Welcome to the First Edition of the DisnatDirect Trade Secret Newsletter. This information-filled bulletin will be delivered to you monthly and is absolutely free! It will cover such topics as Technical Analysis, Option Basics, Trading Strategies and more! Read the latest articles and become a more informed investor!

We will start off with a 5-part “mini-series” on Technical Analysis presented by Eric Stevens, Vice-President, Product Development at Recognia Inc.

Many investors use different sources of information to help them to make better investment decisions and one of the most common types is “Fundamental” research. Fundamental research focuses on a company’s financial situation. It includes information about a company’s key performance indicators such as; revenue, earnings, assets, debt load and prospects for growth in it’s business. This type of research is critical, as the name implies, in an effective analysis of a company and in the decision to buy or sell stock in that company. Fundamental information about a company can provide you with one perspective on the prospects for the shares of a company.

Another type of powerful information is “Technical” research, which is based on the principles of Technical Analysis. Professional traders, money managers and larger organizations have long used this type of investment research and it is now becoming available to average investors as well. While it may not be as well known, many retail investors have done “technical analysis” of a stock without realizing it. Anyone who has ever looked at a chart of a stock and noticed that the price has been moving up or down for the past few months has done the most basic type of technical analysis.

Technical Analysis isn’t complicated. It looks at only five elements and follows a small set of basic principles. From these five pieces of information and the basic principles many new aspects of a stock’s behavior can be uncovered. The five elements that are used in technical analysis are the Open Price, the High Price, the Low Price, the Close price and the Volume. This information coupled with the following principles form the foundation of technical analysis.

The major principles of technical analysis are:

• All of the information currently available in the marketplace is reflected in the price and volume of a stock(s)
  
• Prices move in trends that are based on the changing attitudes and psychology of the people who are buying and selling the stock
  
• When a trend is changing the attitude of the buyers and sellers in the market shows up in the price and volume in recognizable patterns
  
• These patterns can provide investors with insight into the behavior of the buyers and sellers and therefore the potential behaviour of the stock’s price

Technical Analysis does not provide signals that tell an investor when to buy and when to sell. Rather it provides investors with another piece of information that can be used as an indicator that something in the attitude of the market has changed. When used in this way technical analysis is a powerful tool that compliments sound fundamental research. By using fundamental research to find good companies and then using technical analysis to determine the potential behaviour of their shares, knowledgeable investors can potentially make better investment decisions and improve their returns.

In the next article we’ll review the tools that are available to help you access technical research.