Well, hello everyone. Welcome to Getting Started with Technical Analysis. As someone has said in the chat, guess who's back in? Well, I am, but I'm in a different town this week. I'm in Bend, Oregon, actually Redmond, just north of Bend, visiting my daughter and her family. So I'll be back in Salt Lake City next week, but I didn't wanna miss a whole week of getting to connect with you guys. So I wanna thank each and every one of you who has joined us today, both the seasoned veterans, or as I like to call them, the usual suspects. And if you are here for the very first time, please type a greeting into the chat so that we can welcome you to this wonderful.
community Today we are gonna be talking about not just trends and moving averages, but I thought we would talk about an introductory stock investing trading plan that is based on trends and moving averages and a little something called the MACD, or Moving Average Convergence Divergence Indicator. And it's a simple plan that covers both when a trader might decide to enter a position and then when a trader might decide to exit. So just before we get into the throes of things, I just wanna mention that I have Ben Watson with me in the chat. And Ben is a friend and a fellow coach, and he knows a ton about what we're gonna talk about. today He does a lot of live events. I'm gonna show you how you can register for those, but you're gonna wanna follow him on X.
His handle is benwatsoncs, mine is barbarmstrongcs. We're posting great content there on a daily basis. It's another way for me to be able to communicate with you and you with me outside of webcasts like this. So I hope you'll take advantage of that. Just before we get into the thick of things here today, just a couple of reminders. One is that everything that we cover in this class is for educational purposes only; none of it to be construed as a recommendation on the part of Schwab or myself. We're not recommending any particular trading strategy or that you invest in any particular stock. We use the paperMoney platform on the thinkorswim desktop platform, and it is a brilliant place to kind of hone your trading skills, become familiar with the platform and the trading strategies that you might consider using.
We're going to discuss the use of stop loss orders today, and know that stop loss orders don't guarantee you're going to get out at a particular price. They will trigger a market order, and you'll get out at the next particular price. So, last week, the last three weeks, actually, we've talked about price patterns, but because today. We have a lot of new people joining us. I thought we'd just kind of take a break and go back to trends and moving averages and an example trading plan that we could create together using trends and moving averages. So that's what's going to be on the menu for today. And so we're going to look at different trend types and trend lengths. We're going to introduce some moving averages.
We're going to look at some examples and review some of the basic tenets of technical analysis. Now, in addition, I wanted to show you how you can access, and I'm just going to come out here, how you can access our schedule for webcasts because I know we have. a lot of new people here today. And so if you go to schwab. com forward slash coaching webcasts, you don't even have to be signed in, and I'll put that in the chat. I'll also put a link in down in the show notes below because a lot of people watch this in the archives. But if you come down here to Tuesday, you can see we're now talking getting started with technical analysis. And we've got two classes to follow: swing trading with Mike Fairbourn and then selecting an option strategy with Connie Hill.
Tomorrow morning, Ben is going to be teaching trading index options, so you'll want to check that out. He does some really interesting stuff. in that class. Okay. And then, if you have never been to an in-person event, I got introduced to the world of trading at an in-person event back in 2011. And this was one of the first trading strategies I was ever introduced to, or trading plans, shall I say. And that's why I'm going to share it with you today, because this is kind of where I So we're going back to my roots a little bit, but we've got an event coming up September 12th and 13th in DC. We're already like stacked to the rafters for that one.
So, but this, you know, if you are a beginner, and lots of people are typing in that they're joining for the first time, so I want to welcome you that they. are beginners. So, this would be a great type of event to attend: this technical analysis. Two days; the first day is an intro to technical analysis. The second day is an intro to but this one is pretty full. The next two events I will be attending, along with Ben. The first one's in Dallas, and we do still have room there. And then Chicago. These market drives, they kind of look at what's happening globally with the Then they discuss what's happening within our own country. Tariffs might be discussed, for example. Then they'll look at how the individual sectors are doing, and then they'll come right down to individual stocks. So they go from here to here all within one day and how you as a trader might take advantage of all this information and how you might consider applying that in your investing in. When we come out to October, we've got another one of those introductory two-day events in Orlando. And I mean you can scroll through. We've got events posted right through the end of the year,
so I encourage you to consider that. Let me just have a quick drink. Okay, so let's go back to our PowerPoint. And this is one of the few classes where I actually, we actually look at a few slides. So here we go. Price moves in trends, and price can go. A stock can really trend three ways. It can be uptrending; it can be downtrending, and it can be moving sideways. And really, when we look at trend, we say something is uptrending; it doesn't necessarily mean the stock is going up every single day. Because when something is uptrending, it might go up for a few days and then pull back for a few days, and then go up for a few days and then pull back for a few days.
But overall, we're seeing a series of higher highs and higher lows, and that's what makes our uptrend. And the market kind of discounts everything, or I think of it more as it takes everything into account that is currently known about that stock in the market within which it. operates. So, the current price is seen as representing we currently know about that stock and what's influencing its history. Some say history repeats itself, or it at least rhymes. And by that, we mean that given that the market is influenced by human beings, humans tend to react similarly in similar situations. And so it doesn't mean that we can predict things absolutely; we can look at patterns and how they repeat over time. Now, trends also reflect changes in supply and demand.
So, supply is the number of shares that people are willing to sell, and demand is the number of shares that people want to buy. And when we see that supply is Lower than demand, it tends to drive price up. And so, an uptrend reflects strong demand that exceeds supply. And so, you've gotta pay more be able to get people to be willing to part with their shares. And with a downtrend, it's the opposite. We see a lot of people willing to sell and not as many people willing to buy. And so, people keep lowering; the sellers are lowering their price to entice people to buy. Okay. And that creates a downtrend. So, when we see a we see that higher demand is driving price higher, but, and so here we're seeing our price rising, and then we get this equilibrium, or where the stock kind of takes a breather and says, okay.
we've driven the price up. And sometimes you'll have institutional buyers that wanna take a very large position in a company or in a stock. And so the price goes up and then they stop buying and let the price pull back. And then they come in and they start buying again. And that isn't always what creates this, but it can help create this. So this pullback or retracement is when price gets high, it's allowed to fall and then buyers come back in again. Okay, but when we look at this particular chart, what we are still seeing is a series of lows and then higher lows and higher lows and then highs. You know we had a high, a higher high, a higher. high. And then we had this short-term pullback, then followed by new higher highs.
And so, you know, we can have trends within a. So the intermediate-term trend is uptrending overall, but we had this short-term pullback in the. And is that unusual? No, not at all. Okay, now there is a survey in the chat today. And if you wanna click on that link, I know that Ben will post it again before the end of the session, but there are two questions. So it's not like, oh, I've gotta, you know, take 20 minutes. There are two questions. You rank it from one, I hated this, to 10, I loved it, and I'm gonna keep coming back and everything in between. And then you have the ability. to put comments in. So if there are topics you'd like to see me cover in upcoming weeks, let me know.
If you thought the pace was good or a little too slow or too fast, let me know. And you know I promise if you fill it out, to read each and every comment. Okay so when we look at uptrend, uptrend is described as being bullish. You, and again, as I've said in previous slides, it's characterized by a series of higher lows where we have a low and then a higher low and a higher low. So we have a low followed by a higher low and a higher low. And I will often draw a line on the chart just so I can visually see that. And the same thing with the highs, we have a high. and then a higher high and a higher high and a higher high.
And the expectation is that the stock is gonna continue to go higher, and that you'll profit by buying the stock often when it bounces off one of these higher lows. When it comes back and retests the low, then you'll get in when it bounces. So when it bounces here or when it bounced here. And if the trend, you know, when is this uptrend no longer an uptrend? It is if we stop seeing higher highs and higher lows, and we see, you know, a lower low. What do you do then? Well, you know, that's one of the things that we're gonna talk about today. You know, it's one thing to recognize the; it's another thing. altogether to know what to do when we see a change in a.
And so a downtrend is the opposite, right? Like we're seeing lows followed by lower lows and lower lows. So we have a low here and then a lower low and a lower low. And it's the same thing that's happening on the high side. We have a high, a lower high, a lower high, a lower high. So we have a downtrending line. Yeah, and some people will, if they trade options, they might use an option strategy to try and take advantage of a downtrend. It's harder to do in buying a stock, you. So the downtrend, when is a downtrend broken? It's when we don't see a lower high. When all of a sudden it comes up and we see a higher. high And you know this line could be considered a diagonal line, and we would call that a diagonal resistance breakout. Yeah, so you know, if you only like to trade stocks, you might say, well, I'm gonna stay out of this stock until it stops falling. Okay, so that's a downtrend. What about a sideways trend?
A sideways trend is one where we see what? We see similar highs and similar lows. So you know, if we draw a line here, we have something that is trading in kind of a, it comes down to a certain low and then seems to bounce, and then it comes up and it hits its head around this high point, and it tends to roll over. So it's often called a consolidation. Period or a neutral trend, you know, where you have equal highs and equal lows. Okay, now some traders might use options as a way to capitalize. Some, if you know, want to stick with just stocks, could say, well, I'm going to buy the stock when it bounces off this support level, and I'm going to sell it.
So I'm gonna buy here and sell here. Or you might say, hey, I already own this stock. So what I'm going to do is, if I own a hundred shares of stock, I might say, you know what I'm gonna do? When it comes up here, I am going to sell a covered call, and then I'm gonna buy it back when it comes back here. And then when it comes up here, I'll sell another one and I'll buy it back when it comes here, and I'll sell another one. Now, what is the gotcha? Well, if the stock breaks out and continues to go higher, then you could be called out and end up selling your shares. And if you absolutely don't wanna do that, then you might not wanna, you know, use that trading strategy.
There are a number of different trading strategies that can work beautifully with a sideways trend. You know, you just, it's being able to recognize the trend and then developing the skillset to which strategies might work well. So, Kevin is saying like, what is a covered call? Well, a covered call is where you have a hundred shares you. own a hundred shares of stock, or you could buy a hundred shares of stock and then you sell a covered call, typically above where it's currently trading. And so let's say, in this example, we sold a covered call up here. So when we sell a covered call, it means we are agreeing to sell our stock at a certain price at any time between now and expiration.
And if you'd like to buy our 100 shares from us, like let's say this number here is 50. So if we sell a covered call at 52, we're saying, hey, if this stock, if you would like to pay 52 a share for our shares and buy them from us, you may. And for that, you might get paid, let's say you get paid 2 a. make 200. And then when it comes down here, let's say this is at 45, that covered call might only be worth, maybe it's worth a you might say, well, I got paid 2 to sell that covered call, I'm gonna buy it back now for 25 cents, and I've made 175. It depends. So, somebody is asking what's the average percentage you can make on a covered call?
I love all these questions; they're great. It could be 1, it could be 2, it could be more. It depends on how close the covered call you're selling is to the current price of the It also depends on how much implied volatility there is in the options for that stock. And we talk about that a lot in our trading a smaller. account class on Mondays and Fridays. And also, there is a class on Tuesdays; it was a little earlier today on called getting started with options. And they take a whole week and just talk about covered calls. Yeah, and I think there's a class on Mondays that's just dedicated to covered calls and short puts. And so you could check that out also. Okay, I'm gonna shake my anxious sketcher.
We're never gonna get out to the platform today, but I love all these questions that you guys are asking because it means you're thinking about what I'm talking about. Yeah, well, we can do an example. OK, so yeah, the focus of this webcast is actually technical. analysis So a moving average, if we put a moving average on our chart, it can help us identify a trend. And so we can see here, here's a 30-day simple moving average, and it just helps us smooth out the price fluctuations and makes it maybe a little more obvious that this stock is uptrending. And so if you have a faster moving average, and by that we might say a 10-day moving average, it's going to follow more closely the ups and You know, it's going to be more responsive to price movement where if you have like a 200-day moving average, it takes 200 days' worth of information, the price of the stock over the last 200 days.
So it's going to change. Much slower. And so we can look at a long-term trend, an intermediate-term trend, or a short-term trend. And so here's the longer-term trend: it's uptrending. The intermediate-term trend we've had some uptrends and some downtrends. And shorter term is less than three months, so if you're thinking like, hey, I'm really looking to generate some income for my So really, what I want to do is do shorter-term trades where I'm in and out in less than two weeks, two to six weeks. Then you might be focusing more on a three to six month chart because you're looking at a shorter-term time frame. So you want to trade with the trend that matches your time frame. objective And then you may want to look back at the overall trend.
So even though you want to do a trend that you're only going to be in for six weeks, if the stock has been uptrending for a year, that might lend more confidence to your belief that this stock might continue to be uptrending. So let's go look at some things on the charts, because I think this is where things can kind of start coming into play. And we're going to start by looking at a nine month chart on Palantir. And let me just look at our price axis, and we're going to make that a zero. So it'll spread our... So, and then I'm going to spread this a little bit. So we're going to come back here You know overall this stock is up 103 year to date. Okay.
So, and Palantir, if we look at the last year, know it really has been uptrending. It, a year ago, was trading at 29 a share and it recently hit a high of 190. But it kind of had this, you know, when all the tariff shenanigans first kind of hit the fan in February, the whole market pulled back. And then in April, things started to turn around. And so if we said, okay, this has been a longer-term trend uptrending, this is this idea of this shorter-term, well, or intermediate-term trading strategy, where we say, and I have got a 30-day moving average on here and a 10-day moving average. And let's come to So I'm going to click on studies, edit studies, and I'm going to get rid of the 10-day moving average because it's just a little distracting.
And then you'll see I just typed in simple moving average. And when I added that, I said add selected. I've already got it in here, but the default is for it to be based on the closing price, 30 days. And then this says a yes, but the default is for it to say no. And I want it to show breakout signals. So I'm changing the no to a yes. And then I'm just going to save it and hit apply and okay. And now you'll see if this stock closes below the 30-day moving average, it creates a red arrow. And if it closes, if it crosses back above or when it crosses back above, it creates a green arrow.
So we saw this stock that, along with the rest of the market, was kind of getting beaten up, and then it crossed the 30-day moving average. And you may say, you may have sat on that day. Well, it may have crossed the 30-day moving average, but I don't know if this is a fake-out or a breakout. So I'm going to wait until it comes back and kind of bounces, see if it retests, and see if this 30-day moving average continues to hold as new support. Now some might have entered on this day; it pulled back, and it bounced here. So I'm going to say we entered on this day here, which was April 22nd. And let's say we bought 100 shares. So, pre-op, we have so much we want to cover in these.
What I'd say is you can go back and watch the, and this software that we're using here is the Thinkorswim desktop platform. And so if we bought 100 shares on this day, how much are we? Well, we were paying it closed that day at 94, that's a 9, 400 investment. And although it's maybe not likely that Palantir would go to zero, could that happen? It could. So that's what we're risking. So if we said, well, you know what, I think this 30-day moving average, it looks like it's acting as support. So my recent low here was 84, 14. So I am going to take that 84, 14, which is around that. 30 day moving average, and I'm going to multiply that by 0. 97. So I'm going to put my stop loss order at about 8.
156; you could make it 5 below, 2 below, you know, we're going with three as our example. So now we've made an effort to define our risk by putting our stop at what was it? 8. 156, 8. 161. And this is our, if you want to show that on your chart, you can just write your stop loss order. And I'm going to show that on the right. And then we're going to just now, I'm a big fan of know when you're getting out before you get in. And so the stock, you might say, well, as long as it goes up, Barb, I want to continue to own the stock. Well, I would too, okay? So it starts going. up and then it has this big down day.
And you know you might have your kind of like be going like, do I get out? Well, is it below the 30-day moving average? So if our rule is we get in if it looks like it's uptrending or a trend reversal and it's moving to the upside, we put a stop in 3 below recent support. In this case, we think is our 30-day moving average. It comes down, does it close below the 30-day moving average? It doesn't. So what do we do? We just are patient. Now might some choose to move it? Yes. And are they wrong? No, they're not. But if our rule is if it closes below the 30-day moving average, we're going to move our stop up to 3 below the low of that. day. So it keeps going up.
You know, we've got a nice profit, but it's an unrealized gain. So what the market, you know, give it, the market can take it away. So on this day, it closes below the 30-day moving average. And where does it close? At 118. 93. Now, I already did the So that would mean we're going to move our stop up to 115. 36. So this is a new stop, and it's gonna be 115. 36. Now, what did we pay for the stock? Well, we paid, when we bought it, paid about 94 if we bought it on that day. So we're now trying the goal is to be protecting some of the profit but giving it enough room to, if it's just pulling back within the context of an uptrend.
So but we've got an exit in place. And again, this doesn't guarantee we're gonna get out at this price. So it starts going up again. Okay, exit averted. And then on this day, June 27th, it closes below the 30-day moving average again, so we say okay, that was 130. 54 the low on that day. So our new stop now is gonna be 126. 62, 3 below. And we're just going to And this has all happened within the context of this year. So if we just continue rolling along, so it starts up trending again. Now, two days later, we have a new, a lower low. But if we were to calculate a stop based on this low, we would be lowering our stop. And so, one of the rules you may put in your trading plan is that you.
don't move a stop down; you only move it up. And so in this case, it's like, well, we have our stop at 126. 62. We're not gonna move it lower than that. Like we're not gonna move it to 124. We're gonna, so we ignore this candle. We see that it's there, but we don't adjust our stop. And then, wow, it starts taking off. Now when it gets here, would you be wrong to move your stop up to 3 below the 30-day moving average? No. But if you're saying, you know what, I'm comfortable with just waiting till it goes to the 30-day moving average, then on this day we would have moved our stop. So, and on this day the low was 156. 90. And so then we would have moved our stop on this day to 152.
19 And the reason I'm putting this on the chart is so that we can pretty easily see did the stock go down and hit 152? 19 Dang it, all it did. And so we ended up stopped out here at 152? 19 And you know what's it done since then? So it had this, you know, big pullback. We got stopped out. We got in at, sorry, I made a note here and I guess my notes aren't that great. We got in at 90; it was actually 93, 99. So if we got in at 94 and we got out at 152, 152, let's say we ended up getting out at the price we requested. We were up by 58 a share on, you know, a 94 investment. You know, so we were up by almost 62.
And so if we look at that and we say, you know, gee, that worked out pretty well. Now and I still like this, and I would like to get back in. What's your rule on when you get back in? Well, if your rule is that you wait until it crosses back above the 30-day moving average and we have a green arrow, do we have that yet? No. So would we say, well, you know what? Rules, schmools, I'm just gonna buy the stock anyway? Well, you could do that. Or you could say, you know what? This trading plan looks like it's working out well for me, so this is what I'm going to do. And so what might we do if, like, let's say that we had bought this in our paper money account?
We got stopped out here. We're looking at this, and let's say you're gonna go on a little vacation. or something or like you look at your stocks you spend like you know a couple of hours a week looking at this but you don't wanna miss it. You might say, well this current 30-day moving average is around 165. So if it goes back above 165, I'd like to get in. And you might say, are you nuts? Like it's trading at 157. Don't I wanna buy it when I'm paying 8 a share less? Well yeah, but how do you know that it's gonna go back up? Wouldn't you rather pay 8 a share more and have more confidence that the uptrend is gonna continue? Because like we didn't buy this stock you know at the low.
Like a year ago it was trading at 29. We paid you know 94 a share. And we exercised some patience. You don't have to get the whole move. You can get a small part of it and do relatively well. And sometimes, you're gonna get in, and four days later you might end up getting out. And you know, it can be a painful, humbling exercise. So, we don't have time, you know, to walk through another example with that kind of But you know, again, you know, in February and March, a lot of things came down. Starting on April 7th, we now know, hindsight being 20/20, a lot of things hit their bottom and started turning around.
If we were employing that and we waited for it to cross, and then, because it had been a bit of a downtrend, said I'm gonna wait for it to cross and come back if we'd entered around here, you know; and then moved our stop up, would we still be in this stock? Would we still own our? Probably, because it doesn't look like it's gone 3 below most recent lows here. You know that was 263. 80, and if we look at 263. 80 times, if we stick with that 3 example, that would be 255. 88. Well, that would be down below here, 255. 88. So we'd still be in, and I encourage you just pick some different stocks and kind of walk your way through the.
But if we're looking at this now and we're saying, well, if we have a green arrow, that gives us permission to. Would we have permission to enter today? Well, we actually. would because we haven't seen a red arrow yet, even though today we have this big candle. And this candle is called a hammer. A hammer happening at a support level is considered to But what we would want to see is tomorrow's candle to be higher. But if we said, well, we're meeting today, we'd like to place a We're going to buy 100 shares of GE. We're going to look at the recent low, and maybe that's here. And we could use that 255. 88 as our exit because of this red arrow; it gives us some room for the stock to breathe so that we don't end up nicked out on a candle that like this one, with a long tail or a long wick, and then see the stock continue to go up.
And so again this stock has been up trending. It's up 63 year to date. If you would like to see the, I will put it in the link in the show notes. It's also on my X feed in the post pinned to the top of that feed. But if we look at another way, you can see how a stock is doing year to date, well I'll show you if I have a minute. But let's come to the Trade tab. So we are going to right click on GE. We are going to Buy Custom with a Stop. We said 255. 88 is going to be our stop. So I'm going to just move this over to 255. 88. I'm going to write that down.
We're going to buy 100 shares. And when are we going to exit? Well we are going to exit if it goes below what? Below 255. 88. So we are risking. You know, about 20 a share or 2,000. Now, this is a half million dollar example account. And so we can have a position size this big, and we can also afford to risk you know, we're saying half of 1 would be about 2, 500 to 255,88. We're going to make our stop good till canceled. Now, do stops last forever? They do not. Yeah. So the link for the archive video. So, Maria, if you click the subscribe button, you will have the link. And I know that Ben will repost the link as well. If you go to Trader Talks.
Yeah, if we go to Trader Talks. So this is our trend trading growth stocks. So stocks growth, we're going to put it in that bucket. We want to buy 100 shares. of GE at the current price. We want to sell if it goes down to 255. 88 or below. This will trigger a market order. So if it gaps down, we could end up out at a lower price. Okay. And then, just because I've been asked multiple times to get to the archives for this, you're going to scroll down. So you're going to come to Trader Talks from Schwab Coaching on YouTube. And there's a button in the bottom right corner so that there's no cost to subscribe. When you first come, you'll be on the homepage, and it will show you whatever is currently being taught.
So right now, we're in getting started with technical analysis. If you come to playlists, so if you scroll down and this particular class is of the listings getting started with technical analysis. You can see we talked about triangles and pennants last week. We talked about trend reversal patterns. We cover a different topic every week. And then I was gone for six weeks, so Mr. Ben Watson was holding down the fort and doing a fantastic job for me. So you can do some binge learning. And then in addition to that, I've done a bunch of short videos, and probably the easiest way to find them in continuation, they're in the getting started with technical analysis. But if you come to these trade management mini sessions and view this.
playlist I've created a bunch of short videos. So, two of them just went up last week. But it's like, what is a hammer? Remember that pattern I talked about on the chart. What is a hammer? It's five minutes long. What is a hanging man? Three and a What is an inverted hammer? So, these are just kind of little video bites, if you will. There's a couple on here: the power of investing five dollars a day and what that can do for your portfolio over time if you've not checked that out. And then there's a bunch of example trading plans. Here's one: an example trading plan for covered calls. Here's a simple stock investing trading plan, a bunch for options.
And then if you scroll down to the very bottom, if you're new to thinkorswim, there's a bunch of short videos on how to customize your monitor tab, or how to customize a chart, or a watch list, or all of those things. So you're welcome to check those out. Those are under the trade management mini sessions. So we looked at two stocks today. We looked at Palantir and we looked at GE. And with Palantir, you know, what you might want to do is put an alert in to say, hey, when this resumes, if it resumes its uptrend, we'd like to, you know, buy another position. We did do a position on GE, ticker symbol GE, an example trade where we bought 100 shares of stock. and and put a stock in.
And then we walked through how we'd manage that trade once we're in. Yeah, so you know what? That's a wrap for today. I hope that you guys got something out of this. I encourage you to keep coming back. Please hit the like button; it helps move this up in the trading algorithm so more people can find this content. Subscribe to the channel if you haven't done that already. There is that little survey in the chat; I encourage you to fill that out. I promise to read each and every comment. And then last but not least, don't forget to follow us on X: Barb Armstrong CS and Ben Watson CS. So thanks so much for joining me. Appreciate. you being here. Keep coming back. Your financial future, and you are absolutely worth it. Take care.
