Ed Ponsi
Technical Analysis and Chart Interpretations
Additional Praise for Technical Analysis and Chart Interpretations
Ed's thorough analysis will leave you with a deeper understanding and appreciation of a vast array of technical tools and concepts. An essential guide for beginners and seasoned traders alike.
Technical Analysis And Chart Interpretations is a worthy addition to any technical analysis library. Ed Ponsi does a masterful job of taking a difficult, often confusing subject, and making it incredibly easy to digest. Whether you are a beginner or veteran student of technical analysis, this book is a must read.
Ed has written a great book not only on technical patterns and indicators, but on the pitfalls that traders will face as they embark on a trading career. This information can be applied to both longer and shorter time frames. It has value for both the investor and trader alike. I even learned some new things myself!
Ed Ponsi has taught me the value of using some of the more useful indicators on charts such as MACD. While our styles are quite different I have learned a lot from his work and I believe you can as well.
TECHNICAL ANALYSIS AND CHART INTERPRETATIONS
The Wiley Trading series features books by traders who have survived the market's ever changing temperament and have prospered – some by reinventing systems, others by getting back to basics. Whether a novice trader, professional or somewhere in-between, these books will provide the advice and strategies needed to prosper today and well into the future. For more on this series, visit our Web site at www.WileyTrading.com. Founded in 1807, John Wiley & Sons is the oldest independent publishing company in the United States. With offices in North America, Europe, Australia and Asia, Wiley is globally committed to developing and marketing print and electronic products and services for our customers’ professional and personal knowledge and understanding.
Copyright © 2016 by John Wiley & Sons, Inc. All rights reserved.
Published by John Wiley & Sons, Inc., Hoboken, New Jersey.
Published simultaneously in Canada.
No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, (978) 750–8400, fax (978) 646–8600, or on the Web at www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, (201) 748–6011, fax (201) 748–6008, or online at http://www.wiley.com/go/permissions.
Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation. You should consult with a professional where appropriate. Neither the publisher nor author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.
For general information on our other products and services or for technical support, please contact our Customer Care Department within the United States at (800) 762–2974, outside the United States at (317) 572–3993 or fax (317) 572–4002.
Wiley publishes in a variety of print and electronic formats and by print-on-demand. Some material included with standard print versions of this book may not be included in e-books or in print-on-demand. If this book refers to media such as a CD or DVD that is not included in the version you purchased, you may download this material at http://booksupport.wiley.com. For more information about Wiley products, visit www.wiley.com.
Library of Congress Cataloging-in-Publication Data is available:
ISBN 978-1-119-04833-6 (Paperback)
ISBN 978-1-119-04822-0 (ePub)
ISBN 978-1-119-04823-7 (ePDF)
Cover Design: Wiley
Cover Images: Communication collage © iStock.com/archerix; Medical Abstract © kentoh/Shutterstock
INTRODUCTION: THE JOURNEY
Every trader must follow their own path. Maybe technical analysis will be part of your path, but even if your journey takes you in another direction, it's still important to understand the concepts in this book. As you read on, the reasons why will become clear.
How did technical analysis become a part of my journey? It started with my first job interview in the financial services field, which was for a position as a stockbroker.
I was led by two senior brokers into a tiny, glass-encased room. Two more brokers were already waiting there. They began asking questions – slowly at first, then more rapidly. They bombarded me with questions to see if I could handle the pressure. My heart raced: Was I up to the challenge?
“Name your five favorite stocks,” they asked.
“Ascend Communications, 3Com, Cascade, Cisco Systems,” I replied.
At the time, all four companies were in the rapidly expanding computer networking sector. That sector was on fire, making headlines on a daily basis with its huge gains and wild swings.
“That's four … keep going …”
“Four … Fore …”
“Ford? Ford Motor Company?”
“No, Fore Systems.”
I'd named another computer networking stock. I was five minutes into my first interview, and I'd already broken every rule of diversification. Had I blown my opportunity to break into finance?
Surprisingly, my interview caught the attention of a senior broker who specialized in technical analysis. He knew that all the stocks I'd named were in the strongly trending computer networking sector. I was hired at his recommendation and became a member of his team, which placed a heavy emphasis on technology and momentum stocks.
Our reading assignments included books such as The Gorilla Game: Picking Winners in High Technology by Geoffrey Moore. We were also instructed to read a number of books on technical analysis, including Secrets for Profiting in Bull and Bear Markets by Stan Weinstein as well as titles by John Murphy and the team of Edwards and Magee.
On our team, technical analysis was the key to every decision. While others paid close attention to fundamental research reports, our team cared only about price action. Every company's chart was to be thoroughly analyzed. I dove