Resource Centre
Automated: The analyst's first step is to run the instrument through the price action model (Tactical Trading Guide) to obtain an unbiased assessment of technical position and multiple time frame probability. This can either be live or end of day.
At a high level, we also look to determine the following (non-comprehensive):
What is the current regime for the given time frame (daily/weekly/monthly chart): overbought, oversold, neutral etc.?
What was the previous (recent) regime? For example, has it improved from oversold to weak and is now on it's way to neutral? a bullish sequence. Has it deteriorated from overbought to strong and is now on it's way to neutral? - a bearish sequence
What has been the recent candle structure? positive, negative, mixed? Long upper tails (bearish) or long lower tails (bullish)? Who is in control? Buyers or Sellers? Is it opening weak and closing strong, or, is it opening strong and closing weak?
The trend is up/down. Is the momentum slowing? If yes, this could be a sign that a period of consolidation or a reversal is imminent. Alternatively, look for an opportunity to buy on a pullback.
Is the share near short or medium term support/resistance?
Is the share near a key moving average, for example the 8 or 21-day EMA for short term traders, or the 50 & 75-day EMA for medium term traders, or the 200-day SMA for long term investors?
Where is the price distance vs the 8 and 21-day EMA? Is it below or above these levels? How long has it been above or below these levels? Does it appear to be breaking the 8/21-EMA on the upside or downside?
What is the distance vs the 75-day? Is it trading at an above-average distance above the 75-day? If yes, then the buy/long reward-to-risk may be poor.
What is the distance vs the 75-day? Is it trading at an above-average distance below the 75-day? If yes, then the short/sell reward-to-risk may be poor.
What is the distance vs the 21-week? Is it trading at an above-average distance above the 21-week? If yes, then the buy/long reward-to-risk may be poor.
What is the distance vs the 21-week. Is it trading at an below-average distance below the 21-week? If yes, then the buy/long reward-to-risk may be appealing for a mean reversion buy/long trade.
For shares, what are the sector peers doing? Are they weak while this share is strong? Are they strong while this share is weak?
Volume: If you are fortunate to have access to the full market depth, then study the volume patterns. Where are the big buyers/sellers? How quickly are bids/offers being filled?
Lester Davids
Analyst: Unum Capital
Traders also have access to the Tactical Trading Guide which can be used to understand the end if technical position.
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