Technical Analysis

chartNFTRH maintains a premium subscription with Stockcharts.com in order to have the full range of Technical Analysis tools available in our analysis.

There is no one-size-fits-all in TA, with far too many tools available for any one chartist to use effectively. As Stockcharts founder John Murphy once said you take what works for you and leave the rest. In other words, TA is fully customizable to individual style.

Some of the most important tools in our TA toolbox include Support/Resistance, Moving Averages and Chart Patterns. When these readily identifiable aspects are married with momentum indicators like RSI and MACD and trend indicators like AROON, probabilities can be refined for certain outcomes.

The current (as of 7.2.14) weekly chart of gold miners ETF GDX gives us a perfect example of all of the above.

gdx

Note what is a potential bullish Inverted Head & Shoulders (bottoming) pattern. Note also however that the price has not yet exceeded the red resistance line, which also serves as a neckline to the IH&S. Nor importantly, has it made a higher high to the March high (middle red arrow). Combine this with the fact that the 20 and 50 week exponential moving averages have not crossed up since crossing down (1st red arrow) to signal the onset of what turned out to be a bear market and you see that GDX is not technically out of the woods yet.

Ah, but it gets more interesting. There has been a bullish divergence by MACD and RSI since 2013 and the weekly trend (AROON) is positive (above 0). If and when GDX breaks the neckline and crosses the moving averages up, we would have a new bull market. Until then, GDX is only in a potential bottom in anticipation of a potential bull market. But it is these indicators that keep us on alert for positive outcomes.

There are of course so many more patterns, trend tools and indicators that we use, but the above example includes several aspects that NFTRH depends on to keep its readers informed of what is actually happening technically and more importantly, the probabilities toward what is likely to happen.

We consider Stockcharts.com to be an excellent resource for understanding chart patterns, trend indicators, momentum indicators and a wide range of other tools available at a chartist’s disposal. Their Chart School is a good starting point.

We also maintain a public chart list with Stockcharts.com that includes many of our favorite market indicators, ratios and nominal indexes available for review at any time.