FIBONACCI NUMBER

Fibonacci numbers are the result of work by Leonardo Fibonacci in the early 1200's while studying the
Great Pyramid of Gizeh. The fibonacci series is a numerical sequence comprised of adding the
previous numbers together, i.e.,

(1,2,3,5,8,13,21,34,55,89,144,233 etc..)

An interesting property of these numbers is that as the series proceeds, any given number is 1.618
times the preceding number and 0.618% of the next number.

(34/55 = 55/89 = 144/233 =0.618) (55/34 =89/55 =233/144 =1.618), and 1.618 =1/0.618.

This properties of the fibonacci series occur throughout nature, science and math and is the number
0.618 is often referred to as the "golden ratio" as it is the root of the following polynomial x^2+x-1=0
which can be rearranged to x= 1/(1+x).

So that's were the fib # 0.618 comes from. The other fibs 0.382 and 0.5 commonly used in technical
analysis have a less impressive background but are just as powerful in Technical analysis.

0.382=(1-.618)=(0.618*0.618)

and 0.5 is the mean of the two numbers.

Other neat fib facts (0.618*(1+0.618)=1 and (0.382*(1+.618))=0.618.

Use of Fibonacci #'s in Technical Analysis

Fibonacci numbers are commonly used in Technical Analysis with or without a knowledge of Elliot
wave analysis to determine potential support, resistance, and price objectives. 38.2% retracements
usually imply that the prior trend will continue, 61.8% retracements imply a new trend is establishing
itself. A 50% retracement implies indecision. 38.2% retracements are considered nautral retracements
in a healthy trend.

Moving Average Convergence-Divergence

(MACD)
Introduction
Developed by Gerald Appel in the late seventies, Moving Average Convergence-Divergence (MACD)
is one of the simplest and most effective momentum indicators available. MACD turns two trend-
following indicators, moving averages, into a momentum oscillator by subtracting the longer moving
average from the shorter moving average. As a result, MACD offers the best of both worlds: trend
following and momentum. MACD fluctuates above and below the zero line as the moving averages
converge, cross and diverge. Traders can look for signal line crossovers, centerline crossovers and
divergences to generate signals. Because MACD is unbounded, it is not particularly useful for
identifying overbought and oversold levels.
Calculation
MACD: (12-day EMA - 26-day EMA)

Signal Line: 9-day EMA of MACD

MACD Histogram: MACD - Signal Line

Standard MACD is the 12-day Exponential Moving Average (EMA) less the 26-day EMA. Closing
prices are used for these moving averages. A 9-day EMA of MACD is plotted with the indicator to act
as a signal line and identify turns. The MACD-Histogram represents the difference between MACD
and its 9-day EMA, the signal line. The histogram is positive when MACD is above its 9-day EMA and
negative when MACD is below its 9-day EMA.

Trend Analysis

What Does Trend Analysis Mean?

An aspect of technical analysis that tries to predict the future movement of a stock based on past data. Tren
what has happened in the past gives traders an idea of what will happen in the future.

There are three main types of trends: short-, intermediate- and long-term.

Relative Strength Index (RSI)

Introduction
Developed J. Welles Wilder, the Relative Strength Index (RSI) is a momentum oscillator that measures
the speed and change of price movements. RSI oscillates between zero and 100. Traditionally, and
according to Wilder, RSI is considered overbought when above 70 and oversold when below 30.
Signals can also be generated by looking for divergences, failure swings and centerline crossovers. RSI
can also be used to identify the general trend.
RSI is an extremely popular momentum indicator that has been featured in a number of articles,
interviews and books over the years. In particular, Constance Brown's book, Technical Analysis for the
Trading Professional, features the concept of bull market and bear market ranges for RSI. Andrew
Cardwell, Brown's RSI mentor, introduced positive and negative reversals for RSI. In addition,
Cardwell turned the notion of divergence, literally and figuratively, on its head.
Wilder features RSI in his 1978 book, New Concepts in Technical Trading Systems. This book also
includes the Parabolic SAR, Average True Range and the Directional Movement Concept (ADX).
Despite being developed before the computer age, Wilder's indicators have stood the test of time and
remain extremely popular.
Calculation
100
RSI = 100 - --------
1 + RS

RS = Average Gain / Average Loss

Bollinger Band

What Does Bollinger Band Mean?

A band plotted two standard deviations away from a simple moving average, developed by famous technic

In this example of Bollinger bands, the price of the stock is banded by an upper and lower band along with

Investopedia explains Bollinger Band

Because standard deviation is a measure of volatility, Bollinger bands adjust themselves to the market conditions. W
the bands widen (move further away from the average), and during less volatile periods, the bands contract (move cl
the bands is often used by technical traders as an early indication that the volatility is about to increase sharply.

This is one of the most popular technical analysis techniques. The closer the prices move to the upper band, the mor
the prices move to the lower band, the more oversold the market
Stochastic Oscillator
Introduction
Developed by George C. Lane in the late 1950s, the Stochastic Oscillator is a momentum indicator that
shows the location of the close relative to the high-low range over a set number of periods. According
to an interview with Lane, the Stochastic Oscillator "doesn't follow price, it doesn't follow volume or
anything like that. It follows the speed or the momentum of price. As a rule, the momentum changes
direction before price." As such, bullish and bearish divergences in the Stochastic Oscillator can be
used to foreshadow reversals. This was the first, and most important, signal that Lane identified. Lane
also used this oscillator to identify bull and bear set-ups to anticipate a future reversal. Because the
Stochastic Oscillator is range bound, is also useful for identifying overbought and oversold levels.

Calculation
%K = (Current Close - Lowest Low)/(Highest High - Lowest Low) * 100
%D = 3-day SMA of %K

Lowest Low = lowest low for the look-back period

Highest High = highest high for the look-back period
%K is multiplied by 100 to move the decimal point two places

The default setting for the Stochastic Oscillator is 14 periods, which can be days, weeks, months or an
intraday timeframe. A 14-period %K would use the most recent close, the highest high over the last 14
periods and the lowest low over the last 14 periods. %D is a 3-day simple moving average of %K. This
line is plotted alongside %K to act as a signal or trigger line.