Technical Analysis
Support and resistance, trend lines, indicators, moving averages, and chart pattern breakdowns.
Overview
Technical analysis studies historical price and volume data to forecast future market direction. From simple trend lines and moving averages to complex oscillators and multi-timeframe confluence, TA provides a structured approach to identifying trade setups. These tools work across every market and timeframe, forming the backbone of most discretionary and systematic trading strategies.
Topics Covered
Support & Resistance Levels
Support and resistance (S/R) levels are price zones where buying or selling pressure has historically prevented the price from continuing in its current direction. Support is a floor where buying emerges; resistance is a ceiling where selling appears. S/R levels are the foundation of technical analysis and provide the framework for every trade setup.
Trend Lines & Channels
Trend lines connect swing lows (uptrend) or swing highs (downtrend) to define the trend direction and provide dynamic support/resistance. Channels add a parallel line to create a trading range within the trend. Trend line breaks signal potential trend changes. Valid trend lines require at least two touches, with three or more being more significant.
Moving Averages (SMA, EMA)
Moving averages smooth price data to identify trend direction and dynamic support/resistance. The Simple Moving Average (SMA) weights all periods equally; the Exponential Moving Average (EMA) gives more weight to recent prices. Key MAs: 9/20 EMA (short-term), 50 SMA/EMA (intermediate), 200 SMA (long-term). Golden/death crosses and MA ribbons are widely followed signals.
RSI & Stochastic Oscillators
The Relative Strength Index (RSI) and Stochastic Oscillator are bounded momentum indicators that identify overbought and oversold conditions. RSI (default: 14) ranges from 0-100; readings above 70 suggest overbought, below 30 oversold. Stochastic (default: 14, 3, 3) measures where the close falls within the recent high-low range.
MACD Analysis
The Moving Average Convergence Divergence (MACD) measures the relationship between two exponential moving averages (typically 12 and 26 period). The MACD line is the difference between these EMAs, and the signal line is a 9-period EMA of the MACD. The histogram shows the distance between MACD and signal lines. MACD is a hybrid trend-following and momentum indicator.
Bollinger Bands
Bollinger Bands consist of a middle band (20 SMA by default) and upper/lower bands set at 2 standard deviations from the middle. The bands expand during high volatility and contract during low volatility. The squeeze (narrow bands) often precedes a significant move, making Bollinger Bands excellent for volatility-based setups.
Chart Patterns (H&S, Wedges, Flags)
Chart patterns are geometric price formations that signal continuation or reversal. Major patterns include: Head & Shoulders (reversal), Double Top/Bottom (reversal), Bull/Bear Flags (continuation), Rising/Falling Wedges (reversal), Ascending/Descending Triangles (continuation/reversal). All are measured-move patterns with projected price targets.
Fibonacci Retracements
Fibonacci retracements identify potential support and resistance levels by measuring the percentage pullback of a prior price swing using key Fibonacci ratios: 23.6%, 38.2%, 50%, 61.8%, and 78.6%. These levels often coincide with where pullbacks within trends tend to find support or resistance, making them essential for entry timing.
Multi-Timeframe Analysis
Multi-timeframe analysis (MTA) uses multiple chart timeframes to build a complete picture of market conditions. The higher timeframe provides trend direction and key levels. The intermediate timeframe confirms momentum. The lower timeframe provides precise entry timing. This 'top-down' approach dramatically improves trade quality.
Divergence Trading
Divergence occurs when price action and an indicator (RSI, MACD, CCI, OBV) move in opposite directions, signaling weakening momentum and potential reversals. Regular divergence signals reversal. Hidden divergence signals continuation. Divergence is a leading signal — it warns of momentum shifts before they appear in price.