What is Technical Analysis?

Price Structure — The Foundation

Price struc­ture describes the rela­tion­ship between suc­ces­sive highs and lows. A con­struc­tive bullish struc­ture gen­er­ally devel­ops through higher highs and higher lows.

Pull­backs remain con­trolled, impor­tant levels con­tinue to hold, and buyers are able to push price toward new highs.

The impor­tant point is that struc­ture does not need to look perfect. Healthy stocks can expe­ri­ence normal pull­backs, con­sol­i­da­tion and tem­po­rary weak­ness without imme­di­ately destroy­ing the broader trend.

The ques­tion is whether the under­ly­ing struc­ture remains con­struc­tive.

Support & Resistance

Support and resis­tance are better under­stood as areas of inter­est rather than per­fectly precise lines.

Support rep­re­sents an area where buying inter­est has pre­vi­ously influ­enced price. Resis­tance rep­re­sents an area where selling pres­sure has pre­vi­ously limited upward move­ment.

These areas can help define where a stock may react, where a break­out could become mean­ing­ful, and where a trading thesis may become invalid.

A pre­vi­ous swing high, swing low, con­sol­i­da­tion range, break­out level or major price zone can all become impor­tant ref­er­ences.

The loca­tion of price matters because the same candle, momen­tum reading or volume change can mean some­thing very dif­fer­ent depend­ing on where it occurs.

Timeframes

Tech­ni­cal anal­y­sis can look dif­fer­ent depend­ing on the time­frame being studied.

The same stock may appear con­struc­tive on a daily chart while showing a short-term pull­back on a lower time­frame.

Daily — Direction

The daily chart pro­vides the broader context. It helps assess the primary trend, overall price struc­ture, impor­tant support and resis­tance levels, and whether the stock is gen­er­ally moving in the intended direc­tion.

4-Hour — Setup

The 4-hour chart pro­vides a closer view of the devel­op­ing swing. It can help iden­tify con­sol­i­da­tion, pull­backs, struc­tural changes and areas where a poten­tial setup may be devel­op­ing.

1-Hour — Trigger

The 1-hour chart can help refine the entry when the broader direc­tion and setup are already aligned.

The objec­tive is to iden­tify a defined trigger rather than enter simply because a stock appears inter­est­ing.

Trend & Momentum

Trend describes the direc­tion of price. Momen­tum describes the strength and per­sis­tence behind that move­ment.

A stock can remain in a bullish trend while momen­tum tem­porar­ily weakens during a normal con­sol­i­da­tion or pull­back. Like­wise, strong momen­tum does not auto­mat­i­cally mean that a stock offers a good entry.

For swing trading, the objec­tive is to under­stand the rela­tion­ship between trend, momen­tum and price struc­ture. The guide to Bullish momentum shows that rela­tion­ship in action.

When these ele­ments support one another, the tech­ni­cal picture can become clearer. When they con­flict, greater caution may be appro­pri­ate.

Volume & Market Participation

Price tells us what hap­pened. Volume pro­vides addi­tional infor­ma­tion about the par­tic­i­pa­tion behind the move.

Volume must always be inter­preted along­side price struc­ture and loca­tion.

The impor­tant ques­tion is not simply: “Is volume high?” It is: “What is volume telling us about the behaviour of price?”

Volume does not prove a par­tic­u­lar type of market par­tic­i­pant is buying or selling. It pro­vides context that can strengthen or weaken the broader tech­ni­cal inter­pre­ta­tion.

Market & Sector Context

No stock trades com­pletely in iso­la­tion.

A tech­ni­cally con­struc­tive stock may face a more dif­fi­cult envi­ron­ment when the broader market is under pres­sure.

The stock, sector and broader market should be viewed as con­nected parts of the same envi­ron­ment.

Technical Indicators

Tech­ni­cal indi­ca­tors provide addi­tional evi­dence about trend, momen­tum, rel­a­tive strength, volume and volatil­ity. They can help answer focused ques­tions about market behaviour, but they do not replace price struc­ture.

A moving average can provide a trend ref­er­ence. RSI and MACD can provide momen­tum infor­ma­tion.

The objec­tive is not to make every indi­ca­tor agree.

Volume and RSI

Candlestick

Can­dle­stick pat­terns offer a concise snap­shot of the ongoing strug­gle between buyers and sellers over a defined time period.

The objec­tive is not to iden­tify a pattern simply because it looks bullish.

A can­dle­stick pattern should never be inter­preted in iso­la­tion. Its sig­nif­i­cance depends on loca­tion, prior price action, trend, support and resis­tance, volume and what hap­pened after­ward. The same is true of the larger shapes price draws over weeks, covered in Bull flag guide.

Hammer Candle Setups

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