Chapter 15 · 15 of 100 marks · workbook pages 295-324
Technical Analysis
The highest-weight chapter: chart types, Dow theory, trends, candlestick reversals, consolidation patterns, support and resistance, trendlines and channels, and the indicators (MAs, MACD, RSI, ADX, RSC, OBV).
Focus
- Chart types
- Dow Theory
- Primary, secondary, and tertiary trends
- Candlestick reversals
- Triangles, flags, pennants
- Support and resistance
- Trendlines
- MA, MACD, RSI, ADX, RSC, OBV
Must know
- Technical analysis studies price and volume patterns to infer demand, supply, trend, and momentum.
- Dow Theory includes market discounting information, trend classifications, confirmation, volume support, and trend persistence until reversal.
- Reversal patterns include hammer, hanging man, engulfing patterns, dark cloud cover, piercing pattern, morning star, and evening star.
- Consolidation patterns include symmetrical, ascending, and descending triangles, flags, and pennants.
- RSI measures momentum; ADX measures trend strength; MACD follows momentum via moving averages; OBV links volume to price direction.
Traps
- ADX does not show trend direction.
- Overbought RSI is a warning, not an automatic sell signal.
- Support can become resistance after a breakdown.
Formulas in this chapter
Full sheet- MACD: MACD line = 12-period EMA - 26-period EMA; Signal line = 9-period EMA of MACD
- RSI: RSI = 100 - [100 / (1 + RS)], RS = Average gain / Average loss
- On Balance Volume (OBV): OBV = Previous OBV + Volume (if close is up) - Volume (if close is down)