Charting Made Easy

Here is a treasure trove of easy to use tools for mapping your course through todays market. Whether youre using online charts or a professional charting software program, these techniques from master technician John Murphy can increase your trading success. "One of the greatest benefits of technical analysis is its applicability to any and all markets ... charts can be an extremely valuable tool-if you know how to use them. This booklet is a good place to start learning how." - from the foreword by John Murphy Renowned market technician John Murphy presents basic principals of technical analysis in easy-to-understand term. He covers All types of chart analysis "Need to know" concepts, including trendlines, moving averages, price gaps, reversal patterns, volume & open interest spreads, and more! Price forecasting and market timing applications A full resource guide of technical analysis aide How to use the industrys top tools to obtain a better understanding of what charts can do-and how they can help you grab your portion of todays trading profits.

John Murphy has authored three best-selling books on technical analysis, including Intermarket Technical Analysis and The Visual Investor. His latest work, Technical Analysis of the Financial Markets (1999), is a revised edition of his 1986 classic which has been translated into eight languages. He is president of MURPHYMORRIS.COM which produces interactive educational products on technical analysis and online analysis for investors. As the former host of CNBC's Tech Talk show and a speakeer at all the major trading and investment forums and conferences around the world., Mr. Murphy is one of the most recognized and highly respected technical analyts of our time.

Introduction ix

Chapter 1. WHY IS CHART ANALYSIS SO IMPORTANT? 1

Market Timing 2

Chapter 2. WHAT IS CHART ANALYSIS? 3

Charts Reveal Price Trends 4

Types of Charts Available 5

Any Time Dimension 5

Chapter 3. HOW TO PLOT THE DAILY BAR CHART 7

Charts Are Used Primarily to Monitor Trends 7

Chapter 4. SUPPORT AND RESISTANCE TRENDLINES AND CHANNELS 9

Chapter 5. REVERSAL AND CONTINUATION PRICE PATTERNS 13

Reversal Patterns

The Head and Shoulders 13

Double and Triple Tops and Bottoms 14

Saucers and Spikes 15

Continuation Patterns

Triangles 16

Flags and Pennants 20

Chapter 6. PRICE GAPS 23

Chapter 7. THE KEY REVERSAL DAY 25

Chapter 8. PERCENTAGE RETRACEMENTS 27

Chapter 9. THE INTERPRETATION OF VOLUME 29

Volume Is an Important Part of Price Patterns 30

On-Balance Volume (OBV) 30

Plotting OBV 31

OBV Breakouts 32

Other Volume Indicators 32

Chapter 10. USING DIFFERENT TIME FRAMES FOR SHORT- AND LONG-TERM VIEWS 35

Using Intraday Charts 35

Going from the Long Term to the Short Term 36

Chapter 11. USING A TOP-DOWN MARKET APPROACH 39

The First Step: The Major Market Averages 39

Different Averages Measure Different Things 40

The Second Step: Sectors and Industry Groups 41

The Third Step: Individual Stocks 41

Chapter 12. MOVING AVERAGES 45

Popular Moving Averages 45

Bollinger Bands 46

Moving Average Convergence Divergence (MACD) 46

Chapter 13. OSCILLATORS 47

Relative Strength Index (RSI) 47

Stochastics 47

Any Time Dimension 49

Chapter 14. RATIOS AND RELATIVE STRENGTH 51

Sector Ratios 51

Stock Ratios 51

Market Ratios 52

Chapter 15. OPTIONS 53

Option Put/Call Ratio 54

Contrary Indicator 54

CBOE Volatility Index (VIX) 54

Chapter 16. THE PRINCIPLE OF CONFIRMATION 55

Chapter 17. SUMMARY AND CONCLUSION 57

Investing Resource Guide 59