In this episode, I will talk to you abouttwo technical analysis indications, and some of you will be utterly floored by what I have to say because it’s contrary to what most people will tell you. They’ll try to sell you these packages while sharing the most unique, excellent indicator with you. But, you know, I do keep things simple.
If you’ve ever looked at my charts from back when I used to make a lot more videos for free on YouTube, some of the recaps, or if you visit the members’ area of our website, you’ll notice that many of them are straightforward and straightforward for a reason: I only use two leading indicators, actually three main things, but two main indicators that you can stem and use for many other things.
Let me share this with you because some of you are in for a treat. You can make things simple. I’m here to tell you. You only need to do two things, so let me explain them.
I’ll show you this screen, and you can see I’m on TC 2000. If you visit our website, you can save money on this application. However, the two key indications I utilize are current notifications rather than indicators. Anyone can use it.
Price and quantity are essential.
Now I’m done. I never pay attention to those two items on my charts.
Moving averages are included on this page, as you can probably tell. Now have a look at this chart; I cleaned it up. Regardless of which chart you look at, pick one. I’ve used MACD, RSI, and stochastics, which can be helpful occasionally, butwhen I’m looking at a chart, I’m looking at priceand volume ninety-five percent of the time. Choose between Apple and Netflix, or Google Price andvolume are the only factors you need.
I’m going to return to Wix to make sure you’re aware of it, and why is it that price and volume are all I may scan a few other indicators on occasion, perhaps once in a while, possibly two, three, or four percent of the time. Still, I only use them as a substitute for price and volume.
You don’t need any of the additional signs that I learned. For instance, if I move over here and you notice a tight consolidation on these bars, which are sliding sideways? It denotes a static stock. The bars are sliding sideways rather than up and down very much. They are priced similarly.
What does it mean when the bar suddenly widens to such a hefty price spread? It’s a large bar.
Then visualize it as a rocket ship crashing through the surface and bursting, imagining it moving as quickly as possible.
What does that mean, exactly?
It means that it moves quickly and has momentum. Because stagnant stuff tells you that behavior is light and weak, but when you look at the price, if the price is moving quickly and you have an extensive bar from the low to the high, from the open to the closed, a big bar tells you there’s movement, something is happening.
You can therefore know that you and the stock are in constant communication just by looking at the bars. Let’s examine a different one. Let’s look at Starbucks as an example. To fully understand what I mean, I’ll clean up this chart. I’ll show you right here. Look at how these bars are combined.
I’ve been accumulating sideways, not acting sideways, and then suddenly, you have a large bar. What does that mean, exactly? Huge selling pressure When you add volume to this, you have all the ingredients you need. How come? Because the indication from price and volume is driven by many of these other factors, more than half.
If you look at moving averages, you don’t even need a moving average to figure out what’s happening. You can draw that moving average connecting the dots—the same thing with volume. If you go ahead and just take the average right there, you can draw a line across and get a moderate volume.
When you start seeing volume bars that are picking up above the average, you know the stock will move very well,especially when you combine that with nice big bars right there.
And when these things explode that quickly, be prepared for a pullback, which is why you get these shorter-term pullbacks from time to time. You got this pullback here because this exploded so quickly in a Starbucks. If we look at the November timeframe, we’re exploding from 60 to about 70 in just a couple of weeks, which is fast because usually, here at Starbucks, you basically went sideways from August to about August.
Now let’s examine the Square.
We are aware that initially, things move somewhat slowly, but what happens after that? Well, the price spread is quite large. Let me reintroduce this chart. Initially, in 2016–2017, things were going in the wrong direction.
The bars were relatively thin and narrow, but in approximately February 2017, you got a huge breakout bar, and that stock soared past the $15 mark, going from 15 to about 17. The down bars are typically larger due to the panic, but you can also get sideways movement and massive explosions.
When you get those and volume, you can suddenly say, “Hey, it’s moving well, and the strength is behind it.“Stock needs to pause after a huge move.”Then, you can get another huge surge, a wide price spread, and a huge movement in price if the volume is there and everything looks good.
Now, I know that people like these RS eyes and moving averages, but do you think you can draw a moving average here, and all it does is just kind of trend and trail that stock, and that’s all you’re doing? If the stock pulls back, you know, you’re probably going to trail it something like that, and then again, we’ll come back up that level? I already know it’s been stretched, and the same applies to the pullback.
When we pull back, if we’ve been selling for four, five, or six months on a healthy stock, you probably stretch more than you do for a bounce. This is what happens and what you’re looking for now. Let me demonstrate how this functions if I add a moving average.
We’ll do a 20-day on Square, and you can see if we take the distance of the moving average. Let me make this line a little thicker for you, and if we take the distance from the moving average to where that stock was at specific points, you can see that when it was very far away from the moving average to stock pullback, right? So once again, take just any point; you don’t have to make this like a rocket scientist.
Once more, we are stretching, which causes us to move fast upward from the moving average’s perspective of the highs of October. As a result, the price is currently falling. You could use Bollinger Bands, if I look at Bollinger Bands here, that’s another indicator that you could use to determine how stretched things are, and you can see that those points I’ve highlighted right here are where the stock pulled back in November 2017, March 2018, and also in October 2018.
Do you need the Bollinger Bands to see that the stock began to decline?
No,you could take that information from the moving average.
Besides, is themoving average necessary to determine how quickly a stock moves? No,the trend has many consecutive days of up movement even without the moving average, and the faster the angle of movement, the less realistic the trend becomes.
Take a look at this. Consider that. It’s still moving averages. You might say, “oh well, that’s a more specific signal.” In theory, it just starts playing tricks on you. Here I have an RSI indicator when things are the strength index. You can see the strength index here beginning to die out. Okay, this confirms that the stock is selling off a bit, but I can already see the bars. I already know the stock went up like a rocket ship. What’s the big deal here? People make it way too complicated, way crazier than it needs to be. Here’s your MACD. Okay, let’s take a look here. Maybe on a daily. There’s a histogram. Again, there’s the MACD. It’s getting a 1. It is a crossover.
