Build an AI-Powered Technical Analysis Stock Dashboard in Python with Streamlit and Ollama

If the broader market were considered to be in bullish mode, analysis would proceed to a selection of sector charts. The chart of ORCL illustrates Schwager’s view on the nature of the trend. In between the trading ranges are smaller uptrends within the larger uptrend.

An initial stop-loss can be placed just outside the opposite band, e.g., just below the lower band when buying a breakthrough of the upper band. The senkou span A and B lines, as well as the cloud itself, delineate areas of longer-term support/resistance. If the objective is to predict the future price, then it makes sense to focus on price movements. By focusing on price action, technicians are automatically focusing on the future.

• Custom indicators and overlays expand the analytical capabilities of standard technical analysis tools by combining multiple data points into specialized signals.
• Use volume analysis alongside price action to filter false breakouts by confirming sufficient trading activity supports the move.
• (A steeper angle of slope in the line indicates more strength or momentum in the market’s movement, while a shallower angle indicates a weaker price move or lessening momentum).
• Technical analysis and statistical modeling of trading strategies is a key strength of the TradeStation platform.
• While less popular than candlesticks, bar charts display identical information in a different format.

Indicators and strategies

The CMT Association supports the largest collection of chartered or certified analysts using technical analysis professionally around the world. The association’s Chartered Market Technician (CMT) designation can be obtained after three levels of exams that cover both a broad and deep look at technical analysis tools. Some indicators focus primarily on identifying the current market trend, including support and resistance areas.

An important aspect of their work involves the nonlinear effect of trend. Positive trends that occur within approximately 3.7 standard deviations have a positive effect. For stronger uptrends, there is a negative effect on returns, suggesting that profit taking occurs as the magnitude of the uptrend increases. For downtrends the situation is similar except that the “buying on dips” does not take place until the downtrend is a 4.6 standard deviation event. These methods can be used to examine investor behavior and compare the underlying strategies among different asset classes. Trend-following and contrarian patterns are found to coexist and depend on the dimensionless time horizon.

Our Advanced Chart library is a free, standalone solution that you can host on your own servers, even plug your own data into, plus integrate with your website + app. Meanwhile the Trading Platform library contains all of the above, but also has direct trading functionality, if it’s needed. All investments are subject to risk of loss, which you should consider in making any investment decisions. Viewers of Trade With the Pros programs should consult with their financial advisors, attorneys, accountants or other qualified professionals prior to making any investment decision. Customers of TWP programs should consult with their financial advisors, attorneys, accountants or other qualified professionals prior to making any investment decision. The proprietary Pine Script language lets you change existing indicators or create anything from scratch.

The red line (as shown in the chart below) is the Tenkan Sen. The tenkan sen represents the average of the highest high and lowest low that have occurred over the last nine periods. For example, if you’re applying the Ichimoku to an hourly chart, then the tenkan line shows the high/low average over the last nine hours. By the time the trend is identified, a substantial portion of the move has already taken place.

Market technicians are always creating new tools and refining old ones. Technical analysis attempts to gauge market sentiment using graph patterns and signals. Hence, it’s best to use a suite of technical tools and indicators with other techniques like fundamental analysis to improve reliability. The Aroon oscillator functions like a trend-spotting radar, helping traders identify when new trends are beginning and old ones are ending. Unlike many indicators that follow price movements, Aroon focuses on time, measuring how long it has been since the highest and lowest prices occurred within a given period.

Breadth indicators

Just before the sustained uptrend begins, there is a short body blue (up) candle with a long upper shadow. When the trend changes to a downtrend, the first red (down) candle shows a long lower shadow. It is in contrast with a regular candlestick chart that might show alternating back and using technical analysis in the advanced chart forth, up and down, candlesticks. The potential advantage for traders is being able to ride a trend longer rather than being “faked out” by one or two candles that would appear pointing in the opposite direction on a regular candlestick chart. The Ichimoku Cloud – which contains a collection of technical indicators – can appear a bit challenging or overly complex at first glance.

Popular technical indicators

• This method provides a structured approach to understanding market cycles, allowing traders to forecast future movements more accurately.
• A reading above 25 suggests a strong trend, while a reading below 20 indicates a weak trend.
• But the prices of financial assets generally trend upward or downward, so it is not uncommon to see these price barriers change over time.
• It is simply that many market participants are acting off the same information and placing trades at similar levels.
• One strategy is to place short trades as the price touches the upper trendline and long trades as the price reverses to touch the lower trendline.
• Notice how the price of the asset in the chart below finds support at the moving average when the trend is up, and how it acts as resistance when the trend is down.

Also important are sentiment indicators such as Put/Call ratios, bull/bear ratios, short interest, Implied Volatility, etc. Day traders and technical analysts employ technical charting tools that generate signals to buy or sell or indicate trends or patterns in the market. Volume profile analysis displays trading volume as a horizontal histogram, showing price levels with significant activity. It helps identify support and resistance zones through the Point of Control (POC) and Value Area. This analysis confirms trends and helps traders filter false breakouts by showing where most trading activity occurs.

What Happens If a Price Breaks Through Its Support or Reistance?

Additionally, Fibonacci Retracement can be applied across multiple time frames, offering a comprehensive view of market dynamics. The simple truth is that nearly all technical indicators are useful, but no technical indicators are flawless. That is why trading strategies advise placing stop-loss orders to limit one’s risk when taking a position – long or short – in a financial market. A good technical analyst is continually re-evaluating the market’s current price action in an effort to determine whether or not a given technical indicator’s signals are valid or not. Furthering the bias argument is the fact that technical analysis is open to interpretation. Even though there are standards, many times two technicians will look at the same chart and paint two different scenarios or see different patterns.

If a large number of traders have done so and the stock reaches this price, there will be a large number of sell orders, which will push the stock price down, confirming the movement traders anticipated. Technical analysis most commonly applies to price changes, but some analysts track numbers other than just price, such as trading volume or open interest figures. A Bullish Engulfing pattern forms when a small black (or red) candle is followed by a larger white (or green) candle that completely engulfs the previous one, suggesting a potential upward reversal.

Take Control of Your Trading Decisions

Both will be able to come up with logical support and resistance levels as well as key breaks to justify their position. While this can be frustrating, it should be pointed out that technical analysis is more like an art than a science, akin to economics. Some analysts use fundamental analysis to decide what to buy and technical analysis to decide when to buy. Technical analysis can help spot demand (support) and supply (resistance) levels as well as breakouts. Simply waiting for a breakout above resistance or buying near support levels can improve returns. Identifying support and resistance levels adds discipline to a trading strategy.

When a security is trending solidly upward, the closing prices of each period tend to remain between the midline and the upper band – often “hugging” right along the edge of the upper band. When a solid downtrend is in place, prices tend to range between the midline and the lower band, often hugging right along the lower band line. The chinkou span line may also serve as an indicator of support/resistance areas.

Modern technical analysis software is often available as a web or a smartphone application, without the need to download and install a software package. Some of them even offer an integrated programming language and automatic backtesting tools. Note that the sequence of lower lows and lower highs did not begin until August. Then AOL makes a low price that does not pierce the relative low set earlier in the month. Later in the same month, the stock makes a relative high equal to the most recent relative high. In this a technician sees strong indications that the down trend is at least pausing and possibly ending, and would likely stop actively selling the stock at that point.

Advanced investors often use these patterns to predict future price movements and make informed trading decisions. Applying Elliott Wave Theory requires understanding wave patterns and interpreting them in the context of broader market trends. To enhance accuracy, traders often use additional tools, such as momentum indicators or Fibonacci ratios, to confirm wave counts and identify potential trend reversals. Bollinger Bands, developed by and named for noted technical analyst John Bollinger, employ a concept frequently used in the technical analysis of securities – standard deviation.