3 SIMPLE Technical Analysis Examples of Stocks

Part 5 of Our FREE ‘How to Trade Stocks‘-Guide

Our trading strategies applied to real stocks

These examples should illustrate how we approach technical analysis before we make a trade based on our suggested trading strategies.

1. MU short after gap down

Analyzing the weekly chart of MU (Micron Technology Inc.), it shows a clear downtrend (each candlestick equals one week).

Even the daily chart shows a clear downtrend (each candlestick is one day).

So having this in mind, the sentiment of this stock looks very bearish (stock is likely to go down).

You see the stock gapping down overnight (price is opening lower than the previous day). We see a descending triangle forming with many candlesticks that have long upper shadows, which means high selling pressure. Therefore, we can plan our trade accordingly by drawing a descending trendline and the horizontal support to form a descending triangle. With strategy #1 we explained before, you can take this short trade to the downside right before the move happens.

Draw a descending trendline and the support area to see the descending triangle forming. Take your short position and put your mental stop above the high of day.
The close price of two days ago usually acts as support area.

2. CGC flag breakout

Great swing-trade in CGC (Canopy Growth Corporation) after it’s second initial move up. As you can see on the weekly chart below, a flag is building after the second move up. Therefore the trend is clearly to the long side.

Initial move up on high volume.
Second move up on high volume with flag building.

Looking closer at the daily chart, you can see a flag building. That allows you to draw a descending trendline on the flag. As soon as this trendline gets broken, there is a high chance that this stock will go to at least the highs of the previous move up and if it breaks above this resistance, it might even go higher. When you go in on the break of the trendline, you have a great risk/reward setup.

The trendline can get retested and now acts as support which is an even stronger indicator, that this stock will go up.

3. TSLA VWAP short

Looking at the daily chart of TSLA (Tesla Inc.), the stock has been on a downward trend for quite some time. So the sentiment is undoubtedly bearish.

Looking at the intraday action, we see that the stock is gapping down on this day. So we know from looking at the daily that the stock will tend to go down. We see a hard sell-off in the morning on high volume. When we see the price come back up to VWAP, we notice, that VWAP acts as resistance which is precisely the setup we seek. Therefore we take a short position.

Initial morning sell-off on high volume.
VWAP is starting to show resistance so our plan is to short right below VWAP.
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