill of indecision. 

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