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Explanation of technical analysis models
Here you can see technical analysis applied to the chart, and the indications of a possible trend in the stock. This helps you get a basis for assessing
future price potential of the stock.
Notice that you can drag the line between the price chart and the two indicator charts in the bottom. This allows you to expand the analysis of RSI and
Stochastic Oscillator. You can also change the settings for indicators analysis by clicking on the icons with a wrench.
Trend analysis with moving average
- SMA200: 200-day moving average
If the price of the share is higher than average, the share is in a long-term upward trend. If the price is below average, there is an indication that the
stock is in long-term downtrend.
Indicates: Trend in the long term
- SMA50 and SMA20: 50-day and 20-day moving average
See description of the 200-day moving average.
Indicates: Trend in the medium and short term.
The combination of moving averages: Direction of the moving average may indicate a trend reversal for a share. When moving averages cross each other can be
interpreted as an indicator of a trend reversal.
- "Golden Cross": A term for a 50-day moving average crosses the 200-day average in an upward motion.
Indicates: Trend reversal pointing to a positive trend
- "Death Cross": A term for a 50-day moving average crosses the 200-day average in a downward motion.
Indicates: Trend reversal pointing to a negative trend.
Analysis of the momentum in price movements
- RSI: Relative Strength Indicator is a momentum indicator that compares the number of days with price increases in relation to the number of days with
decrease. This indicator indicates whether a stock is overbought or oversold. In the Euroinvestor graph RSI 14 is shown that analyzes a period of 14 days.
A value of 100 indicates that the stock has risen 14 consecutive days, while the value 0 indicates that the stock has fallen 14 consecutive days.
Values above 70 are considered to indicate an overbought situation where the price increased over time and perhaps will correct downwards. Opposite,
values below 30 indicate an oversold situation where the stock has fallen a lot over time, and perhaps will correct upwards.
RSI is used for analysis of momentum and potential trend reversal
- SO: Stochastic Oscillator is a momentum indicator that compares the closing share price with trading prices over a given period. In the Euroinvestor
graph Stochastic Oscillator for 14 days is indicated with a blue line, and a moving average of the Stochastic Oscillator on 3 x 14 days indicated by red
line.
The theory behind the Stochastic Oscillator is that in a rising market, the price of a share close near the highest level. In a declining market, the
closing price will be near to the lowest level in the period.
Signals of change of trend are given when the oscillator crosses the moving average oscillator.
Stochastic Oscillator is used to analyze the momentum and potential trend reversal.
Read more about technical analysis at Investopedia:
Moving Average:
http://www.investopedia.com/terms/s/sma.asp
Golden Cross:
http://www.investopedia.com/terms/g/goldencross.asp
RSI:
http://www.investopedia.com/terms/r/rsi.asp
RSI on Wikipedia
http://en.wikipedia.org/wiki/Relative_strength_index
Stochastic Oscillator
http://www.investopedia.com/terms/s/stochasticoscillator.asp#axzz20xjoj4ER
Graphs with candlestick
http://www.investopedia.com/terms/c/candlestick.asp
Learn more about investing in Euroinvestors Stock School
http://www.euroinvestor.com/ei-news/2012/02/06/euroinvestor-stockschool/15815