Table of Contents

Introduction ix Chapter 1. WHY IS CHART ANALYSIS SO IMPORTANT? 1 Market Timing 2 Chapter 2. WHAT IS CHART ANALYSIS? 3 Charts Reveal Price Trends 4 Types of Charts Available 5 Any Time Dimension 5 Chapter 3. HOW TO PLOT THE DAILY BAR CHART 7 Charts Are Used Primarily to Monitor Trends 7 Chapter 4. SUPPORT AND RESISTANCE TRENDLINES AND CHANNELS 9 Chapter 5. REVERSAL AND CONTINUATION PRICE PATTERNS 13 Reversal Patterns The Head and Shoulders 13 Double and Triple Tops and Bottoms 14 Saucers and Spikes 15 Continuation Patterns Triangles 16 Flags and Pennants 20 Chapter 6. PRICE GAPS 23 Chapter 7. THE KEY REVERSAL DAY 25 Chapter 8. PERCENTAGE RETRACEMENTS 27 Chapter 9. THE INTERPRETATION OF VOLUME 29 Volume Is an Important Part of Price Patterns 30 On-Balance Volume (OBV) 30 Plotting OBV 31 OBV Breakouts 32 Other Volume Indicators 32 Chapter 10. USING DIFFERENT TIME FRAMES FOR SHORT- AND LONG-TERM VIEWS 35 Using Intraday Charts 35 Going from the Long Term to the Short Term 36 Chapter 11. USING A TOP-DOWN MARKET APPROACH 39 The First Step: The Major Market Averages 39 Different Averages Measure Different Things 40 The Second Step: Sectors and Industry Groups 41 The Third Step: Individual Stocks 41 Chapter 12. MOVING AVERAGES 45 Popular Moving Averages 45 Bollinger Bands 46 Moving Average Convergence Divergence (MACD) 46 Chapter 13. OSCILLATORS 47 Relative Strength Index (RSI) 47 Stochastics 47 Any Time Dimension 49 Chapter 14. RATIOS AND RELATIVE STRENGTH 51 Sector Ratios 51 Stock Ratios 51 Market Ratios 52 Chapter 15. OPTIONS 53 Option Put/Call Ratio 54 Contrary Indicator 54 CBOE Volatility Index (VIX) 54 Chapter 16. THE PRINCIPLE OF CONFIRMATION 55 Chapter 17. SUMMARY AND CONCLUSION 57 Investing Resource Guide 59

About the Author

John Murphy has authored three best-selling books on technical analysis, including Intermarket Technical Analysis and The Visual Investor. His latest work, Technical Analysis of the Financial Markets (1999), is a revised edition of his 1986 classic which has been translated into eight languages. He is president of MURPHYMORRIS.COM which produces interactive educational products on technical analysis and online analysis for investors. As the former host of CNBC's Tech Talk show and a speakeer at all the major trading and investment forums and conferences around the world., Mr. Murphy is one of the most recognized and highly respected technical analyts of our time.