Technical analysis – technical indicators, Dow Theory, and Elliott Wave Theory

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Introduction

In an earlier series, we discussed some concepts of technical analysis. These concepts included chart types, support and resistance, trends, and patterns. We saw how technical analysis concepts are important and how market participants use these concepts for trading and investing.

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In this series, we’ll discuss simple moving averages, technical indicators, the Dow Theory, and the Elliott Wave Theory. We’ll also look at technical indicators like the Moving Average Convergence Divergence (or MACD), the Relative Strength Index (or RSI), the stochastic process, and Bollinger Bands.

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We’ll discuss the importance and use of these technical indicators. These indicators are useful in determining trends and making informed decisions. Some traders combine two or more technical indicators along with patterns and moving averages for trend identification. This is also used for entry and exit points.

Applying technical indicators

You can apply these indicators and concepts to auto stocks like Ford Motors (F), General Motors (GM), Tesla Motors (TSLA), and Goodyear Tire (GT). These companies are part of exchange-traded funds (or ETFs) like the Consumer Discretionary Select Sector SPDR Fund (XLY).

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