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Technical Analysis For

Short-Term TradersBy Martin J. Pring

Martin will give you his unique perspective on contrary opinion analysis developed during his 30 year career in the financial markets. He will

explain how to determine when contrary opinion should be used as part of your trading plan and when it should be ignored. You will also learnwhy most traders look at contrary opinion in the wrong way.

Bio

Martin Pring entered the financial markets in 1969 and has evolved into a leader in the US investment community. In 1981, he founded the International

Institute for Economic Research, Inc. A world-traveled lecturer on technical analysis, Martin is the author of several outstanding books including, Technical

Analysis Explained, now in its third edition. It is regarded as a standard for other works in the f ield.

Described by Barron's as a "technician's technician," Martin's articles have been featured in Barron's, Futures Magazine, and Technical Analysis of Stocks and

Commodities. Over the past 30 years, his extensive research has led to the development of reliable financial and economic indicators for timely and effective

forecasting.

In 1987, Martin pioneered the introduction of videos as an education tool for technical analysis and was the first to introduce educational, interactive CD's in thisfield. The latest releases include Technician's Guide to Day Tradingand. He has just released a two course CD-ROM version of the book Market Momentum,

which is referred to by many as THE source for information on this subject. New releases for the year 2,000 include a CD-ROM tutorial on how to select stocks

using technical analysis.

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Definition of technical Analysis:

The art of identifying a price trend reversal at a relatively earlystage and riding on that trend until the weight of the

evidence shows or proves that the trend has revered.

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Prices in any freely traded market are determined by theattitude of all market participants to the underlying

fundamentals.

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Momentum is a generic term, much like fruit

FRUIT MOMENTUM

Peaches Grapes

Apples Oranges

Stochastics RSI

Rate of Change MACD

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Momentum indicators share common

characteristics, much like fruit

FRUIT MOMENTUM1. Fruit is sweet

2. Fruit is almost

always grown in thewarmest season

1. Divergences apply to all

momentum indicators

2. Overbought/oversold linescan be drawn on all

momentum indicators

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There are two broad momentum categories:

Characteristics dealing with overbought,

oversold conditions, divergences etc.

1. Momentum characteristics

2. The identification of trend reversals in the

momentum indicator itself

You can apply trendline violations, moving average crossovers,

price pattern completions etc. to momentum

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Actual buy and sell signals can only come from

a reversal in the trend of the price

Notthe momentum series.

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Just because oscillators

change direction

doesnt mean that

prices will also!

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Momentums valuable contribution is to tell us when theunderlying technical structure is weakening or strengthening.

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1 Overbought/oversold

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Take partial profits

Oversold

Overbought

Equillibrium

The news is so

good, I am

certain to make

money if I buy

now!!

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The news is

so bad only afool would

buy now !!!

Oversold

Overbought

Equillibrium

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Cover at least part the of short position

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2. Momentum character istics change with

bul l and bear market environments.

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Bull trend

Often reaches overbought and stays there a long time

Rarely oversold, but when it is,it is usually a great buying opportunity.

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Bear trend

Few, if any, overbought readings

Often reaches oversold and stays there a long time

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3. Divergences

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A

BC

AB

C

Negative divergence

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In one respect, markets are like houses,they take longer to build than tear down.

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The lead characteristics of momentum indicators are usuallymore pronounced at market peaksthan at market troughs.

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Divergences also appear at market bottoms, where theyare called positivedivergences, because momentumhits bottom before the price.

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Positive divergence

A

A

B

B

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5. Signi f icant divergences

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Virtually no

upsidemomentum at

final peak

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Virtually no

upsidemomentum at

final peak

Sharp decline

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Virtually no downside

momentum at final low

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Followed by a sharp rally

Virtually no downside

momentum at final low

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CRB Spot Raw Industrials

13-week ROC

Confirmation

Virtually no upside

momentum at final peak

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CRB Spot Raw Industrials

13-week ROCVirtually no downsidemomentum at final low

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Trend Determining

Techniques

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6.Trendlines

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Momentum mustbe

confirmed by price

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Momentum mustbe

confirmed by price

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DJ Transports

14-day RSI

RSI and Trendlines

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Motorola

14-day RSI

30-day RSI

65-day RSI

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65 ROC

130 ROC

32 ROC

Eastman Kodak (5-min bar)

Confirmation

No downside momentum

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7.Price Patterns

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Rectangle

Confirmation

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Confirmation

Head and Shoulders

SSH

Head and Shoulders

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Warning: Breakout

is coming from

overbought level

SH S

Confirmation

SH

S

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SH S

SH

S

Whipsaw

ROC T dli d P i P tt

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ROC Trendlines and Price Patterns

S

H

S

Virtually no

downside

momentum

Bangkok Set Index

R t f Ch T dli d P i P tt

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Yen

39-week ROC

Rate of Change Trendlines and Price Patterns

False breakout

X

Extremely weak

momentum at X

ROC d F il d P tt

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Cocoa

50-week ROC

SH

S

ROC and a Failed Pattern

SH

S

This pattern

failed

S

H

S

This one succeeded

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8. Moving Averages

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Good signals Whipsaws

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Moving average of

the moving average

Moving average

of raw data

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Directional change triggers momentum signals

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A Confirmation

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Dow Jones Utilities

Long-term KSTWhipsaw

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Market Cycle Model

Primary trend

9-months-2-years

Short-term trend2-6-weeks

Intermediate trend

6-weeks9-months

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The importance of trading and investing in thedirection of the primary trend

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Red & green highlights show

signals triggered by RSI 50crossover

Bull

market

Hartford Steam B

Bear

market

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Divides one security to another andplots the result as a continuous line.

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Not

the

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Possibilities include..

Gold divided by silver

Commodity spreads

One currency by anotherMost often used by dividing a stock by a

measure of the market e.g. the S&P

Composite

Price continues to rise but.

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Price

Relative Strength

Rising RS means stock out

performing the market.

Declining RS means

stock under performing

the market.

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Price

Relative Strength

Price declining

RS improving

Positive Divergence

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Price

Relative Strength

Price rising

RS deteriorating

Negative Divergence

i

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Price

Relative Strength

Moving average

Moving averageThe Theory

P i

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Price

Relative Strength

Too many whipsaws

Especially with the RS

The Reality

P i

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Price

Relative Strength

Confirmation

P i

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Price

Relative Strength

Confirmation

P i

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Price

Relative StrengthConfirmation

S&P vs Bank RS

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S&P vs Bank RS

S&P Composite

S&P Banks

S&P Banks RS

S&P vs Bank RS

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S&P vs Bank RS

S&P Composite

S&P Banks

S&P Banks RS

S&P vs Bank RS

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S&P vs Bank RS

S&P Composite

S&P Banks

S&P Banks RS

S&P vs Bank RS

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S&P vs Bank RS

S&P Composite

S&P Banks

S&P Banks RS

S&P vs Bank RS

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S&P vs Bank RS

S&P Composite

S&P Banks

S&P Banks RS

S&P vs Bank RS

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S&P vs Bank RS

S&P Composite

S&P Banks

S&P Banks RS

Alberto Culver

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Alberto Culver

Alberto Culver

RS Line

Whipsaw

Boise Cascade

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Boise Cascade

RS Line

Divergence

Boise Cascade

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Boise Cascade

RS Line

Boise Cascade

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Boise Cascade

RS Line

Boise Cascade

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Boise Cascade

RS Line

Boise Cascade

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Boise Cascade

RS Line

Boise Cascade

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Boise Cascade

RS Line

Boise Cascade

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Boise Cascade

RS Line

Sell point

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Abbots Labs

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Abbots Labs

RS Line

False sense of strengthReality break

Whipsaw

Composite Economic Indicators (KST)

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Leading Index

Lagging Index

Coincident Index

Leading Index

Coincident Index

Lagging Index

Idealized Business Cycle

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Equilibrium

Economy Growing


Economy Contracting

B

S

C

BS

C


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y

InflationaryInflationary

Deflationary


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BUtilities bottom

Financials bottom

Consumer non durables bottom


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C

Basic industry and

resource based stocks

out perform

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S&P Composite

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S&P Composite

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S&P Composite

S&P Composite

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S&P Composite

LT KST of Bank/Ali Ratio

Remember

for later

Semi Conductors

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Semi Conductors

KST

RS Line

RS KST

Breakouts

Semi Conductors

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Semi Conductors

KST

RS Line

RS KST

KST buy

signals

Semi Conductors

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Semi Conductors

KST

RS Line

RS KST

Texas Instruments

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Texas Instruments

KST

RS Line

RS KST

Breakouts

and buysignals

Texas Instruments

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Texas Instruments

KST

RS Line

RS KST

Intel

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Intel

KST

RS Line

RS KST

Breakouts

and buy

signals

Intel

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Intel

KST

RS Line

RS KST

Advanced Micro

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Advanced MicroKST

RS Line

RS KST

Breakout

No breakout

Marginal buysignals

Advanced Micro

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Advanced MicroKST

RS Line

RS KST

Advanced Micro

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Advanced MicroKST

RS Line

RS KST

Advanced Micro

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Advanced MicroKST

RS Line

RS KST

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Good luck and good charting !!

From your friends at Pring.com

3425510 commodities

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Transcript of 3425510 commodities