In this blog post, I am going to share the first US trade which I had done earlier May this year. This post serves to bring out the importance of technical analysis in prediction of stock prices.

As a firm believer of technical analysis, I believe that it is unnecessary to know the fundamentals of a company in trading. However, a trader will need to know when is the company releasing its earnings report as this event can cause drastic gap ups/ downs. What a trader needs are just the following: Price Actions and Volume. With these two factors, it is sufficient to give a good analysis of a stock price.

Say for example, I came to know about this stock Wage Works via Chart Nexus Stock Screener Trial Version. I did not know what this stock does and still, eventually place a trade on it as it matches my trading set ups. After a month of holding, the stock went up and I sold it for a profit of 20.8%. So what prompt me to place a trade on this stock?

  1. A hammer candlestick pattern with extreme long low shadows which signifies strong buying pressure
  2. This candlestick pattern confirms the support with a prior gap at 33.93
  3. Volume exceeds a combined average volume for the past 5 days, which signifies strong participation of buyers.

In conclusion, as a technical analyst, knowing and getting a ‘feel’ of price actions is very important. Therefore, training our eyes to understand and read various chart patterns is the first step of being a successful technical analyst.