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The Most Reliable The Most Reliable Trading Tool You Trading Tool You

Will Ever Use!Will Ever Use!

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Written by Greg CapraPresident and CEO of Pristine Capital HoldingsWWW. PRISTINE.COM

What is Technical Analysis?

The analysis of past price changes in the hope of forecasting future price changes.

The studies of supply and demand in a market in an attempt to determine what direction (trend) prices will continue in the future.

Investing in which price movements are predicted from charts or patterns of past price movements.

Technical analysis is a financial markets technique that claims the ability to forecast the future direction of security prices through the study of price and volume.

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How Will The Analysis Be Done?

Types of Analysis / Methods and Technical Tools

Cycle AnalysisGann AnalysisAstrology AnalysisFibonacci AnalysisElliot Wave AnalysisPoint and Figure Analysis

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TrendlinesMoving AveragesPrice OscillatorsVolume OscillatorsBollinger Bands – EnvelopsVolume Weighted Average Price -VWAP

Simple Technical AnalysisPattern Recognition

Price Support and ResistanceStudy of Price and Volume trends

Educating Investors And Traders For Success In Today’s Market!™

Technical analysis is about reading the interaction between buyers and sellers.

That prior interaction between buyers (demand) and sellers (supply) forms chart patterns.

Patterns show past beliefs and expectations of the traders that created them and where they will act again.

Their thoughts and expectations of the moment will be displayed in the most recent data.

There are many patterns, we must define the ones to use.4

Candlestick Analysis

Candle Language Produces Thoughts

Proper trading is said to be proper thinking, but how do we knowwhat to think?

Pattern recognition is a recurring arrangement of price bars that suggests the future movement of prices, which guides our thoughts.

These patterns communicate how traders have acted and what their beliefs (expectations) are in that time frame, at the moment.

Candles provide a picture of those expectations on an ongoing basis.

Those pictures speak to us in “Candle Language” and are the basis for our continuous thoughts and trading decisions. 5

Understanding Candlesticks

Bulls Win Bears Win

Bottoming Tail (BT)Topping Tail (TT)

TT = Sellers have taken control

What did this look like before it became a Topping Tail?

BT = Buyers have taken control

What did this look like before it became a Bottoming Tail?

Momentum Slows - Neutral

Where and how these occur within a trend makes All the difference!6

Opening Price

Closing Price

Closing Price

Opening Price

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Trading is psychological to a great extent.

Let’s use that to our advantage through technical analysis.

Price patterns are pictures of psychology in motion.

Have you ever bought a breakout or shorted a breakdown?

Have any of those breakouts or breakdowns ever failed?

How did it make you feel, think and what did you do?

DEFINE A PRICE PATTERN

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Shock Bar PatternsA candle is not complete until that time period ends, so don’t assume.

A candle’s message will be confirmed or negated on the next candle.

What were traders thinking when the bar was forming as a –WRB, and then when it became a BT?

What about the +WRBat (B) becoming a TT?

B

A

What are they thinking after the reversal at (C)?

C

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Normal or obvious Reversals Potent Reversals = Shocked Expectations

BBF

Shakeout

BOF

BDF

Shock Bar Patterns

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Candlestick Analysis

Can you see how various combinations of opens and closes “speak” to us about ours and others’ expectations!

It opened ok, but closed under the prior low, and at the low of the day!

It gapped down near the prior low and then closed under it!

Go Baby!

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Strong Downtrend

Strong Uptrend

All retracements stall and reverse at or above/below MS/MR.

Shock Bar Patterns increase the odds of a successful trade!

Buy pullbacks against the trend or breakouts (BO) from a base.

Short pullbacks against the trend or breakdowns (BD) from a base.

TREND and TREND REVERSALS

BO

BD Lower highs and lower lows.

Higher highs and higher lows.

Breakout Failure

Downtrend Failure

Base

Pivot or Swing Low

Breakout Failure (BOF) is defined as prices moving above a consolidation and then closing back below it.

Short retracements

A break of a prior swing high or after a lower low negates the downtrend and breaks above Major Resistance (MR) .

Buy Pullbacks

No stall

Pivot or Swing High

TREND and TREND REVERSALS

Shock Bar Patterns increase the odds of a successful trade!

LLLL

LH

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Correction bar

PBS

High prior to new low

New high bar

New low

After a break of a downtrend buy pullbacks or after a correction bar.

Break

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Breakdown

Breakdown Failure is Complete

Pullback


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Same as TT

Shock Shock

Break


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Once a trend reversal occurs buy pullbacks and/or after a Shock Bar Pattern.

Prices must trade above a bar’s high for confirmation.


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Support and Resistance AnalysisThe Theory of Self-Fulfillment

Trendlines, Moving Averages and Fibonacci Retracement levels are used to “locate” Support or Resistance. Traders ask, “Why do prices reverse there?”

They reverse there, at times, because so many “believe” they are support and resistance and act there.

If enough people believe something, whether factual or not, they can have an effect when they act on that belief (e.g., buying or selling at a MA, or T-Line).

Much of technical analysis is a Self-Fulfilling Prophecy 17

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Prices Move Between Reference Points

Traders Bid at references of Support and Offer at references of Resistance, which may create enough Demand or Supply to form reversals.

Reference points of support and resistance can be based on Actual Price or Subjective tools. When both aligned the odds are the best.

As technical traders, our job is to define a trend and reference points with a trend to assess the likelihood of trend continuation points.

Trader Pivot Lines provide a subjective, but reliable reference point that e-mini traders focus on as support and resistance.

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TRADER PIVOT LINES

How they are calculated

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Resistance 3 = R2 + (High – Low)

Resistance 2 = Pivot + (R1 – S1)

Resistance 1 = 2 * Pivot – Low

Pivot Point = (High + Close + Low) / 3

Support 1 = 2 * Pivot – High

Support 2 = Pivot – (R1 – S1)

Support 3 = S2 – (High – Low)

Midpoints are simply lines between pivots

TRADER PIVOT LINES

General Trading Concepts For Trader Pivot Lines

Once a pivot line is violated, a retest of that line may be an opportunity to fade the move to it. Buying pullbacks in an uptrend to a pivot line and vice versa

Against the trend, pivot lines are a lower odds tradable reversal point. Unless the move lower has become climatic. Best used for profit-taking.

The addition of trend analysis, market internals and price pattern recognition will increase your odds of using these lines as “reference points” to place a trade.

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Shock Bar at Pivot

Buyers at Pivot after move above

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Breakout

Failure

What are traders thinking after the failure?

Where are they likely to act?

Wait for a setup!

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Retest of Pivot Line after a break and sellers


What happened here?What did it look like before it became a BT?What were they thinking?

Shock bar at mid-point, but trend in this time frame is not down.

Break

Longs are caught!


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Failed attempt to move lower. You know what to do!

Mid-Point

Buyers are here

Break

Breakout Failure at the Pivot Point. This is an obvious reference point to sell longs, use it!

PP


REVIEW

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Define the trend or the lack thereof

Define when the trend breaks

Define the reference points that buyers and sellers will use

Define the price patterns are that will signal an entry

Define your money management and position management

Remember that much of technical analysis is a self-fulfilling prophecy, so defining where others will act is key.

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Price patterns are pictures of the thoughts, expectations and emotions of the traders that formed them.

When those pictures tell you that others have been caught on the wrong side of the trend and market internals, you have an opportunity to take advantage of it.

Odds of similar patterns repeating an outcome in exactly the same way are low.

That said, pattern recognition does suggest a similar outcome.

Accept the fact that you do not know what will happen next.

The odds will be on your side, if you have a method of trading that you have internalized, have confidence in – and, of course, have the discipline to follow.

FINAL THOUGHTS

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Thank You for Attending !

This is a great start to understanding price action and

putting together a trade plan.

If you have not taken a Pristine Seminar, consider it.

Success in anything comes from education, then practice.

We will be happy to assist you further in order to help you

achieve the financial goals you have set for yourself.

In closing, we at Pristine wish you great success!

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