A Fidelity Investments Webinar Series

Getting Started with

Technical Analysis

BROKERAGE: TECHNICAL ANALYSIS

 Getting Started with Technical Analysis
Learn the assumptions that guide technical analysis, and get to
know the basics of trend trading.

Understanding Indicators in Technical Analysis

Identify the various types of technical indicators including, trend,
momentum, volume, and support and resistance.

Upcoming Identifying Chart Patterns with Technical Analysis

Webinars Use charts and learn chart patterns through specific examples of
important patterns in bar and candlestick charts.

Managing Risk with Technical Analysis

Manage your trading risk with a range of confirmation methods.

2
 Charles D. Kirkpatrick II, CMT
Charles D. Kirkpatrick II, CMT, is president of Kirkpatrick & Company, Inc., a technical
analysis research firm that publishes the Market Strategist investment newsletter.
A past instructor in finance at the School of Business Administration, Fort Lewis
College and Adjunct Professor of Finance at Brandeis University International Business
School, he is a two-time winner of the Market Technicians Association’s prestigious
Charles H. Dow Award for research in technical analysis, winner of the MTA Annual
Award in 2008 for “outstanding contributions to the field
of technical analysis,” and winner in 2012 of the Mike Epstein Award from the MTA
Educational Foundation for “long-term sponsorship of Technical Analysis in

About Our Academia.”

He is a Chartered Market Technician, a past member of the board of directors of the

Co-Author Market Technicians Association, past editor of the Journal of Technical Analysis, past
board member and vice-president of the
Market Technicians Association Educational Foundation and a member
of the American Association of Professional Technicians (AAPTA). He co-authored
Technical Analysis: The Complete Source for Financial Market Technicians, the primary
textbook for the CMT program and for university graduate courses on technical
analysis, authored Beat the Market, and most recently, Time the Markets: Using
Technical Analysis to Interpret Economic Data.

He is a graduate of Phillips Exeter Academy, Harvard College (AB) and the Wharton
School (MBA) and lives with his wife in Maine.

3
 BROKERAGE: TECHNICAL ANALYSIS

Defining
Technical Analysis

Charts, Chart
Best Practices
Types, and Chart
for Trend Traders
Construction

Basics of Trend
Analysis

Agenda
4
Defining Technical
Analysis
 BROKERAGE: TECHNICAL ANALYSIS

Fundamental Analysis &Technical Analysis

Two Common Types of Analysis

Fundamental Analysis Technical Analysis

6
 BROKERAGE: TECHNICAL ANALYSIS

Defining Fundamental Analysis

Definition
Fundamental analysts study companies
using measures such as:
• Quality of management
• Labor relations
• Inventory control
• PE ratio and EPS growth rates
• Return on equity and assets

7
 BROKERAGE: TECHNICAL ANALYSIS

Defining Fundamental Analysis

Limits
Fundamental analysis does not help you
with:
• Timing of the investment
• Making the selling decision
• Quantifying the risk vs. reward

8
 BROKERAGE: TECHNICAL ANALYSIS

Defining Technical Analysis

Definition
Technical analysis primarily studies historical
market data. It also:
• Focuses on the supply-and-demand dynamic
expressed via stock prices
• Visualizes shifts in supply-and-demand which can be
seen in chart patterns
• Accounts for the emotional aspects of the marketplace
• Quantifies the capital risk of trading and
investment decisions
• Does not try to predict the future

9
 BROKERAGE: TECHNICAL ANALYSIS

Defining Technical Analysis

Limits
Technical analysis is still not a perfect
investment method and has limits:
• Patterns, trends, and indicators are never precise,
and charts require human interpretation
• Technical traders are susceptible to the same
emotions and cognitive biases as all other investors

10
 BROKERAGE: TECHNICAL ANALYSIS

Defining Technical Analysis

Assumptions
• Prices in freely traded markets are determined by
the economic principles of supply-and-demand
• Price discounts everything
• Prices are nonrandom but not necessarily
predictable
• Prices have direction and tend to travel in
observable trends
• Behavior and history in the marketplace will
repeat itself
• Price patterns summarizing behavior are “fractal”

11
Charts, Chart Types,
and Chart Construction
 BROKERAGE: TECHNICAL ANALYSIS

Charts, Chart Types, & Chart Construction

Overview

Analyze price Easily visualize

behavior the patterns and
trends within data

13
 BROKERAGE: TECHNICAL ANALYSIS

Charts, Chart Types, & Chart Construction

Overview

Line Bar Candlestick Point & Figure

Chart Chart Chart Chart

14
 BROKERAGE: TECHNICAL ANALYSIS

Chart Types

Bar Charts
Visualizes
• Open, High, Low, Close
• Volume for a specific time interval

Advantages
• Most common
• Easy to read
• Provides full range of trading for time interval

15
 BROKERAGE: TECHNICAL ANALYSIS

Chart Types

Candlestick Charts
Visualizes
• Open, High, Low, Close
• Volume for a specific time interval

Advantages
• Gaining popularity
• More visual than a bar chart
• Uses color to show differences between
open and close prices

16
 BROKERAGE: TECHNICAL ANALYSIS

Chart Construction

Reversal Points
When a price is rising, stops, and then
declines, the price at which the rise
halted is a “reversal point.”
• In this situation, the reversal point is called a “peak”
and is important because it is where buyers were
overcome by sellers.
• When a price is declining, stops, and then rises, the
price at which the decline halted is a reversal point
called a “trough.” It is the price at which sellers were
overcome by buyers.
• Reversal points are the foundations of trends, trend
lines, channels, patterns, and support and resistance.

17
 BROKERAGE: TECHNICAL ANALYSIS

The Value of Reversal Points

The longer the trend,

the more important Breakout
the reversal point Breakout
Above
Above
Peak C
Reversal point importance is Breakout
Peak B Peak C
Peak B
determined by the length of Above
Peak A
the trend before and after the Peak A
peak or trough.

18
Basics of Trend
Analysis
 BROKERAGE: TECHNICAL ANALYSIS

The Value of Trends

Technical analysis is based on the

principles of trends

Trends arise from the interaction

of buyers and sellers

Profit is made from a trend in prices

A trend’s direction is described by the relative

location of peaks and troughs

20
 BROKERAGE: TECHNICAL ANALYSIS

Assumptions about Trends

Trends continue rather than reverse

Trends are influenced by the next longer

and the next shorter trend

Trends are fractal, meaning that

although they occur over different time
periods, their behavior is the same

Trends are not mechanical methods that can

easily be programmed and tested on computers

21
 BROKERAGE: TECHNICAL ANALYSIS

Uptrend

An uptrend has
successively higher
peaks and higher
troughs.

22
 BROKERAGE: TECHNICAL ANALYSIS

Downtrend

A downward trend
has successively
lower peaks and
lower troughs.

23
 BROKERAGE: TECHNICAL ANALYSIS

Sideways Trend

A sideways trend
is a period with
no clear direction
in prices.

24
 BROKERAGE: TECHNICAL ANALYSIS

Trend Influence

Keep time frame in

mind while
considering the
importance of a
trend.

25
 BROKERAGE: TECHNICAL ANALYSIS

From Trend to Trend Line

Definition
A trend is a direction; a trend line is an attempt to define and use that
direction.

How do we draw trend lines?

• From peak to peak
• From trough to trough

26
 BROKERAGE: TECHNICAL ANALYSIS

Types of Trend Lines

Overview

Upward Downward Support and

Sloping Sloping Resistance

27
 BROKERAGE: TECHNICAL ANALYSIS

Upward Sloping

A line connecting
trough to higher
trough

28
 BROKERAGE: TECHNICAL ANALYSIS

Downward Sloping

A line connecting
peak to lower peak

29
 BROKERAGE: TECHNICAL ANALYSIS

Support and Resistance

Support
Horizontal line drawn
through troughs at the
same price level

Resistance
Horizontal line
drawn through peaks at
the same price level

30
 BROKERAGE: TECHNICAL ANALYSIS

Profiting from a Trading Range

Green points
are candles that
hit support and
resistance levels
on close.
Red are intraday
and do not close
at support and
resistance.

31
 BROKERAGE: TECHNICAL ANALYSIS

When Support Becomes Resistance

Once the price breaks

through support, that
support becomes
future resistance.
When the price
eventually rallies back
to that level, it hits
selling pressure
and reverses back
down again.

32
 BROKERAGE: TECHNICAL ANALYSIS

When Resistance Becomes Support

When resistance
is penetrated, it
can become
support

33
Best Practices
for Trend Traders
 BROKERAGE: TECHNICAL ANALYSIS

Trend Trading

Best Practices
Determine:
• Strategy and conditions for entering/exiting trade
• Need of confirmation
• Triggers that will cause the entry to be executed
• Specific risk involved

35
 BROKERAGE: TECHNICAL ANALYSIS

Strategies for Trend Investors

UPTREND Entry and Exit Strategies

EXIT Entry strategy
• Consider buying when chart patterns demonstrate a
new trend

Exit strategy
• Consider selling when the trend reverses or
ENTER
appears to have ended

When investors using technical analysis

execute these two strategies successfully,
they may make a profit.

36
 BROKERAGE: TECHNICAL ANALYSIS

Entry Strategy

37
 BROKERAGE: TECHNICAL ANALYSIS

Exit Strategy

The trend line

crosses previous
troughs.
A trigger could
be a breakout
below the rising
trend line.

38
 Getting Started with Technical Analysis
Learn the assumptions that guide technical analysis, and get to
know the basics of trend trading.

Understanding Indicators in Technical Analysis

Identify the various types of technical indicators including, trend,
momentum, volume, and support and resistance.

Technical Identifying Chart Patterns with Technical Analysis

Analysis Use charts and learn chart patterns through specific examples of
important patterns in bar and candlestick charts.
Webinar
Series Managing Risk with Technical Analysis
Manage your trading risk with a range of confirmation methods.

39
 Visit the Fidelity
Learning Center
Learn more about
putting technical
analysis to work
for you

Read: Access the Technical Indicator Guide

Watch: Check out videos that define core

technical concepts

Attend: Register for monthly webinars

40
 Thank
Please join us for our
upcoming webinars
Fidelity.com/webinars

You Download Active Trader Pro for free at

Fidelity.com/ATP

Questions? Call a trading specialist at

877-907-4429

41
 BROKERAGE: TECHNICAL ANALYSIS

Important Information

Any screenshots, charts, or company trading symbols mentioned, are provided for illustrative purposes
only and should not be considered an offer to sell, a solicitation of an offer to buy, or a recommendation
for the security.

Investing involves risk, including risk of loss.

Technical analysis focuses on market action – specifically, volume and price. Technical analysis is only one
approach to analyzing stocks. When considering what stocks to buy or sell, you should use the approach
that you're most comfortable with. As with all your investments, you must make your own determination
whether an investment in any particular security or securities is right for you based on your investment
objectives, risk tolerance, and financial situation. Past performance is no guarantee of future results.

© 2019 FMR LLC. All rights reserved.

Fidelity Brokerage Services, Member NYSE, SIPC, 900 Salem Street, Smithfield, RI 02917

910805.1.0

42
A Fidelity Investments Webinar Series

Understanding Indicators in
Technical Analysis

BROKERAGE: TECHNICAL ANALYSIS

 Getting Started with Technical Analysis
Learn the assumptions that guide technical analysis, and get to
know the basics of trend trading.

Understanding Indicators in Technical Analysis

Identify the various types of technical indicators, including trend,
momentum, volume, volatility, and support and resistance.

Technical Identifying Chart Patterns with Technical Analysis

Analysis Use charts and learn chart patterns through specific examples of
important patterns in bar and candlestick charts.
Webinar
Series Managing Risk with Technical Analysis
Manage your trading risk with a range of confirmation methods.

2
 Charles D. Kirkpatrick II, CMT
Charles D. Kirkpatrick II, CMT, is president of Kirkpatrick & Company, Inc., a technical
analysis research firm that publishes the Market Strategist investment newsletter. A
past instructor in finance at the School of Business Administration at Fort Lewis College
and adjunct professor of finance at Brandeis University International Business School,
he is a two-time winner of the Chartered Market Technicians Association’s prestigious
Charles H. Dow Award for research in technical analysis, winner of the MTA Annual
Award in 2008 for “Outstanding Contributions to the Field of Technical Analysis,” and
winner in 2012 of the Mike Epstein Award from the MTA Educational Foundation for
“Long-Term sponsorship of Technical Analysis in Academia.”

About Our He is a Chartered Market Technician, a past member of the board of directors of the
Market Technicians Association, past editor of the Journal of Technical Analysis, past

Coauthor board member and vice president of the CMT Association Educational Foundation and
a member of the American Association of Professional Technicians (AAPTA). He
coauthored Technical Analysis: The Complete Source for Financial Market Technicians,
the primary textbook for the CMT program and for university graduate courses on
technical analysis, authored Beat the Market and, most recently, Time the Markets:
Using Technical Analysis to Interpret Economic Data.

He is a graduate of Phillips Exeter Academy, Harvard College (AB), and the Wharton
School (MBA) and lives with his wife in Maine.

3
 BROKERAGE: TECHNICAL ANALYSIS

Support & Technical

Resistance Indicators Indicators Basics

Volatility Trend
Indicators Indicators

Volume Momentum
Indicators Indicators

Agenda
4 Technical Indicators Basics
Technical
Indicator Basics
 BROKERAGE: TECHNICAL ANALYSIS

What Is a Technical Indicator?

A technical indicator is a mathematical

calculation based on historic price or volume.

6
 Trend Indicators
Simple Moving Average (SMA), Exponential Moving
Average (EMA), Moving Average Convergence/Divergence
(MACD), Average Directional Movement Index (ADX)

Momentum Indicators
Stochastic Oscillator, Relative Strength Index (RSI)

Types of Volume Indicators

Technical On Balance Volume (OBV), Money Flow Index (MFI),

Indicators Accumulation/Distribution

Volatility Indicators
Bollinger Bands®, Average True Range (ATR)

Support and Resistance Indicator

Fibonacci Retracements

7
Trend
Indicators
 BROKERAGE: TECHNICAL ANALYSIS TREND INDICATOR

Simple Moving Average

How It Works
Simple Moving Determine trend direction
Average (SMA) • If the SMA is positively sloping, the trend is up.
• If the SMA is negatively sloping, the trend is down.
This is the easiest moving
average to construct. It is Determine trend duration
calculated as the average price
• 200-bar SMAs are common proxies for long-term trends.
over the specified period. The
average is called “moving” • 50-bar SMAs are typically used to gauge intermediate trends.
because it is plotted on the • Shorter-period SMAs can be used to determine short-term trends.
chart bar by bar, forming a line
that moves along the chart as Determine trading signals via price crosses
the average value changes. • When prices cross above the SMA, you may want to go long
or cover short.
• When prices cross below the SMA, you may want to go short
or exit long.

9
 BROKERAGE: TECHNICAL ANALYSIS TREND INDICATOR

Simple Moving Average

Using moving
average crossovers
to generate trading
signals
When a more sensitive
(faster) SMA crosses
above a less sensitive
(slower) SMA from below,
it is considered bullish.

When a more sensitive

(faster) SMA crosses
below a less sensitive
(slower) SMA from above,
it is considered bearish .

10
 BROKERAGE: TECHNICAL ANALYSIS TREND INDICATOR

Exponential Moving Average

How It Works
Exponential Identify trends earlier
Moving Average • Use the same rules that apply to SMAs when interpreting EMAs.
Keep in mind that EMAs are generally more sensitive to nearer-term
(EMA) price movement.

The EMA measures trend Determine trend direction

direction over a period of time.
• When the EMA rises, you may want to consider buying when prices
It applies more weight to data dip near or just below the EMA. When the EMA falls, you may
that is more current. Because of consider selling when prices rally toward or just above the EMA.
its unique calculation, EMA will
follow prices more closely than Indicate support and resistance areas
a corresponding SMA.
• A rising EMA tends to support the price action, while a falling EMA
tends to provide resistance to price action.

11
 BROKERAGE: TECHNICAL ANALYSIS TREND INDICATOR

Exponential Moving Average

Both the EMA and the

SMA here represent 30
days.

EMA reacts faster

to the first pullback and
the subsequent rally.

12
 BROKERAGE: TECHNICAL ANALYSIS TREND INDICATOR

Moving Average Convergence/Divergence

How It Works
Moving Average Determine bullish or bearish
Convergence/ • MACD crossing above the zero line is considered bullish, while
crossing below the zero line is bearish. When MACD turns up from
Divergence below the zero line, it is considered bullish. When it turns down from
above the zero line, it is considered bearish.
(MACD) • When the MACD line crosses from below to above the signal line,
the indicator is considered bullish. The further below the zero line
MACD is a momentum
this cross occurs, the stronger the signal.
oscillator primarily used to
trade trends. • When the MACD line crosses from above to below the signal line,
the indicator is considered bearish. The further above the zero line
this cross occurs, the stronger the signal.

13
 BROKERAGE: TECHNICAL ANALYSIS TREND INDICATOR

Moving Average Convergence/Divergence

A. Bullish

B. Bullish

C. Bearish

D. Bearish

14
 BROKERAGE: TECHNICAL ANALYSIS TREND INDICATOR

Average Directional Movement Index

How It Works
Average Measure strength of trend
Directional • A strong trend is present when ADX is above 25;
no trend is present when ADX is below 20.
Movement Index • If the ADX is declining, it could indicate that the current trend
(ADX) is weakening.
• If the ADX is rising, it could indicate a strengthening trend.
ADX can be used to help • The ADX indicator incorporates two different components in its
measure the overall strength construction which are commonly plotted along with the ADX.
of a trend. ‐ Positive Directional Indicator (+DMI) shows the difference between today’s
high price and yesterday’s high price. These values are then added up from
the past 14 periods and then plotted.
‐ Negative Directional Indicator (–DMI) shows the difference between today’s
low price and yesterday’s low price. These values are then summed up from
the past 14 periods and plotted.

15
 BROKERAGE: TECHNICAL ANALYSIS TREND INDICATOR

Average Directional Movement Index

ADX is less then 25 on

the left side of the chart.

+DM is greater than -DMI

throughout the
uptrend, though this
is not a requirement.

ADX has fallen below

25 on the right side of
the chart and -DM has
crossed up above +DM.

Remember that ADX

shows trend show trend
strength – not direction.

16
Momentum
Indicators
 BROKERAGE: TECHNICAL ANALYSIS

Overbought/Oversold in Oscillators

• In bounded indicators, also called “oscillators,” • In some cases, the reaching of extreme levels
a limit exists as to how high or low they can reach. indicates that a new trend has begun. In these
• When the oscillator reaches a zone close to its instances, the oscillator will remain in a zone for
highest bound, it is called “overbought.” the period of the trend and will give many false
signals on corrections to the trend.
• When it reaches a zone close to its lowest bound,
it is called “oversold.” • The interpretation of oscillator oversold
and overbought is thus dependent on the
• An oscillator value in these zones indicate that underlying trend.
the market is vulnerable to reversal. A signal
often occurs when the oscillator exits one of • They don’t work when a trend is strong, but excel
these zones. in trading range markets.

18
 BROKERAGE: TECHNICAL ANALYSIS MOMENTUM INDICATOR

Stochastic Oscillator

How It Works
Stochastic Determine exit and entry
Oscillator • Generally, the area above 80 indicates an overbought region, while
the area below 20 is considered an oversold region.
The Stochastic Oscillator is a • A sell signal is given when the oscillator is above the 80 level and
momentum indicator that then crosses back below 80. Conversely, a buy signal is given when
shows the location of the close the oscillator is below 20 and then crosses back above 20.
relative to the high-low range • A crossover signal occurs when the two lines cross in the overbought
over a set number of periods. or oversold region.
The indicator can range from 0 • Divergences form when a new high or low in price is not confirmed
to 100. Stochastic Oscillators by the Stochastic Oscillator.
are most effective in broad
trading ranges or slow moving
trends.

19
 BROKERAGE: TECHNICAL ANALYSIS MOMENTUM INDICATOR

Stochastic Oscillator

This example is using a

Slow Stochastic; note the
effectiveness of
the signals during the
sideways trend.

Divergences between
price and oscillators can
also generate signals.

20
 BROKERAGE: TECHNICAL ANALYSIS MOMENTUM INDICATOR

Relative Strength Index

How It Works
Relative Strength Determine the speed and change of price
Index (RSI) • The RSI oscillates from zero and 100. Traditionally, the RSI is
considered overbought when above 70 and oversold when below 30.
RSI measures the speed and • In an uptrend or bull market, the RSI tends to remain in the 40-90
change of price movements. range with the 40-50 zone acting as support.
• During a downtrend or bear market, the RSI tends to stay in the
10-60 range with the 50-60 zone acting as resistance.
• If underlying prices make a new high or low that isn't confirmed by
the RSI, this divergence can signal a price reversal.

21
 BROKERAGE: TECHNICAL ANALYSIS MOMENTUM INDICATOR

Relative Strength Index

Overbought and
oversold signals on the
chart indicate price
movement in the
short term.

22
Volume
Indicators
 Increasing volume reinforces the
trend direction.

Declining volume diminishes the

trend direction.
General
Rules of A price peak or trough on ultrahigh
volume is often an important reversal
Volume point in a trend.
Theory Volume indicators should be considered
warnings but not signals of change in
trend direction.

24
 BROKERAGE: TECHNICAL ANALYSIS VOLUME INDICATOR

On Balance Volume

How It Works
• The actual value of the OBV is unimportant; concentrate on its
On Balance direction.

Volume (OBV) • When price continues to make higher peaks and OBV fails to make
higher peaks, the upward trend is likely to stall or fail. This is called a
OBV measures buying and negative divergence.
selling pressure as a cumulative • When price continues to make lower troughs and OBV fails to make
indicator that adds volume on lower troughs, the downward trend is likely to stall or fail. This is
up days and subtracts volume called a positive divergence.
on down days.

25
 BROKERAGE: TECHNICAL ANALYSIS VOLUME INDICATOR

On Balance Volume

Bearish divergence:
OBV is not confirming
the higher peaks in
price, which preceded
the selloff.

26
 BROKERAGE: TECHNICAL ANALYSIS VOLUME INDICATOR

Money Flow Index

How It Works
• Oversold levels typically occur below 20 and overbought levels
Money Flow typically occur above 80. These levels may change depending on
market conditions.
Index (MFI) • Oversold or overbought levels are generally not reason enough to
MFI is a volume indicator that buy or sell and traders should consider additional technical analysis
or research to confirm the security's turning point.
measures the flow of money
into and out of a security over a • If the underlying price makes a new high or low that isn't confirmed
specified period of time. It is by the MFI, this divergence can signal a price reversal.
related to the Relative Strength
Index (RSI) but incorporates
volume, whereas the RSI only
considers price.

27
 BROKERAGE: TECHNICAL ANALYSIS VOLUME INDICATOR

Money Flow Index

Bearish divergence:
Price peak not Bearish Divergence

confirmed by MFI.

Bullish divergence:
Price trough is not
confirmed by MFI.
Bullish Divergence

28
 BROKERAGE: TECHNICAL ANALYSIS VOLUME INDICATOR

Accumulation/Distribution

How It Works
Accumulation/ Determine the direction of a trend
Distribution • When both price and Accumulation/Distribution are making higher
peaks and higher troughs, the uptrend is likely to continue.
Accumulation/Distribution • When both price and Accumulation/Distribution are making lower
looks at the proximity of closing peaks and lower troughs, the downtrend is likely to continue.
prices to their highs and lows to • When price continues to make higher peaks but
determine if accumulation or Accumulation/Distribution fails to make higher peak, the uptrend is
distribution is occurring in likely to stall or fail. This is known as a negative divergence.
the market. • When price continues to make lower troughs and
Accumulation/Distribution fails to make lower troughs, the
downtrend is likely to stall or fail. This is known as a positive
divergence.

29
 BROKERAGE: TECHNICAL ANALYSIS VOLUME INDICATOR

Accumulation/Distribution

Negative divergence
between price
and Accumulation
Distribution

Negative Divergence
between Price and
Accumulation/Distribution

30
Volatility
Indicators
 BROKERAGE: TECHNICAL ANALYSIS VOLATILITY INDICATOR

Bollinger Bands®

How It Works
Bollinger Bands Determine relative price
• When the bands tighten during a period of low volatility, it raises the
Bollinger Bands are a type of likelihood of a sharp price move in either direction.
price envelope plotted at a
standard deviation level above • When the bands separate by an unusually large amount, volatility
increases and any existing trend may be ending.
and below a Simple Moving
Average of the price. Bollinger • Use swings within the band’s envelopes to help identify potential
Bands help determine whether profit targets.
prices are high or low on a
relative basis.

32
 BROKERAGE: TECHNICAL ANALYSIS VOLATILITY INDICATOR

Bollinger Bands®

Riding Upper Band

Oscillating between Bands

Riding Upper Band
Bands Narrowing

Oscillating between Bands

Bands Narrowing

33
 BROKERAGE: TECHNICAL ANALYSIS VOLATILITY INDICATOR

Average True Range

How It Works
Average True Determine market volatility
Range (ATR) • An expanding ATR indicates increased volatility, whether that’s
selling or buying pressure.
ATR is the average of true • A low ATR value indicates decreased volatility, a series of periods
ranges over a specified period. with small ranges.
ATR measures volatility, taking • ATR is useful for stops or entry triggers, signaling changes in
into account any gaps in the volatility.
price movement.

34
 BROKERAGE: TECHNICAL ANALYSIS VOLATILITY INDICATOR

Average True Range

Periods of increased
volatility are clearly
identified by ATR.

Increasing
Volatility

35
Support and
Resistance
Indicators
 BROKERAGE: TECHNICAL ANALYSIS SUPPORT AND RESISTANCE

Fibonacci Retracements

How It Works
Fibonacci Provide support and resistance levels
Retracements • Applying these percentages to the difference between the high and
low price for the period selected creates a set of price objectives.
Plot percentage retracement • Depending on the direction of the market, up or down, prices will
lines based on the often retrace a significant portion of the previous trend before
mathematical relationship resuming the move in the original direction.
within the Fibonacci sequence. • These countertrend moves tend to fall into certain parameters, which
These retracement levels are often the Fibonacci Retracement levels.
provide support and resistance
levels that can be used to target
price objectives.

37
 BROKERAGE: TECHNICAL ANALYSIS SUPPORT AND RESISTANCE

Fibonacci Retracements

Here, we have drawn a

down sloping Fibonacci
Retracement line from
the absolute peak to
the absolute trough
to determine levels of
resistance we may meet.

In this example, the first

major correction occurred
at 61.8% retracement.

38
 BROKERAGE: TECHNICAL ANALYSIS SUPPORT AND RESISTANCE

Fibonacci Retracements

In this example, we have

drawn a Fibonacci
Retracement line from
the trough to the peak of
the price move for which
we’re trying to determine
retracement levels.

In this instance, we
found support at
38.2% retracement.

39
 Getting Started with Technical Analysis
Learn the assumptions that guide technical analysis, and get to
know the basics of trend trading.

Understanding Indicators in Technical Analysis

Identify the various types of technical indicators including, trend,
momentum, volume, and support and resistance.

Technical Identifying Chart Patterns with Technical Analysis

Analysis Use charts and learn chart patterns through specific examples of
important patterns in bar and candlestick charts.
Webinar
Series Managing Risk with Technical Analysis
Manage your trading risk with a range of confirmation methods.

40
 Visit the Fidelity
Learning Center
Learn more
about putting
technical analysis
to work for you

Read: Access the Technical Indicator Guide

Watch: Check out videos that define core

technical concepts

Attend: Register for monthly webinars

41
 Thank
Please join us for our
upcoming webinars
Fidelity.com/webinars

You Download Active Trader Pro for free at

Fidelity.com/ATP

Questions? Call a trading specialist at

877-907-4429

42
 BROKERAGE: TECHNICAL ANALYSIS

Important Information

Any screenshots, charts, or company trading symbols mentioned are provided for illustrative purposes
only and should not be considered an offer to sell, a solicitation of an offer to buy, or a recommendation
for the security.

Investing involves risk, including risk of loss.

Technical analysis focuses on market action – specifically, volume and price. Technical analysis is only one
approach to analyzing stocks. When considering which stocks to buy or sell, you should use the approach
that you're most comfortable with. As with all your investments, you must make your own determination
as to whether an investment in any particular security or securities is right for you based on your
investment objectives, risk tolerance, and financial situation. Past performance is no guarantee of future
results.
Fidelity Brokerage Services LLC, Member NYSE, SIPC, 900 Salem Street, Smithfield, RI 02917

© 2020 FMR LLC. All rights reserved.

916551.1.0

43
A Fidelity Investments Webinar Series

Identifying Chart Patterns

with Technical Analysis

BROKERAGE: TECHNICAL ANALYSIS

 Getting Started with Technical Analysis
Learn the assumptions that guide technical analysis, and get to
know the basics of trend trading.

Understanding Indicators in Technical Analysis

Identify the various types of technical indicators, including trend,
momentum, volume, volatility, and support and resistance.

Technical Identifying Chart Patterns with Technical Analysis

Analysis Use charts and learn chart patterns through specific examples of
important patterns in bar and candlestick charts.
Webinar
Series Managing Risk with Technical Analysis
Manage your trading risk with a range of confirmation methods.

1
 Charles D. Kirkpatrick II, CMT
Charles D. Kirkpatrick II, CMT, is president of Kirkpatrick & Company, Inc., a technical
analysis research firm that publishes the Market Strategist investment newsletter. A
past instructor in finance at the School of Business Administration at Fort Lewis College
and adjunct professor of finance at Brandeis University International Business School,
he is a two-time winner of the Chartered Market Technicians Association’s prestigious
Charles H. Dow Award for research in technical analysis, winner of the MTA Annual
Award in 2008 for “Outstanding Contributions to the Field of Technical Analysis,” and
winner in 2012 of the Mike Epstein Award from the MTA Educational Foundation for
“Long-Term sponsorship of Technical Analysis in Academia.”

About Our He is a Chartered Market Technician, a past member of the board of directors of the
Market Technicians Association, past editor of the Journal of Technical Analysis, past

Coauthor board member and vice president of the CMT Association Educational Foundation and
a member of the American Association of Professional Technicians (AAPTA). He
coauthored Technical Analysis: The Complete Source for Financial Market Technicians,
the primary textbook for the CMT program and for university graduate courses on
technical analysis, authored Beat the Market and, most recently, Time the Markets:
Using Technical Analysis to Interpret Economic Data.

He is a graduate of Phillips Exeter Academy, Harvard College (AB), and the Wharton
School (MBA) and lives with his wife in Maine.

2
 BROKERAGE: TECHNICAL ANALYSIS

Techniques for
Trading Patterns

Understanding Construction
Patterns and of Common
Their Limits Chart Patterns

Agenda

3
Understanding
Patterns and
Their Limits
 BROKERAGE: TECHNICAL ANALYSIS

Defining Patterns

• A pattern is bounded by at least two trend lines (straight or curved)

• All patterns have a combination of entry and exit points

• Patterns can be continuation patterns or reversal patterns

• Patterns are fractal, meaning that they can be seen in any charting
period (weekly, daily, minute, etc.)

• A pattern is not complete or activated until an actual breakout occurs

5
 BROKERAGE: TECHNICAL ANALYSIS

The Limits of Patterns

Keep in Mind
Some of our human tendencies can be
dangerous for investors.
• See patterns where there aren’t any

• Believe “market lore,” technical and fundamental, without evidence

• Look backwards rather than forward

• Stick with original price targets of patterns after conditions have

changed

6
Techniques for
Trading Patterns
 BROKERAGE: TECHNICAL ANALYSIS

Techniques for Trading Patterns

• Breakouts

• Entry Stops

• Protective Stops

• Retracements

8
 BROKERAGE: TECHNICAL ANALYSIS

Breakouts

Violation of Trend Line,

Support or Resistance, or
previous reversal point

It signifies that a change Resistance Breakout

in buyer and seller
behavior and signals
the beginning or end
of a trend.

Price

9
 BROKERAGE: TECHNICAL ANALYSIS

Confirmation Filters

Types of Filters
Confirmation • Intrabar

Filters • Multiple closes

Apply a confirmation filter to • Time

determine whether a breakout
• Percentage or point
has taken place.
• Money

10
 BROKERAGE: TECHNICAL ANALYSIS

Entry Stops

Entry Stops
Buy stop orders are used to
enter trades once the price
breaks out.

Resistance Breakout

Trend Line Breakout

11
 BROKERAGE: TECHNICAL ANALYSIS

False and Failed Breakouts

False Breakout
Breakout False Breakout (return
Price breaks out but almost Resistance through breakout level)
immediately returns back Line
through its breakout price. Failed Breakout

Failed Breakout
(Trap)
False breakout occurs and
the price then breaks out in
the opposite direction.

Trend Line

12
 BROKERAGE: TECHNICAL ANALYSIS

Protective Stops

Protects Capital
Determines the amount of
capital risk before entry

Types of
placement Breakout
Resistance Line
• Filters, such as percent,
points, or money

• Trend line, support or

resistance level with filter Protective Stop

13
 BROKERAGE: TECHNICAL ANALYSIS

Trading False Breakouts Using Protective Stops

Example
False Breakout Protective sell stop and sell
• Enter on breakout short entry stop

• Place protective stop

outside breakout bar
opposite from breakout
direction

• Place entry stop at same Failure

level (called a “stop and
reverse” order)

• If price continues in
direction of breakout, profit
from breakout entry

• If breakout is false, profit

from stop and reverse

14
 BROKERAGE: TECHNICAL ANALYSIS

Retracements

Counter Trend
Correction Retracement (pullback)

Types
• Pullback (on breakout down)
• Throwback (on breakout up)

Waiting for Trend Line Breakout

• Don’t always occur
• Performance can suffer
when they do

15
Construction of
Common Chart
Patterns
 BROKERAGE: TECHNICAL ANALYSIS

Common Chart Patterns

Multi-Bar Candlestick Short-Term

Patterns Patterns Patterns
Horizontal Congestion • Doji • Pennant/Flag
• Double and Triple • Harami • Gaps
Tops/Bottoms • Hanging Man/Hammer • Pipe Bottom
• Rectangles • Shooting Star/Inverted • Narrow Range
Hammer
Triangles • Engulfing
• Symmetrical • Dark Cloud/Piercing
• Ascending and Descending
• Wedges

Other
• Head and Shoulders
• Cup and Handle

17
 BROKERAGE: TECHNICAL ANALYSIS

Horizontal Congestion: Double Top

Characteristics: Double Top

Double Top
(breakout down)
• Two successive peaks separated
by an opposite reversal point
Resistance Line

• Either rounded or pointed peaks

that are usually at roughly the same Entry Pullback
price (resistance level)
Breakout
Support
• Price must break out of middle Line Breakout
reversal point

Price

Calculate target price:

Taking the height from the highest peak to the trough and
then subtracting the amount from the breakout price to the
downside.

18
*Source: Technical Analysis: the Complete Resource for Financial Market Technicians, 2 nd ed.
 BROKERAGE: TECHNICAL ANALYSIS

Horizontal Congestion: Double Bottom

Characteristics: Double Bottom

(breakout up)
• Two successive troughs separated
by a peak
Breakout
Breakout
• Either rounded or pointed troughs Resistance line
that are usually at roughly the same
price (support level)
Entry
Throwback
• Price must break out of
middle peak Double Bottom
Support line
Price

Calculate target price:

Taking the distance from the troughs to the peak and then
adding that amount from the breakout price to the upside.

19
*Source: Technical Analysis: the Complete Resource for Financial Market Technicians, 2 nd ed.
 BROKERAGE: TECHNICAL ANALYSIS

Horizontal Congestion: Triple Top

Characteristics: Triple Top

(breakout down)
• Three distinct peaks at roughly the Triple
Top
same price level separated by two
intermittent troughs Resistance line

• Breakout occurs when price exceeds Pullback

the extreme of the intermittent Breakout

trough or a trend line connecting

Support line
those points
Entry Breakout
Price

Calculate target price:

Take the height from the highest peak to the lowest trough
in the pattern. Then subtract that amount from the lowest
trough in the pattern to generate a price target.

20
* Source: Technical Analysis: the Complete Resource for Financial Market Technicians, 2 nd ed.
 BROKERAGE: TECHNICAL ANALYSIS

Horizontal Congestion: Triple Bottom

Characteristics: Triple Bottom

(breakout up)
• Three distinct troughs at roughly the
same price level separated by two
intermittent peaks at any level Entry Breakout
Breakout
Resistance line
• Breakout occurs when price exceeds
the extreme of the intermittent peaks
or a trend line connecting those Throwback
points
Triple
Bottom
Support line Price
• Best performance may be after a
sustained decline*

• An average performance, but watch Calculate target price:

for failures*
Take the height from the highest peak to the lowest trough
in the pattern. Then add that amount to the highest peak in
the pattern to generate a price target.

21
*Source: Technical Analysis: the Complete Resource for Financial Market Technicians, 2 nd ed.
 BROKERAGE: TECHNICAL ANALYSIS

Horizontal Congestion: Rectangles

Characteristics: Rectangle
(entry up, breakout up) Resistance Zone
• Trading range with support and
resistance levels bounding price Entry Throwback
action Support Zone
Shortfall Breakout
Breakout
• Slight tilt, similar to horizontal
Resistance line
channel

• Often has many false breakouts*

Support line
Price
• Things to consider:
‐ Confirm a breakout
‐ “Shortfall” often indicator of eventual
breakout direction Calculate target price:
Take the height from the resistance line to the support line. Then
• Best occurrence may be bottom either add that amount to the resistance line to generate a price
breaking upward* target for an upside breakout, OR subtract that amount from the
support line to generate a price target for a downside breakout.

22
*Source: Technical Analysis: the Complete Resource for Financial Market Technicians, 2 nd ed.
 BROKERAGE: TECHNICAL ANALYSIS

Triangle: Symmetrical

Characteristics: Symmetrical Triangle

(breakout up)
• Bounded by a downward sloping
upper trend line and an upward
sloping lower trend line. Each bound Throwback

is a straight trend line Breakout

Target Line
• Prices must touch each bound at
Entry
least twice. Many false breakouts.
Moderately successful in
performance Cradle
Price
• Things to consider:
‐ Confirm a breakout
Calculate target price:
• Best occurrence may be upward Take the height from the highest peak in the pattern to the
breaking out – above average for lowest trough in the pattern. Then either add it (for upward
all patterns* breakouts) to the breakout price or subtract it (for downward
breakouts) from the breakout price to generate a price target.

23
*Source: Technical Analysis: the Complete Resource for Financial Market Technicians, 2 nd ed.
 BROKERAGE: TECHNICAL ANALYSIS

Triangle: Ascending

Characteristics: Ascending Triangle

(breakout down)
• Bounded by a horizontal upper trend
line and an upward sloping lower Pullback
Resistance line
trend line. Each bound is a straight Target
trend line Line
Entry

• Prices can break in either direction,

but more commonly upward*
Support line
Breakout
Uptrend Line
• Breakout usually occurs in pattern.
About average failure rates but many Price
small false breakouts*

• Post breakout performance average Calculate target price:

on upside but above average on Take the height from the highest peak in the pattern to the
downside* lowest trough in the pattern. Then either add it (for upward
breakouts) to the breakout price or subtract it (for downward
breakouts) from the breakout price to generate a price target.

24
*Source: Technical Analysis: the Complete Resource for Financial Market Technicians, 2 nd ed.
 BROKERAGE: TECHNICAL ANALYSIS

Triangle: Descending

Characteristics: Descending Triangle

(breakout down)
• Bounded by two trend lines; the
lower is horizontal and the upper
Resistance line
slopes downward
Downtrend
Line Pullback
• Prices can break in either direction Entry

but most commonly downward*

Support line
Breakout Down
• Above-average performance on Breakout
upside break; retracements occur
often* Price

Calculate target price:

Take the height from the highest peak in the pattern to the
lowest trough in the pattern. Then either add it (for upward
breakouts) to the breakout price or subtract it (for downward
breakouts) from the breakout price to generate a price target.

25
* Source: Technical Analysis: the Complete Resource for Financial Market Technicians, 2 nd ed.
 BROKERAGE: TECHNICAL ANALYSIS

Triangle: Wedge

Characteristics: Rising Wedge

(breakout down from climax peak)
• Bounded by two trend lines, each
headed in the same direction; Price Climax
Pullback
must touch a trend line at least five
times (3 times on one and 2 times on
the other) before a breakout
Breakout
• Often occur following a panic
(declining wedge) or bubble Entry
(rising wedge)
Price
• Performance in both types is below
average, and retracements are
very common* Calculate target price:
For downward breakout, the lowest trough in the pattern is the
price target. For upward breakouts, take the height from the
highest peak in the pattern to the lowest trough in the pattern
and add that amount to the breakout price for a price target.

26
*Source: Technical Analysis: the Complete Resource for Financial Market Technicians, 2 nd ed.
 BROKERAGE: TECHNICAL ANALYSIS

Head and Shoulders: Top

Characteristics: Head

• Three peaks with center peak higher

than the other two Left Shoulder
Right Shoulder
Breakout
• Shoulders should be at approximately
the same level and the head higher

• Line connecting the two throughs Neckline

between the peaks is called
the “neckline”

• Pattern is only complete on breaking

the neckline Target

• Target is the distance from the head to

the neckline projected from the neckline

• This is a standard pattern for tops and

has one of the lowest failure rates

27 *Source: Technical Analysis: the Complete Resource for Financial Market Technicians, 2 nd ed.
 BROKERAGE: TECHNICAL ANALYSIS

Head and Shoulders: Bottom (Inverse)

Characteristics:
• Inverted but otherwise Head and Shoulders Bottom
identical to a top pattern (breakout up)
except not as profitable*
Price

Breakout Breakout

Neckline
Neckline

Entry Throwback

Left Shoulder
Left Shoulder Right Shoulder Right
Shoulder
Head
Head

28
*Source: Technical Analysis: the Complete Resource for Financial Market Technicians, 2 nd ed.
 BROKERAGE: TECHNICAL ANALYSIS

Cup and Handle (also “Saucer”)

Characteristics: Rounding Bottom

(breakout up)
• Pattern consists of a rounded bottom
(not a “V” bottom), two “lips” at each Price Breakout
end, and a “handle” (similar to a flag
Entry Breakout Lip
pattern) from the handle

• Pattern is complete with breakout Lip

above both lips Throwback

Breakout
Down
• Often have a throwback Cup or Bowl
Handle

• The pattern’s performance ranks

about average for bottom patterns*
Calculate target price:
Take the height of the right cup lip to the bottom of the
cup, then add that amount to the breakout price.

29
*Source: Technical Analysis: the Complete Resource for Financial Market Technicians, 2 nd ed.
 BROKERAGE: TECHNICAL ANALYSIS

Trading with Patterns

= Buy Wedge

= Stop Wedge

= Exit
Triangle

Triangle

Rectangle

*Source: Technical Analysis: the Complete Resource for Financial Market Technicians, 2 nd ed.
30
 BROKERAGE: TECHNICAL ANALYSIS

Best Multi-Bar Patterns

Upward Signals Downward Signals

• Descending • Flag
Triangle
• Head and
• Rectangle Shoulders top
• Pipe Bottom • Island Reversal

31
 BROKERAGE: TECHNICAL ANALYSIS

General Information about a Candlestick

Characteristics:
• Traditionally, candlestick patterns are reversal patterns, meaning they
are used to identify when a trend is ending

• Candlestick patterns are often used with longer-term trends, thus,

upward reversal patterns after a correction in a longer upward trend
show the best performance, and vice versa for downward reversal
patterns in a long downward trend

• Be careful not to act on a perceived candle pattern until the pattern

has formed and is activated by a breakout in a certain direction

32
 BROKERAGE: TECHNICAL ANALYSIS

Doji

Characteristics: Doji
• A one-candle pattern formed when the open
and close are the same price, and the high
and low are roughly equidistant from the open
and close

• Extremely common

• Indicates indecision in the marketplace and

thus is a possible warning of price change

33
*Source: Technical Analysis: the Complete Resource for Financial Market Technicians, 2 nd ed.
 BROKERAGE: TECHNICAL ANALYSIS

Harami

Characteristics: Harami
• A two-candle pattern of a large body of either Top Bottom
color followed by a small body of the opposite
color; The second body is completely within
the body of the large body and is called a
“spinning top”

• Although common belief is that the harami is

a reversal pattern, many report that is has the
potential of breaking either way

• A variation that has a doji instead of a spinning

top as the second candle has equally average
performance and random breakout*
Candle body can
be Black or White

34 *Source: Technical Analysis: the Complete Resource for Financial Market Technicians, 2 nd ed.
 BROKERAGE: TECHNICAL ANALYSIS

Hanging Man and Hammer

Characteristics: Hanging Man — Hammer

• One-candle patterns differentiated by the color Top Bottom
of the body. Each pattern has a high that
coincides with either the opening or closing
price

• Hanging man, thought to be a continuation

pattern, actually breaks in either direction
randomly with a slight upward bias. Its overall
performance is below average*

• Hammers occur relatively frequently but have

below-average performance*

35
*Source: Technical Analysis: the Complete Resource for Financial Market Technicians, 2 nd ed.
 BROKERAGE: TECHNICAL ANALYSIS

Shooting Star and Inverted Hammer

Characteristics: Shooting Star and

Inverted Hammer
• A one-candle inverted hanging man or hammer Top Bottom
pattern. Hammers by themselves have white
bodies and shooting stars have black bodies

• As a one-candle pattern, the shooting star has

Either Can Be
average performance. The same is true for the Black or White
single inverted hammer*

36
*Source: Technical Analysis: the Complete Resource for Financial Market Technicians, 2 nd ed.
 BROKERAGE: TECHNICAL ANALYSIS

Engulfing

Characteristics: Engulfing

• A two-bar pattern in which the second bar Top Bottom

body completely engulfs the first bar body*

• A bottom engulfing pattern, with a short black

body followed by a tall white body, is thought
to be an upward reversal pattern and actually
has very good performance on a downward
breakout in a downward trend*

37
*Source: Technical Analysis: the Complete Resource for Financial Market Technicians, 2 nd ed.
 BROKERAGE: TECHNICAL ANALYSIS

Dark Cloud Cover and Piercing Line

Characteristics: Dark Cloud Cover

and Piercing Line
Top Bottom
• The dark cloud cover is a two-bar pattern where
the second bar closes higher than the first and
is black versus white in the first bar

• The piercing line is the opposite of the dark

cloud cover in that the second bar is white and
lower than the first bar which is black

• The dark cloud is thought to be a downward

reversing pattern

• The piercing line pattern is thought to be an

upward reversing pattern*

38
*Source: Technical Analysis: the Complete Resource for Financial Market Technicians, 2 nd ed.
 BROKERAGE: TECHNICAL ANALYSIS

Pennant/Flag

Characteristics:
Flag and Pennant
• Pennant and flag patterns are
variations of the same pattern in upward trend Flag Pennant

• These patterns are often preceded by

a steep, sharp price change, up or
Price
down, and form a short consolidation
that appears like a triangle or flag.
Generally, the pattern slopes slightly
in the direction opposite from the
trend

• The breakout in either direction is

often followed by a move that equals Calculate target price:
the earlier steep, sharp price change Take the height from the start of the "flag pole” to the
into the pattern highest peak in the pennant. Add that amount to the
bottom of the pennant for an upward price target.

39
*Source: Technical Analysis: the Complete Resource for Financial Market Technicians, 2 nd ed.
 BROKERAGE: TECHNICAL ANALYSIS

Gaps

Characteristics
• Definition – no trading (gap)
at specific prices

• Gaps can be considered

“up” or “down”

• Gaps are caused by

appreciable changes
in supply and demand
from one close to the
following open
Gap Up

40
*Source: Technical Analysis: the Complete Resource for Financial Market Technicians, 2 nd ed.
 BROKERAGE: TECHNICAL ANALYSIS

Gaps

Characteristics
• Gaps are generally profitable on
breakouts from patterns, trends,
support or resistance

• A method of trading a gap is the

“explosion gap pivot.” It assures Breakout
that the gap is valid

• After the gap, wait for

“throwback.” If throwback “covers”
the gap, no action. If the
throwback stops, this is called the
“pivot low.” Place buy entry above
high of the gap bar
Gap PivotLow
Pivot Low

• “Pivot” is the lowest level of the

post-gap breakout

• Protective stops initially placed at

gap low and then below pivot low
41
*Source: Technical Analysis: the Complete Resource for Financial Market Technicians, 2 nd ed.
 BROKERAGE: TECHNICAL ANALYSIS

Two-Bar Reversal Button or Pipe Bottom

Two-Day Reversal Bottom

Characteristics: (or Pipe Bottom)
• Two bars and occurs at the end of a large
trend, up or down trend. Ideally, the first bar,
in a bottom pattern, closes at the low, and the
second bar closes in the upper half of the range.
It is more reliable in weekly data

• Bar ranges are larger than preceding

bar ranges

• Action occurs on breakout through second bar

Calculate target price:

Take the height from the taller of the two bars to the lower
of the two bars. Add that amount to the taller of the two
bars to get a price target.

42
*Source: Technical Analysis: the Complete Resource for Financial Market Technicians, 2 nd ed.
 BROKERAGE: TECHNICAL ANALYSIS

Volatility Patterns

Characteristics: Inside Bar

• Dull activity is known as “low volatility.” New
trends often begin from periods of low volatility Buy next bar
at opening
above inside
• One way to look at volatility is to observe the bar close
relationship between price bars

• “Range” is the spread between high and low in

a price bar

• If a bar is followed by a bar with less range,

volatility is declining; the second bar is called a Sell next bar
at opening
“narrow range” bar below inside
bar close
• When this second bar’s range is contained
within the range of its preceding bar, it is called
an “inside bar.”

43
*Source: Technical Analysis: the Complete Resource for Financial Market Technicians, 2 nd ed.
 BROKERAGE: TECHNICAL ANALYSIS

Narrow Range

Characteristics: NR4
• One low volatility pattern is called a “Narrow
Range” pattern and consists of a bar with a Range on day 4 less
range narrower than its preceding bars than days 1-3

• The graph shows a four-bar, Narrow Range

pattern (NR4) with four bars, the fourth bar
having a narrower range than the preceding Buy

three bars

• The breakout occurs on a break above or below

the high or low of the narrow range

Sell

44
*Source: Technical Analysis: the Complete Resource for Financial Market Technicians, 2 nd ed.
 Getting Started with Technical Analysis
Learn the assumptions that guide technical analysis, and get to
know the basics of trend trading.

Understanding Indicators in Technical Analysis

Identify the various types of technical indicators including, trend,
momentum, volume, and support and resistance.

Technical Identifying Chart Patterns with Technical Analysis

Analysis Use charts and learn chart patterns through specific examples of
important patterns in bar and candlestick charts.
Webinar
Series Managing Risk with Technical Analysis
Manage your trading risk with a range of confirmation methods.

45
 Visit the Fidelity
Learning Center

Learn more about

putting technical
analysis to work
for you

Read: Access the Technical Indicator Guide

Watch: Check out videos that define core

technical concepts

Attend: Register for monthly webinars

46
 Thank Please join us for our upcoming webinars
Fidelity.com/webinars

You Download Active Trader Pro for free at

Fidelity.com/ATP

Questions? Call a trading specialist at

877-907-4429

47
 BROKERAGE: TECHNICAL ANALYSIS

Important Information
Any screenshots, charts, or company trading symbols mentioned are provided for illustrative purposes only and should not be considered
an offer to sell, a solicitation of an offer to buy, or a recommendation for the security.

Investing involves risk, including risk of loss.

Past performance is no guarantee of future results

Stop loss orders do not guarantee the execution price you will receive and have additional risks that may be compounded in pe riods of
market volatility. Stop loss orders could be triggered by price swings and could result in an execution well below your trigg er price.

Trailing stop orders may have increased risks due to their reliance on trigger pricing, which may be compounded in periods of market
volatility, as well as market data and other internal and external system factors. Trailing stop orders are held on a separat e, internal order
file, place on a "not held" basis and only monitored between 9:30 AM and 4:00 PM Eastern.

Technical analysis focuses on market action – specifically, volume and price. Technical analysis is only one approach to analyzing stocks.
When considering which stocks to buy or sell, you should use the approach that you're most comfortable with. As with all your in vestments,
you must make your own determination as to whether an investment in any particular security or securities is right for you based on your
investment objectives, risk tolerance, and financial situation. Past performance is no guarantee of future results.

Fidelity Brokerage Services LLC, Member NYSE, SIPC, 900 Salem Street, Smithfield, RI 02917

© 2020 FMR LLC. All rights reserved.

919638.1.0

48