Technical Analysis Nasdaq-100, S&P500 and Gold
- Technical Analysis Nasdaq-100 @ 6655
The Nasdaq-100 continues to draw lower relative maxima and minima on the weekly chart, but has regained the exponential of 200 days and 6816. We keep a neutral bias above 6800. Technical Analysis
A short-term correction that sustains above 6800 would confirm the breakout and would allow us to defend a bias bullish.
From a trading point of view we highlight the negative divergence on the hourly chart and point out the expected goal for a breakout. The index prepares a gap down opening, so we can suggest a short term plan with a target of 6800. We set a stop at 7040 and the entry should only be made if the index tries to close the gap. The sale should be made at least at 6992 (return/risk ratio of 4). We also continue to defend only 1/16 of the usual risk.
S&P500 @ 2725
The S&P500 regained the range of the last quarter of 2018, cancelling almost all of December’s decline.
We are indeed in a technically neutral zone, but a correction to hold in the 2670/5 zone, or even at the base of the range highlighted on the daily chart, would allow us to maintain a bias bullish and defend a test above 2800.
From a trading point of view, the bias is neutral and the market is over bought. Also in this case we have a clear negative short term divergence, so we can expect a test to the exponential 200 hours and breakout. We defined the 2745 as stop and the 2675 as objective. We continue with 1/16 of the usual risk and the entrance will only make sense if the index tries to close the gap. A sale at 2731 or above would allow a plan with a return/risk ratio of 4.
Gold @ 1306
We continue to highlight the bullish cross between the exponential of 50 and 200 days. We maintain a positive bias if the price does not go back below 1250/70. The next big reference when we look up, is the 1360/75 interval.
The negative divergence in the daily MACD continues to place the possibility of a retreat that will bring our opportunity to enter next to the supports on the daily chart.
In a short term trading perspective and while the mentioned opportunity does not occur, we suggest an entry at the current levels (1306) with two objectives, 1311 and 1325. We set a stop at 1302. In this case we also defend 1/16 of the usual risk.
What is technical analysis?
Technical analysis involves the analysis of an asset by its recent and past price behavior. This behavior is indicated on the chart and reflects the interactions between the offer and demand of the asset. The technical analysis understands that the price of an asset already covers all the relevant information and, therefore, should only observe the price table to determine the evolution and direction, probably the price in the future. When we look at the price behavior, it is very important to analyze the history, because in the technical analysis we can observe the price evolution. It is said that the price has memory because it is very common that after reaching a certain level they behave, at this level, as it happened in the past. In this case, we refer to supports and trends.
Technical analysis uses quotation, drawn figures, supports and resistances… This type of analysis is usually accompanied by technical indicators such as MACD, RSI, etc. Technical indicators are mathematical formulas and statistics applied to the prices and volumes of an asset in order to provide additional information for the price.
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Another aspect
However, what is really important for a technical analysis is the action of the price. Technical indicators are used to help make decisions or to systematize an operation, but we must remember that they all use the action of price.}
Another aspect to take into account when doing technical analysis is the liquidity of the asset. Liquidity is the ease with which an asset can be bought and sold without changing its price quotation. For example, an asset with little liquidity, if we want to buy a lot of shares suddenly, we can sensibly raise its price. How does this affect technical analysis? The scenarios discussed later in this guide are more reliable the more liquid the asset is, that means it adequately represents the opinion of the majority of the asset.
Technical analysis allows us to study financial markets for the most common patterns and try to anticipate asset price movements. This approach based on historical price behavior can provide insight in any environment, from volatile markets to stable trends. In this analysis guide, we will analyze the main technical analysis tools and their application to the Nasdaq-100, S&P 500 and gold.
Introduction to Technical Analysis
In its most basic form, technical analysis (also known as charting or chart analysis) aims to track price movements based on past behavior. This is based on the belief that the behavior will repeat itself and that the patterns found on this chart of past behavior may indicate future behavior.
Since technical analysis ignores the underlying fundamentals of something, i.e. industry-related events and financial fundamentals, it is known as the cost analysis approach. . This way of analyzing financial markets appeals to short-term traders, as it provides an indication of preference for those who have entered and exited the market quickly.
The best technical analysis tools
Technical analysis traders will compare various charts and price patterns looking for connections between past and future activity. Over the years, traders have developed a wide variety of analytical tools and techniques aimed at detecting price trend patterns and movements. These include, but are not limited to, applying trend lines, resistance lines, common chart patterns, moving averages, and time cycles.
trend line and resistance
Tilt and resistance lines are graphical methods of representing price action and trends. Technical analysis is often included primarily in charts, and the application of trend and resistance lines is an effective measurement method to detect changes in an asset’s price behavior.
A trendline in technical analysis refers to a rectangular, linear, or curved area that reflects the direction of the past trend. These lines are measured with a significant degree of accuracy on the chart to try to predict possible support and resistance levels for price. A resistance level, for example, is reached when the direction of the same price but the price is unable to reach higher. A support level is the point at which prices should be expected to recover once they hit that point.
paper patterns
Chart pattern detection is also a useful tool for technical traders. This technique is based on the idea that patterns repeat over and over again, so traders look for patterns on charts that provided the previous trend signal. This allows them to anticipate the future price direction and make timely buy and sell decisions.
Paper patterns can be single or combined, and the identification of these patterns is based on the account’s price change configuration. The most common patterns in technical analysis include candlestick patterns, triangle patterns, wedge patterns, and reversal patterns.
Chart patterns have a standard pattern that repeats over and over again to indicate the start or reversal of a trend.
moving averages
The moving average is a technical analysis tool that removes the daily noise from the price of the asset and allows us to analyze the long-term trend of the asset. If prices have broken above the moving average line, it usually indicates that the asset price is in an uptrend. On the other hand, if prices fall below the moving average, the price is usually placed lower.
Moving averages are based on price and are generally divided into simple moving averages, exponential moving averages and weighted moving averages.
time cycles
Seasonal cycles are based on the idea that asset prices follow similar trends at certain times of the year. They look for time cycle histories to try to predict future price movements. Technical traders trading markets near the peak of one of these time cycles try to profit from the added effect of the reaction to the peak, in addition to the price movement itself.
Time cycles are often customizable, like many traders. they use