Guppy Tutorials in Applied Technical Analysis

 

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TUTORIALS IN APPLIED TECHNICAL ANALYSIS is published weekly by Guppytraders  on the Internet for readers to collect. Publication is usually over the weekend.

The objective is to examine how technical analysis can be applied to market analysis so that you can test the same techniques with greater confidence across stocks in your charting database.

The tutorials use recent price data to illustrate notional case study trades and explain the ways that the tools of technical analysis can be applied to understand market behaviour.

Like a weekly textbook, it uses selected charts to explain, for instance, what a stochastic tells us about market sentiment and how it applies to the data

 >>>>>>  Download an Example Newsletter here <<<<<<<
TUTORIALS IN APPLIED TECHNICAL ANALYSIS is not a stock tipping service, nor is it a brokers service giving trading advice. It is not advice about securities nor is it a securities report. Guppytraders is  not an investment advisor.

The newsletter is a general discussion of selected technical analysis indicators. This newsletter teaches readers about the tools of technical analysis and the notes are based on my experience of applying technical analysis to the market.

The material is of a general nature and designed to be used as a tutorial showing how technical analysis can be applied to a chart of price data. Because the information is of a general nature readers should seek advice from their broker or other investment advisors as appropriate before taking any action
 
An example extract from Tutorials in Applied Technical Analysis Newsletter
 

Applying the Guppy Multiple Moving Average


This Guppy Multiple Moving Average (GMMA) indicator tool is based on the relationships between groups of moving averages. Each group of averages in the GMMA provides insight into the behaviour of the two dominant groups in the market – traders and investors. The indicator itself does not initiate an entry or an exit.  It allows the trader to understand the market relationships shown in the chart and so select the most appropriate trading methodology and the best tools.

The GMMA is designed to understand the nature of trend activity. If there is no trend, then the tool cannot be usefully applied. Traders should not attempt to make it work in conditions to which it is unsuited.

We track the trader’s inferred activity by using a group of short term moving averages. The traders always lead the change in trend. Their buying pushes up prices in anticipation of a trend change. The trend survives only if other buyers also come into the market. Strong trends are supported by long term investors. The investor takes more time to recognize the change in a trend but he always follows the lead set by traders. We track the investors’ inferred activity by using a group of long term moving averages.  

The GMMA is used in six trading situations.  In this extract we are interested in mid trend entry conditions. The remaining five trading situations are covered in detail in the full newsletter.

Mid trend Entry
The mid trend entry analysis is designed to answer a simple question. Is it safe to buy on this temporary price retreat? The circled area on the chart shows the point where we want to apply the analysis.

There are three relationships we look for.

They are:
1.    The character of the long term group.
2.    The character of the short term group
3.    The relationship between the two groups.


The long term group is the most important because without support from investors, the trend cannot continue. The strength of this support is shown by the degree and nature of the separation of averages in the long term group. When the group is well separated, and generally moving upwards and parallel, we know the trend is very strong. This reduces the probability of a sudden trend collapse.


 


 


The short term group of averages – the traders - deliver a consistent pattern of retreat and rebounds. We need to decide  if the current retreat is unusual, out of character, or severe. In this example it is part of an established pattern of general retreats and rebounds. This is not a dramatic sell off, so there is again a reduced probability of a trend collapse.


Finally consider the separation between the two groups. This trend, at the point circled, has never been under threat. Traders have not been successful in driving prices down. Instead as prices dip, investors step into the market as buyers. This is shown by the way the two groups of averages remain separated even on these trader driven retreats.


This is a strong trend with a temporary price retreat. It is a safe entry.
 

 
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