Chapter 2: Technical Market Analysis

CNA Finance Trader in Training - Free Trading Training CourseIn the last “Trader in Training” chapter, we discussed, the difference between technical and fundamental analysis. It’s perfect timing too because both ISR and PBMD are showing great opportunities for the technical trader. So today, we’ll do a quick recap of what technical analysis is, discuss key terms you’re going to need to know to understand today’s lesson, and take a look at the ISR and PBMD charts to see what opportunities they’re showing us. So, let’s get right to it…

What Is Technical Market Analysis?

Technical market analysis is the process of tracking quantifiable trends in the market in an attempt to predict future market movements. This type of analysis is based on two key factors…

  1. History Repeats Itself – The technical market analyst knows that history has a habit of repeating itself. Therefore, by studying what’s happened in the market in the past, you can get a good idea of what to expect in the future.
  2. Trends – Another factor that technical analysis is based on is the fact that the market tends to move in trends. Therefore, by studying a specific asset’s previous trends, the trader can successfully predict the next movement in the trend.

Key Terms For Today’s Training

  • Support – Support is a term used to describe when a stock on a downtrend reaches the floor. At this point, the market generally supports the price of the stock. Therefore, it’s got nowhere to go from here but up!
  • Resistance – Resistance is a term used to describe when a stock on an uptrend reaches the ceiling. At this point, the market resists any further growth and we are likely to see downtrends to follow.

Now Let’s See What We’re Getting From The Charts Today

As mentioned above, today, we’re going to focus on two stocks; ISR and PBMD. So, let’s get right to it…

IsoRay, Inc. (NYSEMKT: ISR)

ISR Chart

The IsoRay stock chart is above. As you can see, there has been a bit of a breakout recently. After announcing data from a clinical trial yesterday, IsoRay’s stock climbed by more than 100%! However, it’s important to remember that the market is a series of overreactions. So, strong uptrends are commonly followed by strong downtrends. This is what we know in the market as a correction.

However, in this particular case, a correction isn’t necessarily a bad thing. After all, 100% gains in a single day is quite a bit more than natural market movement. So, the market is reacting to the overgrowth and sending the value back down. As a result, we’re getting closer and closer to support on the stock. This means that IsoRay is likely to hit the floor! As a result of the movement, we’re starting to see a triangle (a key shape to the technical trader). All of these factors add up to the fact that we are likely to see more strong upward activity in the near future!

Prima Biomed Sp ADR (NASDAQ: PBMD)

PBMD Stock Chart

When it comes to PBMD, we’re seeing much of the same thing. Yesterday, we saw massive gains in the stock. However, overreactions in the market brought the value of the stock higher than it should have gone. As a result, today, we’re seeing a bit of a correction. As you can see above, the strong trend yesterday followed by a falling resistance line makes a bit of a flag shape in the chart. This is one of the key shapes that technical traders look for when identifying a breakout. So, we’re likely to see this one break out in the positive direction as well!

That’s It For Today!

Thanks for joining me for today’s “Trader in Trading”. I hope you’ll use these tips to spot profitable patterns in the market in the future! Tomorrow, we’ll talk about fundamental analysis and go over a couple of examples of how you can use it in today’s market to earn a profit!

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