Spot-on market analysis and insights from the trading desk

First Resources – time to take profits at the end of the markup phase | Technical Analysis | Singapore Stocks

A climatic move up will exhaust demand for the moment, meaning that it is time to get out until further price action gives a new buy signal. It is also unlikely to break through the strong psychological resistance on its first try, hence a quite short swing trade may be attempted, since risk is limited if a stop is placed at that level. With a lower close on a doji pattern which is also an evening star, it is starting its decline.

Yanlord – an excellent shorting opportunity | Technical Analysis | Singapore Stocks

The general market is weakening, and with China’s property market taking some hits, this stock is a perfect candidate for markdown by the BB (big boys). It has broken the 200-day EMA and the middle channel line on high volume, taking the form of 3 black crows. Shorted this 2 days ago on a strong signal. Can you spot the obvious signal.

Volume Spread Analysis – Spotting the Hidden Clues in Volume

Price action and volume lies at the core of technical analysis, since that is all the data a market technician works with. Almost all technical methods, such as chart patterns, candlestick patterns or even Elliot wave are studies of price action. Indicators like RSI, Stochastics or MACD are all calculated from price data as well. To understand the big picture, it pays to first understand the building blocks.

Volume Spread Analysis - Spotting the Hidden Clues in Volume

Volume Spread Analysis – Spotting the Hidden Clues in Volume

At the most basic level, price action is the movement of a security’s price. This encompasses all technical and classical pattern analysis, including swings, support and resistance, trends, etc. The most commonly known tools are candlestick and price bar patterns, which are ways of cataloging common price action patterns.

However, the crux about price action is not about memorising patterns and names. It is about understanding. That is what professional traders do. No two people will analyze every bit of price action the same way, and that is why a lot of traders find the concept of price action so elusive. That is why it takes experience to read price action.

Below is a useful picture summary of essential candlestick patterns:

Volume is the number of shares or contracts that trade hands from sellers to buyers during a period of time, and serves as a measure of activity. If a buyer of a stock purchases 100 shares from a seller, then the volume for that period increases by 100 shares based on that transaction.

Hence, volume is energy. It represents the level of commitment and participation by buyers and sellers, hence it indirectly indicates the supply/demand equation. Volume at times also serves as a leading indicator, because large movements in the market are due to the actions of market-movers (also known as the professionals or smart money), and these actions will show up in volume and price. At times,either of these two could provide the leading clues to future market movement.

The level of volume marks the significance of events – for example a breakout, a gap movement, or breaking a key support, etc. The higher the volume, the more significant these events are, because it shows more participation by smart money. In general, volume should be rising n the direction of the trend and decreasing on corrections, which would also be useful for identifying pullbacks in a trend. Watch out for unusual climatic moves in volume, for a climax usually results in a swift reversal or rebound.

The key is understanding the relationship between price and volume.

Dow Jones Industrial Average – watch for demand coming in at support zone

Currently, a markdown phase is heading right into a channel bottom area, where potential demand could come in. We should be looking out for signs of accumulation and bullish reversal bars or small pause bars which could turn the tides.

Advanced Traders Mentoring Sessions at Singapore Management University

After a year of conducting weekly research and classes for the Advanced TA traders from the SMU Investment Club, I am proud to say that there are many promising traders in the club. Given the role of research director, it was my duty to organise trainings on a variety of trading subjects, as well as showcase its applications by doing real stock picks to facilitate discussion. I had a great time, and I would like to thank the Investment Club for all their support. All the best, and may the markets be with you!