Technical Analysis for Beginners!

[isplicer]

Hey all, I was asking a few questions about getting started in T/A on another thread. Hopefully this can be a place where those new to T/A can post their charts and ask the pros for feedback/advice.

I'm new to T/A so I thought I'd start out by trying a chart on NEN! I had already shared my chart with others and had a discussion going here: https://www.aussiestockforums.com/forums/showthread.php?t=18974&p=653632#post653632 but I decided to move the chatter here. Continuing the talk:

Originally Posted by Chalea
Hi isplicer,

Check the weekly if the daily confuses

SP needs to close below 31c to call it a double top, (target approx 15c).

For now, the uptrend's over & longer term indicators have signalled & now confirmed a change in momentum direction, (confirming the trendline break).

Click
Attachment 44146

Thanks a lot for your contribution Chelea. A few quick clarifications if I may. I'm not quite sure what you meant by "SP needs to close below 31c to call it a double top, ". Where/when did this sub-31c close need to occur?

Regarding the above, I had a read of this rather comprehensive guide on what they entail and how to identify them: http://stockcharts.com/school/doku.p...e_top_reversal

After reading that, I doubt that the two highs we saw in early May and early July can be part of the 'double top' pattern - the two tops are not very similar (they are a good 9% apart). Also, the decline from the second peak wasn't on expanding volume like the above guide requires.. and of course, the neckline of this possible double top was indeed tested after the 'second peak' (early Aug) but the support held and there was a substantial rebound. I don't think we have a double top reversal on our hands...? What do you think? Is my reasoning here correct?

Also, regarding your comment about the bearish divergence between price and RSI, could you please clarify? You've said that if the RSI gets lower as new highs are formed, then it's a bearish signal. My (rather elemental) understanding of RSI is that it indicates how overbought or oversold a security is. It thus seems logical to conclude that if new highs correspond to LOWER RSI's, then it means that even though new highs are being formed, the lower RSI's are saying that the stock isn't being overbought, despite the new highs (doesn't that make it bullish?) If the RSI was getting HIGHER as the price got higher, that would seem bearish to me as the new highs are corresponding to the RSI displaying an overbought signal (that is, the new highs are a result of being overbought, suggesting a reversal) I'm really sorry for the jumble, I hope what I just wrote is intelligible =).

Thanks a lot guys!

 

[isplicer]

And:

In the short term I'd be looking to see the bottom tested.

Tech/a, is that because we might possibly have a bearish head/shoulders reversal pattern on our hands? It's obviously not a double top, and it can't be a double bottom as there was an UPTREND before the two troughs (a double bottom reverses a DOWNTREND). Perhaps it can indeed be a H/S pattern?

https://lh5.googleusercontent.com/-.../AAAAAAAABY4/4--RYOz557Y/s1600/Untitled-1.jpg

It fits in with the information given here shockingly well:
http://stockcharts.com/school/doku...._analysis:chart_patterns:head_and_shoulders_t

If it's true, we have a target of 15c.

 

[tech/a]

No I'm just looking for the two lows which have previously held as support to be tested.
If they don't hold then I would look at further analysis.

 

[Chalea]

Where/when did this sub-31c close need to occur?

I'd say within the next few weeks. If need be wait for it to hold below 31c for 3 days in a row to confirm, (if you can't wait for end of week confirmation).

After reading that, I doubt that the two highs we saw in early May and early July can be part of the 'double top' pattern - the two tops are not very similar (they are a good 9% apart).

They look pretty similar to me

Also, regarding your comment about the bearish divergence between price and RSI, could you please clarify? You've said that if the RSI gets lower as new highs are formed, then it's a bearish signal. My (rather elemental) understanding of RSI is that it indicates how overbought or oversold a security is.

Divergences are a warning of a reversal of momentum. On a weekly chart they're significant.

"Developed J. Welles Wilder, the Relative Strength Index (RSI) is a momentum oscillator that measures the speed and change of price movements. RSI oscillates between zero and 100. Traditionally, and according to Wilder, RSI is considered overbought when above 70 and oversold when below 30. Signals can also be generated by looking for divergences, failure swings and centerline crossovers. RSI can also be used to identify the general trend."

Link

 

[rnr]

I'd say within the next few weeks. If need be wait for it to hold below 31c for 3 days in a row to confirm, (if you can't wait for end of week confirmation).

Hey isplicer,

I would suggest that you monitor chart patterns on a daily chart and that way you won't miss critical info like that NEN closed at 29c on Aug 8th confirming a double top.

You might also want to have a look at this site as it has heaps of info on patterns.

http://thepatternsite.com/

 

[isplicer]

^ Thanks for your input, will have a look =)

My second try: https://lh6.googleusercontent.com/-_5KaYI9B4sA/TljLJrE3GlI/AAAAAAAABZs/m8xED7baXVU/s0/trh.jpg