APPENDIX A
Basic Investment Decision Making Based on Chart Analysis
A.1 USING TECHNICAL DATA TO SUPPORT CLIENT'S OBJECTIVE
[Note: Before reading this chapter, the reader should first be familiar with the concepts and content of Chapter 25].
Once we have organized all our technical data according to duration, sentiment, and instrument, we may proceed to integrate all the available information, organizing it into a coherent presentation of facts and reasons for various trading decisions and recommendations.
One important point to keep in mind is that is does not really matter which outlook, be it bullish or bearish, that market participants are acting upon, as long as they have clearly defined the potential risks and rewards involved in maintaining a certain outlook on the market or on a stock. This is the most logical approach that any trader or investor can adopt in the markets, since no one possess the ability to actually forecast future market or price action with any certainty.
The next section contains sample analysis and basic participatory recommendations. It is by no means meant to be exhaustive or comprehensive. It will at least provide a basic idea of how technical data is used to support various market outlooks and trading objectives.
The format is as follows:
- Describe the climate or environment in which the stock is trading in bullish and bearish terms (i.e., an analysis of the index or broad market)
- Describe the outlook for the stock in bullish and bearish terms ...
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