Technical Analysis

The Bears

Like the back of a bear, stocks are down-trending. If a person is bearish or short (taking a negative position), you assume that the stocks is down-trending. If you are in a bearish market, main indices are down too, stocks can barely hold gains and crash very quickly. Therefore buying stocks (going long) is not very common, as people assume that stocks that made a cliff dive, just keep falling. In a bear market it is never a good idea to put hard earned money at risk, by going long.

The Bulls

Bull markets assume that stocks will continue to rise. This means, if you buy a stock (go-long) you anticipate and up-trend of the stock you purchased. This also means, that a stock that plunges, after a couple of day of uptrends, will also rise again. In general, selling stocks (going-short) is not a preferable strategy (at least in theory). The term "bullish" is also used intraday, if a stock is up-trending. By a closer look, a bull market is characterised you that main indices are in an uptrend and the market environment is in positive moot. 

Support & Resistance

Resistance 

It represents a price level, or more an area which cannot be broken easily on the way up. The reason is that people, who went long are stuck their. So imagine YOU have bought a stock a couple of month ago at the recent top, just before the stock starts declining. Of course you do not wanna loos to much money, so you hold and hope (which is not a strategy, but anyway...). When the stock is getting even close to the level where you have bought it you wanna get out (?), you wanna sell (?), don't you? Guess what, so do many other people too! This results in a overload of sellers, which makes it harder to overcome that price level, resistance is created. I hope you understand now the mechanics behind it, but also how significant it is, when such a level is broken and becomes support!

 

Support

It also marks a price area which cannot be broken easily, but  this time on the way down! I see this mostly from a short seller perspective than. If you have shorted a stock at a certain price level you wanna get your profits... Approaching a support level makes it even more likely to cover (buy the negative position back). But also, support marks a good entry level for many longs, as they see an "opportunity" to get in a better price to sell is later close to resistance. Both sides increase the ask on the Level 2 and the result is a price rise. But be aware, if support breaks, a panic is often followed, as longs wanna get rid off their stock, and short jump in for possible profits. This means broken support, becomes resistance, what a circle.

Volume

Volume equals market. It represents the number of traded shares. Therefore, no volume means no people are trading it, it makes it than difficult to sell OR buy. Imagine you go to a farmers market, but there is not one farmer there you can buy from, you just sit on your money. Or if you are the farmer (owning shares) and there are no customers, you are stuck with your products until they become bad and rod. NEVER get in the position of being unable to zero your position!

 

Positively, if there are a lot of people who buyers and a lot of sellers , it is quite easy to enter and exit your position. So look for volume if you wanna trade! Keep in mind, if the volume decreases and fades out, the interest of the stocks also fades, means mostly that the stock goes down. On the other hand, if volume starts rising, it might be a trading opportunity!

 

But be careful, a lot of shares do not automatically mean a lot of money has been traded. Always look at the stock price and multiply it with the volume to see how much really went over the counter. 

Level 2

What you see up there is the Level 2 feed. On the left side you see the Bid, people who bid a certain price so they can purchase a certain amount of shares. On the right side we have the ask, people who are willing to sell shares at certain prices. The prices are made by the Market Maker (MM), represented with there ID (MMID). If there is a price match between those sides, a trade can be executed. 

 

PLEASE study deeply about the Level 2, there are fake bid and asks, understand wall of sellers and buyers, understand uptick and downtick. Study how the different MM execute, understand how Level 2 is manipulated and how you can profit of it.

Bullish & Bearish Signals

First of all if you wanna know anything more about this stuff READ BOOKS and WATCH DVDs!

 

In my opinion you only need 3 basic indicators, Volume-Price-Chart! He uses seven indicators (PREPARE), but decide for yourself, because this guy only goes by chart and Level 2. You have to find and decide your own indicator which provide you the signals you need!

 

Honestly, the only true thing that moves a stock is price action! I know people say news and fundamentals are important I don't think so... For penny stocks, fundamentals do not matter at all, as they are all shitty companies, with mostly no cash at all. News do influence a bit, but I have seen the same kind of news influencing similar stocks of the same sector totally differently, so it is all fluff! BUT what people look at is PRICE-CHART and VOLUME!

 

If there is no volume, there are no people, which means no market. So first, stay away form stocks under one million shares, at least at the current bull market! The price and the chart provide you the actual signals for the stock direction. I know it sounds to easy, but KISS (keep it simple stupid!). Just look at support and resistance for your entry and exit level, and thats it. 

 

If a stock starts rising above long term support and the volume increases jump on in and go long, or even if the volume fades and the support starts to crack, than go short. If resistance looks strong and the volume fades, go short, if the resistance gets hit, and hit again, volume surges , and give it a shot for long when it is broken! There is money to be made on the way up and down. Buy the breakouts, short breakdowns... Thats it. 

History of "Bear" and "Bull" U.S. markets