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A Technical Approach To Trend Analysis: Practical Trade Timing for Enhanced Profits

Book Description

This is the only modern, action-oriented and practical guide to trend analysis and prediction for the professional trader. Unlike outdated competitive guides, it fully reflects today’s markets and charting sciences.

Writing for traders with basic knowledge of trends and technical analysis, Michael C. Thomsett introduces advanced analytical tools for recognizing how risks evolve as trends proceed; distinguishing between strong and weak trends; objectively evaluating the health of a stock’s current price levels, trading breadth, and technical condition; and anticipating plateaus, slowdowns, or price reversals.

Thomsett introduces trend prediction based on technical signals such as candlestick reversals, price gaps, and movement through resistance or support, enabling traders to go far beyond mere trend "following." You’ll learn techniques for gaining deeper insights into price change – and into valuable factors such as the angle of price change, trend duration, and offsetting price movements.

You’ll find detailed coverage of trend theory, resistance, support, trendlines and channel lines; patterns and confirmations of both reversals and continuations; broadening and narrowing trends, price jumps; and trends based on volume, moving averages, and momentum.

While other books focus solely on technical price movement, A Technical Approach to Trend Analysis will help you understand the trend itself – and use that insight to manage market risks far more effectively.

Table of Contents

  1. About This eBook
  2. Title Page
  3. Copyright Page
  4. Contents
  5. Acknowledgments
  6. About the Author
  7. Introduction: Defining the Trend
  8. 1. The Theory of Trends—Dow, EMH, and RMH in Context
    1. A Set of Assumptions about Short-Term Trends
    2. The Beginnings of Trend Analysis: The Dow Theory
    3. The Dow Theory Applied
    4. Other Price Theories: EMH
    5. Types of EMH in Theory
    6. The Bubble Effect
    7. Other Price Theories: RWH
    8. Trend Analysis as a Risk-Management Process
  9. 2. Statistically Speaking—Trends by the Numbers
    1. Fat Tails and Trends
      1. Bollinger Bands
    2. Statistical Tendencies
    3. Trends and Averages
    4. Trends Versus Price
    5. Strengths and Weaknesses of Trends
    6. Pattern Cycles
    7. Market Sentiment Expressed in the Trend
    8. Momentum Trading
    9. Statistical Measurements and Trend Behavior Distinguished
    10. Spikes and How to Manage Them
    11. After the Spike—Breakouts and Reversals
    12. Statistical Analysis of Fundamentals
    13. Game Theory Applied to Trend Analysis
    14. Magical Thinking and Trends
  10. 3. Resistance and Support—A Trend’s Moment of Truth
    1. Tests of Breadth
    2. The Nature of Resistance and Support
    3. The Channeling Trading Range
    4. Reaction High and Low Prices
    5. The Bouncing Price in a Trend
    6. The Flip
    7. Wedge-Shaped Trends
    8. Triangle-Shaped Trends
    9. Support and Resistance Zones
    10. Breakouts as Signals of Supply and Demand Adjustment
  11. 4. Trendlines and Channel Lines—The Shape of Things to Come
    1. Signal Patterns Versus Trends
    2. Trendlines and What They Reveal
    3. Price Increments on Charts
    4. Trend Angles
    5. Internal Trendlines
    6. Validation of the Trend
    7. Retracement Versus Reversal
    8. Fibonacci Retracement
    9. Channel Line Types
  12. 5. Reversal Patterns—End of the Trend
    1. The Dilemma: Minor or Major Reversal
    2. Reversal Versus Consolidation
    3. The Time Element: Momentum of Reversal
    4. Reversal in Western Patterns
      1. Head and Shoulders
      2. Gaps
      3. Rounding Top and Bottom
      4. Rectangle Top and Bottom
      5. Double Top and Bottom
      6. Diamond Formations
    5. Reversal in Eastern Patterns
      1. Long Candles
      2. Doji Formations
      3. Hammer and Hanging Man
      4. Engulfing Pattern
      5. Harami and Harami Cross
      6. Doji Star
      7. Piercing and Meeting Lines
      8. Three White Soldiers and Three Black Crows
      9. Morning and Evening Star
      10. Abandoned Baby
      11. Squeeze Alert
    6. Divergence and Its Role in Reversal Trends
    7. Breakouts and Proximity to Resistance or Support
  13. 6. Continuation Patterns—A Bend in the Trend
    1. Continuation and Its Relationship to Reversal
    2. Western Continuation Signals
      1. Head and Shoulders
      2. Inverse Head and Shoulders
      3. Gaps
      4. Rounding Top and Bottom
      5. Rectangle Top and Bottom
      6. Double Top and Bottom
      7. Diamond Formation
      8. Flags and Pennants
      9. Cup and Handle
    3. Eastern Continuation Signals
      1. Long Candlesticks
      2. Long-Legged Doji and Spinning Top
      3. Thrusting and Separating Lines
      4. Side-by-Side Lines
      5. Tasuki Gap
      6. Gap Filled
  14. 7. Confirmation Signals—Turning the Odds in Your Favor
    1. The Causes of Price Movement
    2. Behavioral Psychology and the Market
    3. The Flaw of Overconfidence
    4. Resistance and Support as Keys to Confirmation Proximity
    5. Strong and Weak Confirmation
    6. Momentum and Timing of Preceding Trends
    7. Divergence Analysis and Confirmation
    8. Fundamental Analysis and Confirmation
    9. Confirmation Bias
  15. 8. Consolidation Patterns—The Sideways Pause
    1. Consolidation and Its Meaning
    2. Resistance and Support as Keys to Consolidation Reading
    3. The Triangle Breakout
    4. Volume Spikes and Gaps
    5. Breakout Signals
    6. Consolidation Plateaus
    7. The Bollinger Squeeze
  16. 9. Volume Signals—Tracking Price Trends
    1. How Volume Confirms Trends
    2. Confirmation Trends with Volume
    3. Trends with Volume-Marked Breakouts
    4. Trend Climax and Gap Patterns
    5. On Balance Volume (OBV)
    6. Accumulation/Distribution (A/D)
    7. Money Flow Index (MFI)
    8. Chaikin Money Flow (CMF)
    9. Chaikin Oscillator
  17. 10. Mind the Gap—When Price Jumps Signal Change
    1. The Nature of Gaps
    2. Gaps Filled or Unfilled
    3. Gap Up and Gap Down
    4. Common Gaps
    5. Hidden Gaps
    6. Breakaway Gaps
    7. Runaway Gaps
    8. Exhaustion Gaps
    9. Island Cluster
    10. Ex-Dividend Gaps
    11. Gaps as Part of Other Signals
    12. Gap Proximity to Resistance or Support
  18. 11. Moving Averages—Order in the Change
    1. Two Moving Averages
    2. Bollinger Bands
    3. Convergence
    4. Divergence
    5. Price Crossover
    6. MA Double Crossover
    7. Resistance and Support
  19. 12. Momentum Oscillators—Duration and Speed of a Trend
    1. The Nature of Momentum
    2. Relative Strength Index (RSI)
    3. Moving Average Convergence Divergence (MACD)
    4. Stochastic Oscillator
  20. 13. Volatility—Marking Risk within the Trend
    1. Calculating Volatility
    2. Volatility Indicator
    3. Evolving Volatility Levels
    4. Average True Range (ATR)
    5. Volatility According to the VIX
  21. 14. Fundamentals—Connecting the Two Sides
    1. Value Versus Growth
    2. The Concept of Fundamental Volatility
    3. Dividend per Share and Increased Dividends
    4. P/E Ratio
    5. Revenue and Earnings
    6. Debt/Equity Ratio
    7. Comparing Fundamental Trends to Technical Trends
  22. 15. Overview—Putting It All Together
    1. Moving from Downtrend to Consolidation
    2. Secondary Trend Volatility
    3. Large Price Move Ending Primary Trend
    4. Primary Trend with Secondary Trend
    5. Consolidation Primary Trend with Failed Breakouts
    6. Conclusion
  23. Endnotes
    1. Chapter 1: The Theory of Trends—Dow, EMH, and RMH in Context
    2. Chapter 2: Statistically Speaking—Trends by the Numbers
    3. Chapter 3: Resistance and Support—A Trend’s Moment of Truth
    4. Chapter 4: Trendlines and Channel Lines—The Shape of Things to Come
    5. Chapter 5: Reversal Patterns—End of the Trend
    6. Chapter 6: Continuation Patterns—A Bend in the Trend
    7. Chapter 7: Confirmation Signals—Turning the Odds in Your Favor
    8. Chapter 8: Consolidation Patterns—The Sideways Pause
    9. Chapter 9: Volume Signals—Tracking Price Trends
    10. Chapter 10: Mind the Gap—When Price Jumps Signal Change
    11. Chapter 11: Moving Averages—Order in the Change
    12. Chapter 12: Momentum Oscillators—Duration and Speed of a Trend
    13. Chapter 13: Volatility—Marking Risk within the Trend
    14. Chapter 14: Fundamentals—Connecting the Two Sides
  24. Bibliography
  25. Index of Topics
  26. Index of Companies
  27. Financial Times Press