Introduction To Technical Analysis – Peter Ashton
Dec 1, 2016
[CIBC Investor's Edge Intro to Technical Analysis and Recognia]
[We will start momentarily]
Hello, everyone. Thank you for joining us today. We at Investor's Edges are thrilled to present today's webinar to you. My name is Ammar, and I will be your host for this event. Now just a few things to note before we get started,
CIBC Investor Services Inc., does not provide investment or tax advice or recommendation, so everything we share today is for education purpose only. We are recording today's session, and a replay will be available on our website. You will find the link to the replay on our homepage. Also, if you wish to
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[SPEAKER, Peter Ashton Vice President of Client Service at Recognia]
So today, we are presenting introduction to technical analysis, and we're delighted to have Peter Ashton as our speaker. Peter is Vice President Client Services at Recognia. He has over 20 years of experience and is also a frequent speaker at industry events such as MoneyShow and TradersEXPO. So without further ado, please join me in welcoming Peter Ashton.
Thank you very much, Ammar. It's a pleasure to be here. And thank you, everyone, for attending today's webinar. I'm just going to share my screen, and we will get started with the presentation.
[Intro to Technical Analysis and Recognia Peter Ashton, VP, Retail and Self-Directed Investing December 1, 2016]
So today's webinar is entitled introduction to Technical Analysis and Recognia. My name is Peter Ashton.
Before I begin, I wanted to present just a brief disclaimer to say that we're going to talk about a number of specific examples of stocks as part of this webinar today. All of these stocks are provided for illustrative purposes only. None of the information in this presentation is intended to constitute a recommendation by Recognia to buy, sell, or hold any stock option or securities.
So today's agenda, we're going to talk a little bit about using technical analysis to understand price action. We'll talk a little bit about the history of technical analysis, how it came about, how we can use it to help in our investing and trading decisions. We'll talk about Recognia's event-driven approach to technical analysis. We define what we call technical events, things that are of interest to a technical trader. We divide these into a number of different categories, short-term patterns, classic patterns, indicators, and oscillators. We'll go through a few examples of each of those different kinds of events. Then we'll turn our attention to how we can actually use these tools to actually find investing opportunities and validate the perspective of a given instrument. We'll do that via a live demonstration on the CIBC Investor's Edge website. And last but not least, we'll follow up with some question and answers. So if you have questions, please save them for the end of the presentation. We'll try to answer as many of them as we can.
[WHAT IS TECHNICAL ANALYSIS?]
So without further ado, let's talk a little bit about technical analysis. And many of you may already be trading using technical analysis, but for those of you who are not, let me give you a very brief introduction to technical analysis and why you might want to think about including it as part of your investing toolbox. So at its core, technical analysis is really all about looking for patterns and relationships in the price and volume histories of stocks that can tell us something about the attitudes of buyers and sellers. So if we think about every trade that takes place on an exchange, that trade represents an agreement between a buyer and a seller for what is the fair price of that stock at that moment in time. And that fair price reflects everything that is publicly known about the stock. So it reflects the fundamentals, reflects the news, reflects the general market sentiment of both that stock or that sector of the market at that point in time, all those things get reflected in the price. So by following the shifts in price throughout the trading day or across the weeks, it can tell us something about the shifting balance of supply and demand for that stock in the marketplace. And that can help us to make better investing and trading decisions.
When we talk about the history of technical analysis, many people are quite surprised to learn that this is not some recent phenomenon that in fact technical analysis goes back over 400 years, in fact, to the rice markets of Japan. Many of the events that we use in technical analysis today still have Japanese names, names like Doji. But modern technical analysis that we practice today really dates back to Charles Dow who observed the stock markets back in the late 1800s and believed that the markets tended to move in cycle. So Dow called these various cycles first and foremost the primary trend. This is the longest term trend lasting anywhere for nine months to two years. That's the blue line we have drawn on this chart. And also on top we have what is known as the intermediate term trend, which lasts anywhere from six weeks to nine months. And further superimposed, we have the short-term trend, the red line which lasts anywhere from two to six weeks. So what's important is to know some places, for example, right over here on the left-hand side, we have all three trends moving in the same direction, short-term trend, intermediate-term trend, and long-term trend all moving upwards. However, on the right-hand side, you can find places where the short-term and intermediate-term trend are moving up but the primary trend is moving down. So Dow believed that by understanding where you were in these various markets, it could help in your trading decisions.
[WHY STUDY PRICE?]
Now if anybody comes away from this presentation with a desire to learn some more about technical analysis, I'd like to recommend a book, this book called "Technical Analysis of Stock Trends" by Edwards and Magee. This is as close as there is to a bible of technical analysis. This book actually came out in the 1950s. It's now in its 10th edition. But Edwards and Magee talk a lot about the foundations of technical analysis and why we use it in our investing. There's a great quote in the book that I wanted to use to talk about why technicians like to study the price. And Edwards and Magee wrote that, "The market price reflects the hopes and fears and guesses and moods, rational and irrational, of hundreds of potential buyers and sellers. Price is the only figure that counts." So again, this reflects the belief of technicians that by understanding the price of the stock, you're also understanding all the things that go into deriving that fair price which includes the fundamentals and the news and the market sentiment and so on.
Let's look at example. So here's an interesting stock chart. This is a real stock. And you can see that it has a very interesting price history. So over on the left-hand side of the chart, it's got a period of time where it's kind of hovering around $2 for weeks not doing very much. Has a big rally up to about $21, falls back immediately to about $8 or $9, another big rally up to $20. So by this time, it really has the market's attention, then it falls off again and kind of consolidates down in this range between $8 and $12, let's say, is in that range for a number of months before going on this huge rally again back up to about $30. Well, wouldn't it be nice to know that this consolidation period on the right-hand side of the chart would have been a good opportunity for you to be acquiring a position in this stock? How could you have done that? Well, technical traders would say that there is a way to know because the occurrence of a classic pattern here, something called a head and shoulders bottom. This is an upside down head and shoulders chart pattern. You can see, this is the left shoulder, this is the head, and the right shoulder, and you can see that the stock comes into this pattern in a very strong down trend. It's declining from that high of $20, it declines, it rallies once, declines, rallies twice, declines, and on the third attempt, it breaks through that horizontal red line. That red line is very significant. It is called the neckline of the pattern. This represents a level of resistance to the price of the stock. So you can see we actually bounced off that line twice before breaking through on the third attempt. So in technical analysis where we overcome this level of resistance, that often is the start of a new bullish trend. And in fact, this particular case, we can see that the stock did go on to rally up to about $30.
[Types of Technical Events]
Now as I mentioned in my introduction, Recognia has an event-driven approach to technical analysis. We basically do technical analysis the way that a human technician would do it, rather than doing it one chart at a time, we're doing it basically on every single stock in Canada, in the US, and we do it every single night. We define what are called technical events. These are things that are of interest to a technical trader. And these technical events
[TECHNICAL EVENT CLASSES]
come in different classes. We have first what are called the short-term patterns. These are, as the name suggests, patterns which form over a very short period of time and also have very short-term influence on the price of the stock. These are based on the shape and relationship of candlesticks or price bars. So let's look at a couple of examples of short-term patterns. Here's a short-term pattern called a hammer. And it looks like a hammer, that's why they call it that, so it's got kind of a hammer head on top and a long handle coming down. And hammer is a bullish reversal pattern and tells us that the previous bearish trend is likely to reverse. So here we have a stock that's been in a long downtrend. You can see it's been moving downward over a number of days and weeks. Then we have the occurrence of a hammer. Now why is the hammer a bullish reversal pattern? What does it tell us about the sentiment of traders on the day that it formed? Well, let's look at it. So the stock in this particular day opened right near the highs of the day, right at the very top of the hammer. Immediately, the price moved much lower, so traders are very bearish about this stock and why wouldn't they be, I mean, it's been moving lower for a number of weeks. But then something happens during the course of the trading day and the stock actually starts to rally and it ends up closing back right near the highs of the day. So it started high, fell much lower, and then closed back near the highs of the day. What does that tell us about the sentiment of traders on that day? Well, it tells us something's changed. They started very, very bearish, but somehow they finished the day much more bullish, something has changed in their sentiment. So the hammer can often be an indicator of a change in sentiment about a particular stock. Now of course, the challenge of trading something like the hammer is you don't get the benefit of seeing what happens next. So how would you trade a pattern like this? Well, couple of suggestions. So if you are perhaps a bit more conservative, what you might want to do is after the occurrence of a bullish reversal pattern like a hammer, you might want to watch the stock for a few days. Let's see what happens. Does that reversal that we're hoping takes place actually occur? And if you see a few up candles and things seem like they're taking place in the right direction, then that's when you might actually want to buy into the stock. Now remember that this is a short-term pattern, so it has influence over a fairly short period of time, typical over the next 10-20 candles. Now if you're a more aggressive investor, what you might choose to do is to buy in immediately after the occurrence of a hammer, but in that case, I would advise you that you probably want to have a stop-loss order in place to protect your capital just in case the price happens to move in the opposite direction that you expect. Here's another example of a short-term pattern. This is called a shooting star. And I've actually drawn two on this particular price chart, one on the left and one on the right. They're both circled in purple. So these are both valid examples of the shooting star. The shooting star is basically the bearish counterpart of the hammer. So it's a bearish reversal pattern. You can see, it kind of looks like it has, you know, the shape of a star falling down to earth from the sky with a long tail trailing behind it, hence the name. And notice that the shooting star on the left has a white real body and the one on the right has a black real body. These are both valid examples of shooting stars. It doesn't matter whether the real body is white or black. What we do want to look for though is a long tail, longer the tail, the greater the reversal in sentiment that's represented. So although these are both valid examples of a shooting Star, I much prefer the example on the right because the tail is much, much longer.
[TECHNICAL EVENT CLASSES, Classic patterns]
So that's a couple of examples of short-term patterns. Let's turn our attention to another kind of pattern, something called the classic patterns. And these are patterns that are formed by distinct price swings, forming a shape on the chart. And the names of these patterns tend to come from the shape that they form. So I'll give you an example, we already talked, it's about the head and shoulders bottom. Here's another example of this pattern. So again, this comes at the end of a long decline in the price of the stock. And again, it's a bullish reversal pattern. So we basically have the stock declining and rallying, declining and rallying, declining and rallying, and breaking through that neckline on the third attempt. And what's very important of course is that we have to confirm these events, so it's confirmed when the price actually crosses above that neckline. One of the reasons why classic patterns are very useful in technical analysis is that they're the only type of event that can give us an expected move or a target price. And the way that this is done is technicians actually measure the height of the pattern, in other words, in this case we measure from the neckline down to the lowest point of the head of this head and shoulders bottom, and we're going to add that amount to the conformation price to give us the expected. This is where the pattern suggests the price is going to go. So we think it'll go to about this level of, I mean, roughly $13. Technicians also derive what they call the trading horizon. In other words, how long do we think it's going to take to reach the target price? And this is done by measuring the pattern duration. So here we measure from where the price crosses the neckline in the downward direction to where it crosses the neckline in the upper direction, that is the pattern duration, we add that number of trading days to the confirmation date, that tells us a rule of thumb for about how long we think it will take to reach the target price. And bear in mind, these are not hard and fast rules of thumb, but they can be very, very useful to the technical trader.
[Indicators & Oscillators]
And last, let's talk about indicators and oscillators. And these are probably the best known type of technical events. In fact, those of you who are kind of beginners with technical analysis, when you think of technical analysis, this is probably what you think of. So these are typically based on moving averages and other kinds of mathematical functions. Let's look at one example, very simple type of indicators, something called the simple moving average, abbreviated SMA. So the simple moving average dates way, way back in technical analysis, almost to the turn of the century, simple moving can be described as the average price over the last n days. So if I talk about the 21 day simple moving average, it's the average price over the last 21 days. And to calculate the 21 day simple moving average, all we have to do is add up the closing prices over the last 21 days and divide by 21, and that gives us today's value for the 21 day simple moving average. This is so easy to do that this is very popular even in the days before computers. Now I've got an interesting price chart up here. This is Hewlett Packard. And I've got two different simple moving averages drawn on this price chart. I have in red the 200 day simple moving average, and then in blue, the 50 day. And what's interesting is I could use these two moving averages in two distinctly different ways. So notice that red simple moving average actually forms a very nice level of dynamic resistance to the price of the stock. Look how many times we approach that line or touch that line without ever actually breaking through. So this actually seems to be a level of resistance to the price of the stock. Now if we were to actually extend this price chart out to the right-hand side beyond what is shown here, and if the price was closer to that red line, we might expect it to bounce off rather than to actually break through. However, if the price did break through the 200 day simple moving average, that would actually be a very bullish sign. So price crossing the simple moving average in the upward direction is a bullish event. It indicates a previous level of resistance has been broken, and that would possibly be the start of a new bullish uptrend. Now 50 day simple moving average, the blue line, is useful in a bit of a different way. So notice that the price crosses this line in a number of different places, but if I was to plot where we crossed the 50 day SMA in the upward direct with a green arrow and in the downward direction with a red arrow, you could actually have used this as a very simple trading system. So if I buy the stock where we cross in the upward direction, where this green arrow is, and I sell short the stock where I cross in the downward direction, I probably would have made quite a bit of money. I would buy here at the first green arrow and hold it, I would sell short at the red arrow and hold it, buy at the next green arrow and so on. So you'd can, I probably had actually done quite well with that very simple trading strategy.
So to sum up, we've talked about a few different kinds of technical events. We talked about short-term patterns, we looked at two examples, hammers and shooting stars. In classic patterns, we talked about the head and shoulders bottom and then in the indicators and oscillators category, we talked about price crossing the moving average. And you may be thinking already this seems like a lot to learn, and of course, the challenge is there's not just these five kinds of patterns,
[RECOGNIA TECHNICAL EVENTS...]
in fact, there's lots and lots of patterns. In fact, Recognia automatically detect over 65 different technical events. And we do this not just on a handful of stocks, we do it on every stock and ETF that trades in Canada and the US, and we do it every single day. So if you want to use technical analysis as part of your trading, you don't need to have to learn how to recognize all these events yourself because Recognia can do that for you, and in fact we can cover the entire market in one day, so we cover more ground than you'd able to do on your own. I'd like to think that we do the heavy lifting so you don't have to.
[USING TECHNICAL INSIGHT]
So with that being said, I'd like to actually show you a bit about Technical Insight, and I'm going to show you how to use this using the CIBC Investor's Edge website. And I'm going to go through three different use cases for the product. We're going to talk about how to use Technical Insight to find new investment opportunities, we'll talk about how to use it to validate an idea you already have, so I've been watching a stock for a few weeks, is today the right day to buy. I'll also talk about how you can use this to manage your risk. So let's take a quick look at Technical Insight on the CIBC Investor's Edge website. So I'm going to exit this and I'm going to switch to my browser. And I already have the CIBC Investor's Edge website loaded.
So first and foremost, let's talk about where to find Technical Insight? Technical Insight is found under the Quotes and Research section. And if I go to the Market Centre, here I have a number of different things I can access, but notice the last tab is called Technical Analysis. So this is Recognia's Technical Insight. So I'm going to select that tab and you can see a new page comes up for me. So our first use case really is how do we use this to find some new trading ideas? So there's a number of ways you can do that, but the first one I'm going to talk about and probably the easiest one is to use what are called the featured ideas. So this panel right here is called featured ideas. Effectively every day, we've scanned the whole market, we've identified all kinds of interesting technical events, and we're using some of that information to form a shortlist of ideas that you can look at. So you can see across the top, we actually have 10 ideas, there's 5 here that are in green, and there's 5 that are in red. So the green ideas are the bullish ideas and the red ones are the bearish ideas. In every market, there's people that are bullish and people that are bearish. And if I just scroll through these, you know, the very first idea something called, "Farmer Brothers" trades on the Nasdaq, here's BanColombia, Umpqua Holdings, and so on, and Chesapeake Lodging Trust, for example, is another one.
So, you know, why did we pick this particular idea? Well, we picked this because first and foremost, you can see outlined on the price chart, this has had a bullish classic pattern, this is called a pennant. So notice that there's a very steep up trend that develops before the pennant, and it's outlined by those gray lines. And this is called the flagpole often, so that very steep uptrend in the price of the stock. And then we have that pennant where we have the price moving sideways within a consolidation period and oscillating between an upward level of resistance and a lower level of support. What's happened now is we've broken out above that upper level of resistance, the price is now above the upper level of the pennant. This signals the start of a new bullish trend. So in fact, remember we talked about how to derive target prices for the classic patterns? Well, in fact, this pennant suggests a target price of 25.60 to 26.10. So if this particular idea was to move from the confirmation price where we detected it to the target price where the pattern suggests the price is going to go, that would represent an upside 10%. So the target profit here would be 10% on your investment. Now in this commentary on the right-hand side, we talk a little bit about why this particular idea was in. So it was chosen because it had this bullish pennant, which we talk about, but incidentally, it also had something called a triple moving average crossover. So the 4 bar moving average has crossed above the 9 bar, which has crossed the above the 18 bar. That's called the triple moving average crossover, another bullish event. So in fact, there's been two different bullish events that have occurred against this one particular security. Now if you wanted to look at a longer price history for this particular stock, for example, you can click on the charting icon here. And here we have an interactive chart. So I could look, for example, longer history for this particular stock. And it's interesting that Chesapeake Lodging Trust has actually been in a downward trend since January of 2015. So close to two years at this point, we actually have been moving down, we can see there's been lots and lots of uptrends, bullish uptrends within this longer-term downtrend. And this pennant is suggesting that another one of those bullish uptrends is about to start, so we may see another kind of a rally like we saw right here or right here taking place in this particular stock. Now if I want to know more about what Chesapeake Lodging Trust does because I don't know this particular stock, I can click on the information icon, and I get a bit of a company description. This is company, a self-advised real estate investment trust. And here is some fundamental data for that particular company, so 6.8% yield. So this has got a very, very nice yield as well as representing a short-term gain. Now if I had seen enough and I decided that I wanted to actually trade this particular stock, I could click the trade button. And this would take me to the Investor's Edge equity order entry page, and I could place an order. But maybe what's more common is I might say, "I want to watch this for a few days. I want to see what's happening. Let's see if the uptrend that we're expecting to take place actually does take place." So I can put this on my watchlist. So by clicking the Watch button, this places that stock on my watchlist. And this little star you see up here, this tells me how many stocks are on my watchlist. So I've got one that I've added. And I can toggle between today's featured ideas and my watched ideas just with this little pull-down here. So there I have Chesapeake Lodging Trust on my watch stock list. Another question you may be asking at this point is, you know, "Jeez, there's a lot of stocks that trade in Canada and the US, and you've got 10 ideas here, like why did you pick these? Why just these 10?" Well, in fact, these 10 were picked because there's something called the custom setting. So I can actually tell the featured ideas something about what it is I'm looking for. So I can say, for example, which exchanges do I want to get my ideas from? So here I said I want all the two Canadian exchanges plus the three US ones, maybe I want to take off the TSX Venture Exchange. And I said I want both stocks and ETFs, and I want both bullish and bearish ideas or maybe if I'm just very bullish on the market right now, I might say I just want bullish ideas. And you can also say something about your holding timeframe. Are you looking for a short-term trade, something you'll be in and out of and two to six weeks, maybe something a little longer-term, something you'll hold maybe up to nine months, or you're looking for a longer-term investment, something you might hold up to two years, so you can select what your holding timeframe is. And you can say something about your research preferences, you know, do I want stocks that have great fundamentals or picked more based on their technicals or both, and then what sectors of the market do you care about. I'd like to get my ideas from the whole market, let's suppose, you know, minus the basic materials and minus energy. That might be an interesting set of things to say. So we'll do our best to pick our ideas based on the research preferences that you give us. So having done that, I've made a few changes. Now notice that the featured ideas is going to recast itself and notice now all the ideas are green because I said that I only want to have bullish ideas. And you'll also notice, there will not be any more TSX Venture Exchange ideas in this list because I said I wanted that excluded. You know, so here for example is Xerox Corporation has had a pattern called the diamond bottom, so lots of great ideas coming to you every single day as part of the featured ideas.
Now another way you can get some daily trade ideas is by scrolling down a little bit on this list and we have first of all some sort of community based ideas, the most viewed bullish and bearish ideas. So based on all of Recognia's users, what are the most viewed ideas in Canada today? So here, I see Canadian National Railway, for example, Commodity Channel Interest, it's one of today's most viewed bullish events. I can do this for the US as well. So in the US, for example, I don't know any of these, I'm not sure what HOV is but, you know, HOV has had a head and shoulder pattern. And the same thing is available for the most viewed bearish ideas as well. So the other way you can get some trade ideas is by using what is called the Technical Event Screener, and this is a very, very powerful capability. So many of you are probably familiar with stock screeners, so here's a stock screener that works based on technical events. So remember, we've automatically done all the analysis for every stock and every ETF in Canada and in the US and we've put information into our database. So the Technical Events Screener allows you to screen against that database to find some trade ideas. And you can use the screener in two ways. You can use it in what's called the preset mode, so we have actually built for you some preset screens, just click one of these buttons and we'll bring up some ideas for you, or you can use it in what's called the advanced mode.
So let's try the preset mode first, so show me stocks with a long-term bullish outlook for example, we want one of those comment screens. So here, we'll actually dig into our database and we'll bring up for you a set of ideas where for the Canadian market we've got stocks that have had long-term bullish events. TransAlta, for example, had a double bottom, and it's also got an active head and shoulders bottom, so very interesting. And by the way, many times for technical traders, what they're really interested in is looking at the charts. So there's what's called a thumbnail view where you can just look at the charts and see what's going on. So here's TransAlta, a double bottom. And here's the head and shoulders bottom over here. We have what's called the detailed view where I can get for every one of these ideas both the thumbnail chart plus what is the event block. And this is all the tabular information I might want to know about this particular idea. Let's go back and I wanted to show you the advanced screener. So the advanced screener is what you use if you have a very specific idea in mind what it is you're looking for. So I might say, for example, in Canada, I want to be interested in like. So yesterday, the price of oil took a big, big leap upward, many energy stocks have been propelled higher, maybe we want to look just within the energy sector for some ideas. So I want to look in the oil and gas sector and I've got different sub industries here drilling, ENP, integrated, midstream, and so on. Let's say exploration and production. And I want to look for companies that are fairly bigger cap of sale, at least one billion Canadian dollars. And let's look maybe at stocks that have had bullish technical events over the last seven days. So I want bullish classic patterns and short-term patterns. So that should bring up some interesting trade opportunities in this particular sector of the market. So I can say search, we'll dig down into our database and we'll bring up for you a number of Canadian large cap in the exploration and production space that have had bullish technical events, and there's quite a few. So this is a great way of actually finding some trade ideas on a daily basis. So we've talked about that first use case which is finding an idea.
But oftentimes, people have their own ideas. They like certain stocks or they made some money in the stock last year and they're looking for a good entry point again, or they read about stock in the Globe and Mail and they want to know is today the right day to buy. Well, to do that, we have something called the Technical Event Lookup. And what you can do here is, you know, we've already done the analysis against every stock and it's in our database, you can look up the perspective and see what is going on. So, you know, over the last few weeks, there's been a huge rally, you know, following the election of Donald Trump in the US. So the industrials and the financials have done really, really well. The precious metals like gold have done very, very poorly. Let's take a look at maybe, you know, is it time to buy, you know, gold mining stocks like Barrick Gold, so I can look it up. So Barrick Gold here is a two year price history for this security. So you can see the stock actually was in a pretty strong bull market from about October 2015 to roughly the summer of 2016, it's actually fallen off quite a bit since then. See these green dots, these represent the dates where we have had bullish technical events. And notice these bullish events tended to proceed this big run up in the price of the stock. The red squares are the dates where we have had bearish events, and of course, the bearish events are more numerous in this recent downtrend we've had. So we actually have 5 active bullish events and 12 active bearish events. And if I scroll down this list, here are all the events that are active against Barrick Gold, and they go from newest at the top and they get older as you move down the list. So what you first of all see looking at this is it's predominantly red, so most of the events tended to be bearish. There are certain few bullish events but predominantly bearish. And for example, back here in August, we said the summer was kind of above the peak. Well, back in August, August 24th, there was a classic pattern called the double top. So if I click on that event, take a look at it, so here the stock had been in a long, long uptrend, it formed a classic pattern called the double top where you had two successive rallies and declines and broke through that horizontal level of support. And this red rectangle, you'll say "what is it?", well, we talked about deriving a target price in the target price region, this is called the target price region. So this dark red at the bottom is the target price suggested by the pattern. So it's $20.80 to $21.70, and incidentally, this pattern was detected when the stock was trading at $23.49. So the price actually did fall immediately following the occurrence of this pattern and did actually achieve the target price. Now the width of this rectangle tells us about how long we think it will achieve the target price. So this particular pattern worked out really well. We did hit the target in a bit less than the target price horizon.
So going back again to the Event Lookup page, the other thing I'll mention is we can look at the outlook for this particular stock in different time horizons. Remember Charles Dow and his market cycles, short-term, intermediate-term, and long-term, well, we have those same market cycle periodicities here in technical event lookup. So this is the summary view which gives us all events. If I want to look at just that events playing out in the short-term, I can click on the short-term tab, so we have two active bullish events and five bearish events. And it's very common, when looking at an instrument, you'll have some combination of both bullish and bearish events, and technicians like to talk about using the weight of evidence approach. This is a very common situation. I've got two bullish events and five bearish. What do I make about the outlook for Barrick Gold in a short-term, what does the weight of evidence tell me? Well, the weight of evidence is this is predominantly bearish. I've got five bearish events compared to only two bullish ones, so technical analysis would suggest that the outlook in the short-term is looking somewhat bearish. In the intermediate term, it's looking very bearish, five bearish events and zero bullish. And in the long-term, it's a bit mixed, but we have three bullish events and two bearish. So certainly in short-term and intermediate term, Barrick Gold is looking bearish and it seems to be turning around a little bit in the longer term. Let's try another example, so I mentioned the financial stocks have done very well. So some of the insurance companies have done very, very well, so look at Sun Life's, again two year price history, look at what has happened since, you know, roughly October. Stock has moved up from about 42 to about 50-something, it's at 52.59 right now. So it's had a huge move over the last roughly six weeks. And you can see all these green dots preceding this big, big run up in the price of the stock. Looking down the list at all the active technical events, look at all the green events that we have had since the 15th of July. So there's lots and lots of evidence that are turning very, very bullish for Sun Life even as early as the summer of 2016. Here we had a nice pattern in early October. This is preceding the US election, which was November, so October the 5th we had an ascending continuation triangle. So here's a triangle that suggest the previous trend is likely to continue. So you see there's a bullish trend that started in the early part of 2016 outlined by this gray channel. This red markup shows the continuation triangle, this is a consolidation period, the price sort of moving sideways and consolidating. And when it broke out above the upper side of the triangle, that is the start of a new bullish trend. And the stock did actually move almost immediately upward and in fact you can see this huge move right here is the US elections. So it actually caused an even bigger jump. So this was an event that really worked out quite nicely had you been in this stock since early October. Going back to the Event Lookup page, you look at the three different time horizons for this stock, it's looking kind of mixed in the short-term, you can see that the stock has moved up very sharply but that momentum seems to have slowed, it's kind of rounding off at the top here. So the price may move up or down, there's some evidence of both. But in the intermediate term it's very, very bullish, and in the long term, it's very, very bullish. So here's the stock, you may actually, if you get lucky, you may get a lower entry points over the next few weeks, but you're poised actually for, in the intermediate and long term, according to the technical events that have been detected. Maybe we'll run by one more just for fun. So let's pick one in the US So whenever I do these presentations at a live event, people always say do Tesla. So let's look at Tesla. Here's a stock that's, you know, very volatile, lots and lots of things going on. So if you look at Tesla, certainly it's been a predominately bear stock over the last let's say nine months. So since April 2016, look at all these red bearish events that have taken place. And in fact, if we look at the list here, there was a bullish period between, well, roughly in late November there was a bullish period but things are looking quite bearish. In fact if we pick one of these bearish events, let's pick the most recent one.
Occurring October 26th. You can see that the price of Tesla stock has been declining, and certainly, there's lots of technical events suggesting that price is likely to continue. I'd like to turn my attention now to the third use case we talked about and we'll try to wrap up in about 5 to 10 minutes. But this use case is really around managing your risk and staying on top of your positions. So one of things I'd like to mention is let's go back to our example of Sun Life again, so I'll go back to here. And one of the things I could use Technical Insight for is to help me understand things like support and resistance. So for any stock, Recognia automatically calculates support and resistance levels. So for Sun Life, for example, we found support at 42.75, resistance of 53.22. And in fact, if I go to any one of these events, I can actually get an interactive support and resistance panel. And again, here you can see the support resistance levels we've found, I can actually draw those on the chart if I want to. So what's interesting, if I was thinking about buying Sun Life based on this huge up that it's had, you can see support is way, way down here, just below $42 and resistance is just a little bit above the entry point where I have now. I'm trading at $43 and resistances is at... Sorry, I'm trading at... Where's my trade? I'm trading at $52.59 and my resistance is at $53, so just a dollar above where I'm trading right now. So remember, prices tend to bounce off levels of resistance and it's only if we break through that we have a new bullish trend. So this one might have a very low sort of reward to risk ratio because it's more likely that it'll bounce off that resistance level than actually breaking through. Other thing I'll mention while we're on this page is that we can also use this page to help us with things like stop losses. So stop losses are, generally speaking, good trading practice. I think that they actually help manage risk quite nicely, but people often don't know where to place their stops. So one of the things Recognia can help you with is where to place my stop. Well, we can do this in two ways. One way is the traditional percentage trailing stop where I can set a stop, give me a stop that's 10% below where the stock is trading today. Now of course, you have to go in and enter this into the CIBC order entry system yourself, it doesn't place the order automatically, but it can suggest you where the order could be placed. But we also have what are called the trailing stops. And these are basically volatility adjusted stops. So we look at a long price history of the security and then figure out how volatile it is and how much away from the current price you need to be such that you're not going to get stopped out just based on the normal day-to-day volatility. So let's suppose we are trading this particular pattern, this continuation triangle in Sun Life. This occurred on October the 5th. So let's suppose the 6th, the next trading day, we had placed an order and got into the stock, where would we have placed our trailing stop? Well, I can actually draw that right on the chart. So let's say I wanted a tight stop, so I want a very, very low risk tolerance, and I'm going to say update that. So what actually happens, this purple line shows me where my stop would have been as I followed the price of Sun Life up. So every day, I would have adjusted my stop based on what's suggested here. And this is where my stop would have been, I actually would have got stopped out right here where this downward purple arrow is. In fact, that would have been on November 28th, and I would have got stopped out right there. If I had used a bit of a looser stop though, maybe I use a loose one and I redo this, I would actually still be holding the stock today. I would not have gotten stopped out at this little downward trend here. So you can see how using different tightnesses of stop can make a difference depending on your risk tolerance and your investing time horizon. The last thing I'll talk about in terms of staying on top of your positions is the idea of alerts. And alerts are a very powerful part of Technical Insight. So we can add alerts to do a lot of things in an automated way that we would otherwise have done through the interactive product. So for example, let's suppose I own a watchlist of securities and suppose I own a bunch of US tech stocks, I own some, let's see, some Netflix, and some Amazon, and some Apple, and some Microsoft, and what else, maybe eBay, that's my portfolio. What I want to do is stay on top of that portfolio. I want to know when things are happening in these stocks that I have in my portfolio. So I can basically say what I want to be alerted about. So maybe if I actually own these stocks, I would want to know about when anything bad was happening, so tell me about any kind of bearish technical event, let's suppose. That could be an alert that I set up for myself, so I'll say Finish. So every day after the markets close, Recognia will do its analysis and we will see analyze every stock in the market. If we happen to find bearish patterns on any of these stocks that you told us about, we will send you an email and tell you what has actually happened. You'll have that email in the evening after the market is closed and it'll be in your inbox before the markets open the next day. So you can perhaps take some action after the markets are open. And I'll just finish up by mentioning that, you know, we talked a lot about technical analysis education as part of this webinar, it's certainly not all encompassing, but I wanted to mention that there is lots of education built into the products, so under the Education tab, there's lots and lots of educational material. And in fact, we talked about all the classes of events, the classic patterns, the short-term patterns, indicators and oscillators, every one of those is described in this Education section. So if I want to know more about a bottom triangle, for example, well, I can click on bottom triangle. I get a description here. Here's a picture of what it looks like, so I come in from the top and I exit from the top. Here's the important characteristics. Here are the trading considerations. Here's the criteria that support, the criteria that refute, and so on. So tons of educational material built right into the product. And last but not least, I want to bring your attention to this Help button right here. If you forget everything else that I tell you in this webinar, please remember this Help button. Click on that button, you can get access to a Getting Started guide, a PDF document, you can print out and read in bed at night, learn more about technical analysis and Technical Insight. And we also have three video tutorials available. So three tutorials covering the three use cases that I talked about in this webinar all covered in a very brief interactive video. So that's, I think, all I'm going to cover as part of the demonstration today. So what I'll do at this point, I'm going to turn it back to Ammar and we can run an interactive question and answer session.
[Q & A]
Thank you, Peter. That was a very informative presentation. We would love to hear questions from the audience. So if you have them ready, please type them into the Q&A panel, it's located on the right-hand side of your screen. Peter, while everyone is entering their questions, I noticed that some of the events have different target prices associated with them, is there any reason why some of them do and some of them do not?
Ammar, absolutely, so that's actually a very common question. If you look at, you know, the Technical Event Lookup page, you'll see lots of events, some have target prices, some do not. The reason why some have target prices and some don't is because only classic patterns can give us target prices based on that principle that I talked about as part of the webinar. So for classic patterns, we measure the pattern height and the pattern duration, and we can derive a target price and an opportunity horizon. Unfortunately, for short-term patterns and for indicators and oscillators, we can't do that. So we only show target prices when we have classic patterns.
Great. Thank you for clarifying that, Peter. It looks like we have received some questions, so we can go through them now. So the first one, Jim would like to know which technical indicator works the best and if they can also see the historical performance of each indicator?
Yeah, that's another common question and, you know, which technical indicator works the best is sort of like asking people, "What's the best hockey team in Canada?" So I asked in 10 different provinces, I'd probably get 10 different answers. And of course the answer is also it depends on what time of year it is. So some teams are doing better at the beginning of the year and some are doing better at the end of the year. So Recognia doesn't have any opinion about which is the best technical indicator. What we seek to do is to automate the standard practices of technical analysis, so like that book I showed you, Technical Analysis of Stock Transit, it will talk about lots of different kinds of technical events. We basically take those textbook principles and put them in software and automatically find those events for you. The other thing I wanted to point out is that, you know, let's suppose I told you that today the best event is the commodity channel index. Well, that may be true for awhile, but maybe a month from now, the best event may be a different event. It really depends on market conditions. So there is really no one best event, there's a variety of different events to take advantage of different kinds of conditions in different markets.
Thanks again, Peter. It looks like we have a lot of questions coming in, so we'll try to get through as many as possible. So the next question we have is, "Are the analysis provided by Recognia at real-time? And how often does Recognia scan the markets?"
So Recognia's Technical Insight is not a real-time product, it is an end of day technical analysis tool, so we're doing our analysis on daily and weekly price bars. So we have to have the market closed before we can do our analysis. So every evening, we get our data and we actually do our analysis, and it's available on the Technical Insight site somewhere around 9:30, 10 o'clock at night. So it's not a real-time tool. However, I'll point out that the data in Technical Insight for example, if we show you the current price, that is an intra-day price, it's not end of day. So we're showing you the prices as its trading during the trading day, but the analysis itself, the recognition of events is done in the evening, so it's not real-time.
Great. Thanks, Peter. And another question we have is, "Do you use events such as quarterly results?"
So quarterly results would be an example of what we call fundamental data. So there is some fundamental data included for example in the featured ideas. So some of the featured ideas will use fundamental data, but at its core, Technical Insight is really a technical analysis tool, right? It's really looking at price data as the primary mechanism to determine whether a particular stock is an interesting opportunity today or not. So we're really looking at market data, price data versus the fundamentals.
Thanks again, Peter. It looks like that's all the time we have. Peter, you've certainly done a great job going over all the information, a ton of useful information, and I really hope our clients will benefit from the tools and information we have available to them. So thank you again for a great presentation, Peter.
Thank you very much for having me.
We also encourage all the participants to try out the technical analysis tool, as Peter demonstrated earlier, to access this site on to your Investor's Edge account online and click on Quotes and Research, then click on Market Center, and then there you'll find the Technical Analysis tab. I would like to thank the audience. We really appreciate you being here. Should you have any questions, please visit Investor's Edge website or get in touch with us by phone, chat, or email. Thanks again for joining us today and we will see you next time.