Tag Archives: Technical models

What are the main technical models to analyse a share or fund? (Part 2)

We have already commented some technical models to take into account when you invest (link a post). Moving average and Bollinger bands describe the general trend, but when should I invest or go out? Do I have any signal? There are technical models that specifically report about it.

MACD crossover

MACD are the initials or “Moving Average Convergence Divergence”. It helps us follow the trend, but mainly to check if it is the right moment to buy or sell. If the fast MACD line crosses below the slow MACD line, it is a signal to buy. Otherwise, if it crosses above, it is a sell-signal. For instance, if we look at the chart, we find that the fast line (green) cut below the slow one (blue). Afterwards, the stock chart shows a positive trend. We discover then a momentum for the security.

T-Advisor chart with MACD

Relative Strength Index (RSI)

This momentum indicator compares the magnitude of recent gains and losses to determine overbought and oversold conditions of an asset. Then a investor can detect quick turns in the security to decide whether he or she has to sell or buy. The RSI expresses as a percentage. If it is over 70%, it is overbought. If it is under 30%, it is oversold.

T-Advisor chart with RSI

Stochastic crossover

It shows the relative position of a closing price to the price range in a certain period. It is used simultaneously with the MACD to detect trends and triggers.

In T-Advisor, we show a comparative table of different technical models to indicate if it is the right moment to stay long or out.

T-Advisor table with technical models

Technical models are a reference to take decisions about investments, but not the only one. In T-Advisor, we prefer to offer several sources and indicators in a deep report so that investors have a global view about the stock or fund. With the suitable helps, these reports are a definitive compass to select the best assets for a portfolio.

What are the main technical models to analyse a share or fund? (Part 1)

Investors have usually two options about how to analyse an asset. These are fundamental and technical analysis. The first one focuses on the company, its balance, its sales and benefits or the market share in its business. The second just look at the share price and its movements, which are organised in patters for them.

The technicians or chartists have developed several measures to take into account when they analyse an asset. These are some of the most important:

Moving average

It is the most usual to analyse a chart. A moving average is the average price of a security over a set amount of time. It removes the effect of the day-to-day fluctuations and allows investors to find the real trend and react to get it or go out from a share. There are several types: simple, linear and exponential, but the SMA or Simple Moving Average is the most common. It can have different periods: 7 days, 50 days, 200 days… For instance, the 200-day-SMA is commonly used to find deep trends and the 7-day-SMA is extended for short-term trends. In T-Advisor, we use a composed SMA by a short-term and a long-term simple averages.

Chart with moving average in T-Advisor

Bollinger bands

These bands developed by John Bollinger place volatility lines above and below a moving average (usually a 20-day-SMA). The more volatility the asset has, the wider are the bands. The usefulness of them is about the signals, when the daily movements cross the upper or lower limits. Investors have to check different patterns to find if the next movement will be upwards or downwards. There are 16 different patterns as the lines cross the upper line as they cross the bottom line. Let’s see an example in T-Advisor.

Chart with Bollinger Bands in T-Advisor

These are some of the technical references that investors use to find out the trend of a security and take their next decisions. You can see more details in all the T-Reports in our database.