How To Pick Stocks, Part 2. Technical Analysis

Written by 
Polina Medianina
/
October 6, 2021

Answer: Samsung

Hover your cursor over the buildings and look at the connections between the companies
⬇️

trading simple strategy for beginners photo photo
Table of contents

If you think you are not a math person but a creative type, then you will definitely like to look at drawings aka ‘do technical analysis’. 

Can I trade without technical analysis?

Try GainyTry Gainy

Technical analysis involves analyzing charts. Please find a chart of any company from your portfolio and let’s analyze it together step by step.

Step 1. Find the chart

To find the chart click the name of the company. In my case I will use Activision Blizzard, my favorite game production company. You will see the line chart here.

activision bizzard line chart photo

There are several types of charts such as candle chart, bar, heikin ashi, kagi charts and others. In essence, the chart shows the price at different moments in time and the line is the simplest one.

Step 2. Look at the broader picture

Look at the chart at different periods. The more you know about how a company grew, the better decisions you will make. 

Click the 1-week chart, 1 year and ALL. 

activision blizzard 1 week timeframe photo

‘ALL’ shows you the whole chart from the beginning of the company. Don’t be surprised to see a very short timeframe in some companies that you’ve been hearing about for quite a while. Some of them have just started trading their shares, like Airbnb or Coursera.

Notice what kind of long-term trend they have. 

Is it growing like in this graph?

growth chart photo

Is it neutral?

flat chart investing strategy photo

Or is it declining?

declining trend investment strategy photo

It is better to choose companies with a growing long-term trend.

Step 3. Analyze patterns

🌚 Does it mean I should never consider companies with no long-term growth trend?

‍Long-term investment should be based on both fundamental analysis and technical, because a company might have been undergoing changes, the chart would reflect this and it’s now ready to grow with strong fundamentals. In Gainy we consider these factors when suggesting stocks. 

Consider companies with the neutral or declining trend as a short-term investment opportunity. Let me explain with examples. 

If you see a chart like this, where do you expect the price to go?

fence chart pattern analysis photo

Logically here. So if you see such a pattern you can buy low and sell high. 

jump bottom chart pattern analysis photo

But don’t wait until the last peak. It’s better to sell a little bit before.

Real-life example:

trading strategy pattern analysis photo
jump from the bottom chart photo

And then it went down.

Another example.
You see the company fell dramatically. Would you buy it?

stock dramatic fall photo

Yes, because there is often a jump up from the bottom. 

GE jump from the bottom photo

Not only did it jump up from the bottom (1), but it also restored to values before the crisis (2).

Step 4. Compare with competitors and industry

In the stock market everything is relative. Especially to the industry average. 
So in order to understand whether a company has potential, you can click ‘Industry median’ and you will see how the industry grew. 

stock comparison industry median photo

As you can see in the picture, in one day the industry was growing but Activision had a rather neutral trend and lagging behind the average increase. Thus, we can conclude that it has the potential to reach at least the median. 

Another important feature is to compare with competitors to choose which company has been growing better and more stable. You can do this if you click ‘Compare stock’ and choose the closest competitor (Gainy will help with this too).

stock comparison ATVI vs EA photo

In this case, Electronic Arts’ chart looks better because it has a rising trend. 

All in all, chart analysis is a prerogative of traders, who choose it as their profession and devote a lot of time to finding patterns and market timing. If you want to spend less time but still make good choices, then following these steps will help you.

Don’t forget!

If you bought a stock as a long-term investment because you believe in the gaming industry, the company is a leader and has a strong cash flow, then you shouldn’t care about short-term price fluctuations—leave it to traders. You will gain more if you hold it for several years. 

That’s why I’ve already mentioned before that it’s important to set a price goal or time period for the company and not to sell despite dips.

Fortunately, Gainy recommends companies taking into account your time period and yield preferences. We mark ideas like ‘short term’ or ‘long term’ for you so that you better understand predictions on a company and know how to act to have higher returns.

See you,
P.

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because I want to check what my friend has just sent me
The company developed and maintains technological products and services, namely Snapchat, Spectacles, and Bitmoji. Snapchat is the third most popular app among millennials and gets high profits from ads on the platform. Since TikTok is not available to invest in yet, Facebook is boring, we see Snap as a good choice to diversify your portfolio. We don’t know what keeps those kids so glued to screens in Snapchat but if companies profit from it, we can get a share thanks to investing in their stocks.
because xBox brings us together with friends
Microsoft is the second biggest company on the market in terms of capitalization. Xbox, Skype, Windows Office 365 are all part of Microsoft business as well as it develops, licenses, and supports a wide range of software products and services, as well as designs and sells hardware. The company’s future is as bright as it’s past with all the money the company invests in disruptive tools like AI. Next time you plan to buy another game for the Xbox console, you might also consider buying a Microsoft stock which is not very expensive.
because we want schools to be cooler
So we packed peanut butter and jelly sandwiches for the kids, now it’s time to go to school. The K12 Inc. is an educational technology company. The company offers a private education program, software and education services built to teach online for preschool students up to grade 12 or K-12. The company’s earnings soared up after the pandemic because we came to realise that online learning is not far in the future and may continue the trend.
because we like to treat our pets and ourselves, too
The American manufacturer of supermarket food JM Smucker Co also operates a pet food business including brands such as Milk-Bone and Meow Mix. It’s also the producer of the peanut butter JIF, kid’s all-time favorite filling. The company offers a 2.96% dividend yield and in the third quarter reported a 7% increase in net sales.
because we love playing games
If there is one game to teach you financial literacy - it’s Monopoly, which belongs to Hasbro, as well as unparalleled portfolio of approximately 1,500 brands including MAGIC: THE GATHERING, NERF, MY LITTLE PONY, TRANSFORMERS, PLAY-DOH, BABY ALIVE, DUNGEONS & DRAGONS, POWER RANGERS, PEPPA PIG and PJ MASKS, as well as premier partner brands. The company generates strong cash flows and pays regular dividends. The company’s business moves along the online trend and develops digital content in the form of TV shows, films, computer games.
because everyone has a favorite childhood hero
Disney is a widely diversified company which owns everything from toys to apparel, and books to video games: Disney Parks, ESPN channel, Pixar, Hulu and so much more. And now it bets on streaming services with Disney+ and threatens Netflix’s market share. The company revenue suffered a major drop last year due to closure of Disneylands, but has opened them in October and foresees a strong comeback.
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