Before I get into this week’s article topic on technical analysis, I want to take a moment to share with you a bit about where UVstocks is headed this year. This is something that I’m really excited about, and I hope you will be too. It’s because of you, the UVstocks subscribers, that my team and I we are taking these next steps.


UVstocks started as a passion project to help me solve a big problem I was having: finding undervalued stocks but not take hours of my day, every day. It’s taken time to get the automation and algorithms right, but we’re very pleased with the progress. Still, to this day, I’m just as avid of a user as you are. And that’s the most rewarding part of this process—the positive comments you share with me of your experiences with investing based on article insights and the daily stock screen. It’s been invigorating talking with so many of you, and I feel this strong sense of a community taking shape. Thank you so much.


Going forward, the UVstocks team is on a mission to bring our service to more people who can benefit from the value UVstocks brings to their investing strategy—saving them something money just can’t buy…time. So we’re going to be doing more to share this vision with others and we hope you can help us. We have a goal to grow UVstocks by 50% of our subscribers over the next few months and beyond. You can help us by sharing the website and/or this article with your colleagues, friends and family and encourage them to sign-up. We’re excited to grow the UV community and expand on how we can work together to enhance the technology to be even more powerful for us all.


You’ll be hearing more from me on this in the coming weeks so stay tuned. If you have any thought, as always, I’d love to hear from you.

The Fundamentals of Technical Analysis


And now for this week’s post where we’ll cover Technical Analysis, which is when technicians analyze patterns in stock charts. Everything these analysts need and care to know can be found in the charts. There are three main types: Line, Bar and Candlestick.

Line charts are visual representations of a stock’s closing price over the course of time, giving investors a view into long-term trends. Using closing price only helps to simplify the chart, filtering out opening, low and high prices and everything in between throughout a given trading day.


Bar charts on the other hand provide more detail about a stock’s price throughout a given trading day. The top and bottom of the vertical line represents the high and low prices for the day. The left and right horizontal bars indicate opening and closing prices. 


In fact, Barchart.com is a source site that we reference. The site’s technical stock ratings are incorporated into UVstocks.io’s CSR algorithm that generates the list found at the bottom of the UVstock screen e-mail received daily by premium subscribers.

Candlestick charts add color-coding to bar charts. The vertical line showing high and low for the day is the wick. The green or red body is the candlestick indicating whether the stock closed higher or lower than the opening price.

Two fundamental stock chart patterns that analysts derive indicators from include cup and handle and head and shoulders.


In the cup and handle pattern, price movement looks like a cup where it trends down and moves back up. The formation is then followed by a downward price movement which forms the handle portion. Technicians would often see this as a buying opportunity ahead of a possible jump in price. 

The head and shoulders pattern that sits above the purple “neckline” (shown below) generally tells analysts that a stock price has possibly peaked. Price rises, followed by a dip, to make the shoulder. Then the price rises a bit higher to form the head. And again the price slumps and goes back up to form the other shoulder. This is when chartists anticipate the price to drop below the neckline (i.e., “pierces the neckline”) sounding the alarm bells to sell, sell, sell.

“With the glee of Count Dracula surveying one of his victims, the chartists are off and selling, anticipating that a prolonged downtrend will follow as it allegedly has in the past.” — Burton G. Malkiel


P.S. I'm sharing some investment information, but it's important to remember that what I'm providing is for informational purposes only and should not be construed as financial advice.


Happy Investing,

John


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