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Technical Analysis Plain and Simple: Charting the Markets in Your Language, Second Edition

Book Description

Technical analysis is a hot topic for investors right now and offers powerful, objective tools for picking stocks and making money--but most explanations of the subject simply confuse investors instead of enlightening them. In this clear, practical book, Barron's columnist Michael Kahn introduces technical analysis in simple English. Kahn explains exactly how technical analysis works, then teaches you how to read charts and translate what they tell you into real buy and sell decisions. The fully updated Second Edition contains many new examples reflecting major market changes since the First Edition: 9/11, equities bear markets, commodities bull markets, changing interest rates, and more. Step by step, Kahn illuminates the basic theory of technical analysis, demystifies its jargon, outlines its core techniques, and shows how to use it to complement (not replace) the reader's current approach to stock selection. He explains trendlines, chart patterns, and corrections; reveals what makes a stock look promising; and helps to assess potential risk and reward.

Table of Contents

  1. Copyright
  2. Financial Times Prentice Hall
  3. Financial Times Prentice Hall Books
  4. Acknowledgments
  5. About The Author
  6. Preface
  7. About This Book
  8. How to Get the Most From This Book
  9. A Few Things You’ll Need To Know Before You Begin
    1. Required Background
      1. The Past
      2. Technical Market Theory
        1. Myths and Truths
      3. The Pillars of Technical Analysis
      4. For Fundamentalists
    2. What Is Technical Analysis?
      1. Components
      2. What Is the Market?
    3. What Is a Chart?
      1. A Picture Is Worth a Thousand Words
      2. What Good Is That?
      3. Tea Leaves? Crystal Ball?
      4. What About Earnings?
      5. Conclusion
    4. Jargon You Cannot Avoid
      1. Bar Chart
      2. Support and Resistance
      3. Trends
      4. Consolidation, Congestion, Correction
      5. Breakout
      6. Continuation Patterns
      7. Reversal Patterns
      8. Moving Averages
      9. Momentum
      10. Divergence
  10. The Core Of Chart Analysis
    1. Concepts
      1. What Is Really Going on to Form the Charts?
        1. Indecision and Alignment of Needs
      2. Taking the Easy Way Out
      3. The Herding Effect
      4. Markets Are Scalable
    2. What Are Supply and Demand in the Markets?
      1. What Causes Support and Resistance Levels to Be Penetrated?
      2. Summary
      3. Perceptions Are Reality
    3. The Trend Is Your Friend and So Are Trendlines
      1. Trendlines
      2. Fan Lines
    4. See the Forest and the Trees
      1. Less Is More
      2. Multiple Time Frames
      3. Moving Averages
    5. Chart Patterns—When the Market Needs a Rest
      1. Rectangles
      2. Triangles
      3. Flags
      4. Cup with Handle
        1. Rules of the Game
    6. Chart Patterns—When The Market Is Changing Its Mind
      1. Head and Shoulders
      2. Double Tops and Bottoms
      3. One-Day Reversals
      4. Triangles and Rectangles
      5. Rounded Tops and Bottoms
      6. Spikes
    7. Chart Patterns—Explosions
      1. Breakaway Gaps
      2. Continuation Gaps
      3. Exhaustion Gaps
      4. Other Gaps
    8. Corrections in perspective
      1. The Right Way
      2. The Wrong Way
  11. Technical Analysis In The Real World
    1. What Is There Other Than Price?
      1. The Big Picture
      2. Does the Market Have Bad Breadth?
      3. Sectors and Industry Groups
      4. Momentum
      5. Divergence
    2. Volume
      1. Accumulation and Distribution
      2. Cumulative Volume
    3. Time
      1. Proportion
      2. Cycles
      3. Seasons
    4. Sentiment
      1. Sentiment Indicators
      2. Measuring Expectations That Drive Markets
      3. Subjective
      4. Social Mood
    5. Fundamental Analysis Really Is Technical Analysis
      1. Intermarket Analysis
      2. The Major Markets
      3. Intramarket Relationships
      4. Prove It!
    6. Just What Makes a Stock (Bond, Commodity) Look Good?
      1. Trend and Momentum
      2. Volume
      3. Relative Strength (the Market, Sectors, and Individual Stocks)
        1. Quick Visual Analysis
      4. Basing and Breakouts
    7. Risk Versus Reward—Is This Stock Really Worth It?
      1. How Can Potential Profit Be Measured?
        1. Sizing Up a Pattern
      2. Is That a Good Trade?
        1. It’s Not Perfect But It Won’t Kill You
      3. Sometimes the Best Trade Is the One You Don’t Make
    8. This Isn’t Brain Surgery
      1. Technician’s License
        1. Rationale
      2. Let the Market Talk
      3. Theme and Variation
        1. Head and Shoulders Standard
        2. Subjective and Interpretive
      4. In the Real World, Nothing Is Textbook so Stay Flexible
        1. Conclusion
  12. The Actual Process Of Investing
    1. Ok, Now Do It!
      1. The Questions
      2. No Fear
    2. How To Know If You Are Wrong
      1. Invalidating a Trendline
        1. Time Breaks
    3. Sometimes Being Wrong Is Good
      1. Failure That Forewarns
      2. Failure That Cuts Losses
      3. Summary
    4. When To Sell
      1. The Trend Is at Its End
      2. Price Objective Is Reached
      3. Stop Is Hit
      4. Would You Buy It Right Now, at Its Current Price?
    5. Bear Markets
      1. What Happens in a Bear Market?
    6. A Word About Your Ego
      1. Remember Why You Are Investing
  13. Tools And Case Studies
    1. What Do I Really Need To Get Started?
      1. Real-Time Data
      2. Charting Software
      3. Internet
      4. Your Child’s Geometry Tools
    2. Building Your Technical Toolbox
      1. Technical Tasks
      2. Combination Tools
    3. Final Advice
    4. Case Study—The Perfect World
      1. Are Conditions Favorable for Equity Assets?
      2. What Sectors of the Market Are Good?
      3. What Stocks Within the Good Sectors Are the Best to Buy?
      4. Risk Assessment
      5. Pull the Trigger
    5. Case Study—The Real World
      1. Summary
    6. How Good Is Your Broker’s Stock?
      1. When Your Broker’s Recommendation Looks Like Nothing Special
      2. Breakout Warning
      3. Confirmation Required
      4. What Makes a Stock Look Good?
      5. Compare It to the Market
      6. Compare Them to Each Other
  14. Further On Down The Road
    1. Introduction to Candlesticks
      1. Reading Candlesticks
      2. Basic Candlestick Shapes
      3. Reversal Indicators
      4. Continuation Indicators
      5. Dojis
      6. Trading with Candlesticks
    2. Cycles
      1. What Is a Cycle?
      2. Summary
    3. Elliott Waves
      1. Introduction
    4. Technical Terms You May Have Heard
      1. Open Interest
      2. Bollinger Bands
      3. Relative Strength Index (RSI)
      4. Stochastics
      5. RSI Versus Stochastics
      6. Fibonacci Retracements
      7. MACD
        1. Using MACD
      8. Tick
      9. Trin (Arms Index)
      10. Pivot Points
      11. Point and Figure
    5. Debunking the TV Analyst
      1. Summary
  15. Fun With Jargon
    1. Double Reverse Whirligig
    2. Bear Trap
    3. Dead-Cat Bounce
    4. Whipsaw
    5. Catapult
    6. Saucers
    7. Candlestick Terms
  16. Closing Thoughts