Technical analysis involves forecasting future stock price movement based on historical price and volume data. Many investors are intimately familiar with fundamental analysis, but technical analysis can be trickier since there are fewer educational resources available. On AAII.com, we have archived numerous technical analysis articles and they have been aggregated in one location. To navigate to our Technical Analysis area, go to www.aaii.com, click on the Investing tab and select Technical Analysis from the submenu.
At the Technical Analysis area of AAII.com, a Technical Analysis Know-How section and a Featured Article are presented. If you click on the Archives link at the bottom of the page, you’ll see a list of technical analysis articles separated into a variety of categories: introduction, chart types, pattern analysis, technical indicators, technical analysis & chart resources, and additional articles (Figure 1).
One of the articles listed in the introduction section, “Why Technical Analysis Matters,” by Michael Kahn, outlines a five-step process to complete before deciding if a stock idea should be a buy or a sell. The article also goes over some technical analysis theory and includes definitions of some key terms, such as trends and trendlines, support and resistance, moving averages, volume and momentum, and relative performance.
The chart types section is very useful, detailing several different charts, including Japanese candlestick and point & figure charts. In addition, articles in this section detail the types of analyses that you are able to perform using these charts.
The pattern analysis section lists articles on patterns such as the cup-with-handle and triangle patterns. As always, not only are these patterns defined, but the articles show how to make use of them and what to look for in order to differentiate between stock winners and losers. Furthermore, this category also covers gaps, explaining the differences between their meanings, based on where they fall within a trend.
The technical indicators category provides both introductory articles and also more sophisticated articles. “An Intro to Moving Averages,” written by Computerized Investing Editor Wayne A. Thorp, CFA, is a comprehensive piece on moving averages, one of the most popular technical indicators. In addition, this category includes articles on the stochastic oscillator and MACD (moving average convergence/divergence) line.
A link to our list of top charting websites is also provided.
Using AAII.com for Basic Technical Analysis
At AAII.com’s home page on the far right side, you can pull up fundamental and technical data by entering a stock symbol in the ticker box under the Today’s Market chart. Data provided by QuoteMedia covers both U.S. and Canadian stocks. Once you are at a stock’s page, click on Charts in the blue menu bar to pull up a basic price and volume chart for the stock. The time frame of the chart and the chart type can be changed. The time periods offered include intraday through 10 years, and the chart types include line, open-high-low-close, candle and area. A Java chart is also available with the same options.
Click on Interactive and Comparative Charts at the bottom of the page to toggle to a chart with more options. In addition to more chart types (such as bar and dot charts), and time frames (such as 20 years), the interactive chart provides a number of other technical charting capabilities. Over 30 indexes (one at a time) along with 10 stocks (together) may be overlaid on the chart.
Upper indicators, ones that are overlaid directly on the price chart, include a multitude of moving averages, Bollinger bands and price channels. Lower indicators, those shown underneath the price chart, include MACD, RSI (relative strength index) and momentum (Figure 2).
After you are finished, AAII.com can save the settings if you click Remember Chart Settings at the bottom of the page. The next time you search for a symbol and click Interactive and Comparative Charts, your saved chart settings will be loaded.
In Case You Missed It: Recent Online Exclusive
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In October 2011, Wayne A. Thorp, CFA, updated the PC Buyer’s Guide. The article goes over the factors to consider when buying a new PC to help you in the computerized investment and tracking process, including tasks such as portfolio management and tracking, stock and mutual fund screening, and technical analysis and charting. It gives the latest recommendations for hardware as well as components.
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