Example Of Technical Analysis Importance
As the week of 10/2/17 comes to an end, we wanted to include an article on the importance of Technical Analysis. As you can see by now, we focus on watching stock charts that look appealing for swing trades in our opinion. Now as you can see, we usually post a few charts on Sunday nights that we will be watching all week long for potential breakouts during the week. As you know by now, Swing Trades are trades that are held more than one day. You can see our earlier blog post that further explains Swing Trading.
Example From Week of 10/2/17
Now we wanted to show an example of how technical analysis can be significant in identifying potential opportunities. We like to look for key resistance levels on charts. If stocks hit and trade above the significant resistance level, we like the potential for breakouts.
$GLUU
$GLUU was a stock chart we had posted Sunday night for the week of 10/2/17. We had mentioned we liked the $3.83 level. We thought if the stock could break $3.83 level that there could be potential upward momentum. As you can see from the chart above, the green line was that $3.83 level that we wanted to see the stock break. Now if you look at the picture below, it's the GLUU chart as of Thursday 10/5/17.
As you can see from the updated chart above, this is a great example of risk management! For the week up until Thursday, you can see the stock never traded above $3.83. It actually rejected this resistance level and traded down because of it in our opinion. This is an example of great risk management, because rather than randomly jumping into a stock, you can identify key resistance levels and protect from potential losses like this stock witnessed during the week! In an ideal situation we wanted to see the stock surpass $3.83. With this being said we could have placed a buy order @ 3.84 for the week and it would have never been triggered, saving us on a huge loss!!!!
$ATRS
On the other hand, identifying key resistance levels can be of great benefit in many ways in our opinion. Here is a pure example. Our chart on Sunday night was targeting a key resistance level @ $3.31. We thought if the stock passed this level there could be upward momentum. Now look at the updated chart and see what happened below!
As you can see from the updated chart, the green line signifies the $3.31 level we mentioned on Sunday night. This is the level we wanted to see the stock surpass. If it did, we thought there couple be upward momentum. The stock indeed traded through the $3.31 resistance and shot up tremendously! Throughout the week the stock climbed as high as $3.97 for a gain of 16.6% in just 4 days. This was a great example how a little technical analysis can go a long way in swing trading.
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