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by The Wall Street Daily Research Team THE 3 BEST TECHNICAL INDICATORS ON EARTH “Those who cannot remember the past are condemned to repeat it.” This oft-quoted warning also forms the basis for technical analysis. Only I’d tweak it to say, “Those who do remember the past are likely to profit from it.” THAT’S TECHNICAL ANALYSIS IN A NUTSHELL. After all, technical analysis is based on the idea that all the information is represented in price and volume. So by comparing what’s happening in the market today to what’s happened in the past, you can tell what will (most likely) occur in the future. The Three Best Technical Indicators on Earth How to Start Killing the Market and Never Look Back 2 In other words, while fundamental analysis involves screening businesses’ balance sheets, earnings reports and economic conditions to try to predict stock returns, technical analysis relies on the participants in the market to distill all that information into meaningful data. And by watching price and volume, you can interpret the emotions driving the market. Some believe that technical analysis is simply about drawing lines on a chart – and that it’s essentially the equivalent of Hogwash!financial astrology. Granted, some methods have failed to produce real returns. And I agree that not all technical indicators are worthy of your attention. That’s why it’s important to focus only on the key indicators that have proven successful – time after time. Lucky for you, we’ve found the top three, best of breed, technical rundown of each… indicators that you can use to maximize your profits. Here’s a brief INDICATOR #1: MOVING AVERAGE CONVERGENCE/ DIVERGENCE (OR MACD) The MACD indicator is a great introduction to technical analysis because it’s based on one of the easiest, most powerful concepts: the moving average. Calculating and drawing a moving average line is simple. It’s just the average price of a stock over a number of days, usually 50 or 200. A stock trading above this line is a strong bullish indicator by itself. The Three Best Technical Indicators on Earth How to Start Killing the Market and Never Look Back 3 But you can take a moving average to the next level by tracking when moving averages of different lengths of time cross paths. Take a look at the chart for Under Armour (UA) to see what I mean. When the 50-day moving average crosses above the 200-day moving average, it means the stock is likely going to see a big move higher. them into a single indicator. It just takes a few more steps… Basically, MACD takes moving averages, fine tunes them and combines 1) First, instead of a 50- or 200-day moving average, MACD uses 12 and average,” which means more weight (and importance) is given to the most26 days. recent It also stock focuses prices. specifically on the “exponential moving 2) difference between the 12- and 26-day exponential moving averages fromThe next step step one. is creating the “MACD line,” which is simply the The Three Best Technical Indicators on Earth How to Start Killing the Market and Never Look Back 4 3) exponential moving average of the new MACD line. Once that’s done, the “signal line” is created. That’s the nine-day If this sounds complicated, keep in mind that you don’t really need to know how the lines are created. The important part is how they interact. Check out the following chart of Bank of America (BAC) to see what I mean. There are two main things you need to watch for… 1) When the MACD line jumps above zero, it shows that the current momentum is positive. And when it drops below zero, momentum is negative. 2) Most important, you can identify when these shifts in trajectory are likely to occur. It’s all about watching when the lines cross over each other. The Three Best Technical Indicators on Earth How to Start Killing the Market and Never Look Back 5 When the MACD line crosses above the signal line, momentum is When the MACD about to turn positive. And when the signal line jumps higher than line crosses MACD, it’s a sign that the share price is about to dip. above the signal line, The chart indicates the bullish points with green arrows and the momentum is bearish patterns in red. Sure enough, the stock movements (mostly) about to turn positive. And when the signal correspond with the “Buy” and “Sell” signals. line jumps higher than MACD, it’s a sign that the share price is about to dip. The trick is to spot the crossovers as close to the zero line as possible. That’s where the strongest signals occur. INDICATOR #2: PARABOLIC SAR Don’t let the imposing name fool you. Parabolic SAR is dead simple to interpret. turning points in stock trends. SAR stands for “stop and reverse,” meaning that it’s designed to find The Three Best Technical Indicators on Earth How to Start Killing the Market and Never Look Back 6 In short, Parabolic SAR captures momentum. The indicator is typically drawn as dots that follow a stock chart. When the dots are below the price, the momentum is positive, like the dots are pushing the stock up. When the dots are above the price, momentum is negative. In simplest terms, when the dots switch from above the stock price to below, that’s a clear “Buy” signal. On the flip side, when they switch from belowYou’ll also the pricenotice to that above, the it’sdots a tend“Sell.” to converge with the stock price right before they switch sides. So the closer the dots get to the share price line, the sooner the current share price direction is likely to reverse. So not only does Parabolic SAR identify the turning point, it shows how much time you have to invest accordingly. Simple, right? There’s one trick to using Parabolic SAR, however. You need to be selectiveYou see, if about a stock your is trading “Buy” signals. within a narrow range, the dots will give off for making money. multiple “Buy and “Sell” signals in rapid succession. That’s not a formula The Symantec (SYMC) chart on the next page shows what I mean. When the stock traded in a tight range between June and August, there January and March, the signal worked well. was a flurry of signals that wouldn’t have been profitable. But between To reconcile this, verify that the overall stock market is trending in a similar direction, too, and not staying stagnant. Of course, you could pair the MACD line with Parabolic SAR to double check your findings. The Three Best Technical Indicators on Earth How to Start Killing the Market and Never Look Back 7 With a stronger grasp of investor sentiment about a particular stock, you could pick your “Buy” and “Sell” levels with more confidence. INDICATOR #3: CHAIKIN MONEY FLOW We already know there are two sides to every stock trade – the buyer and seller. But wouldn’t it be nice to know what’s going on behind the scenes? That is, whether the buyers or the sellers are more eager to act? With a stronger grasp of investor sentiment about a particular stock, you could pick your “Buy” and “Sell” levelsThat’s withwhat more the Chaikin confidence. Money Flow tries to capture. It indicates “buying pressure” and “selling pressure.” The Three Best Technical Indicators on Earth How to Start Killing the Market and Never Look Back 8 The Chaikin Money Flow takes positive and negative periods for a stock, then multiplies them by the volume of trading over that time. This assigns greater weight to days when there was heavy volume. Then it compares the ratio of positive pressure to negative pressure and converts that to a value between -100 and 100 (or between -1 and 1 on some software). At that point, you chart it as an additional line under the stock. When Money Flow is high, it means the stock has more buying pressure than selling pressure – and vice versa. Now, you may be tempted to use this as a trend indicator. So you’d buy when there’s a lot of buying pressure. oversold. As a result, it shows the end of the trend (or a reversal point). But Money Flow actually identifies when a stock is overbought or In other words, it’s more of a contrarian indicator. When the rating is high, it means there may be too much buying pressure and the stock is set to collapse. The Three Best Technical Indicators on Earth How to Start Killing the Market and Never Look Back 9 On such merits, when the Money Flow passes a critical level (25 or -25 is a good rule of thumb) and stays there for a while, it’s a sign that a reversal is imminent. Wall Street Daily provides its subscribers with unique opportunities to build and pro- tect wealth globally, under all market con- (An indicator called the Money Flow Index is very similar to Chaikin ditions. We believe the advice presented to subscribers in our published resources Money Flow, with only a slight change in the calculations. You can and at our seminars is the best and most useful to global investors today. The rec- interpret the signals the same way.) ommendations and analysis presented is for the exclusive use of subscribers. Subscribers should be aware that invest- Bottom line: Combining these three simple indicators can create a ment markets have inherent risks and powerful system for identifying when stocks are likely to rise or fall.

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