Stock Portfolio (Part 5): Analyzing 5000+ Stocks Using Common Technical Indicators
Approach
In this article, I will implement different technical indicators on different time series plots and integrate them in one table for today’s stock market for more than 5000 stocks. Through different approaches, this integration will aid traders in selling (shorting) or buying (longing) stock equity. A technical analysis attempts to capture market psychology and sentiment through an analysis of price trends and chart patterns for possible trading opportunities. Some investors believe a technical analysis is the best way to conduct trade, while others believe it is a misguided approach and lack sufficient theoretical grounding.
Technical analysis differs from fundamental analysis in that the stock’s price and volume are the only inputs. The core assumption is that all known fundamentals are factored into the price, thus there is no need to pay close attention to them. Technical analysts do not attempt to measure a security’s intrinsic value. Rather, they use stock charts to identify patterns and trends that suggest what a stock will do in the future. The most popular forms of technical analysis are simple moving averages, support and resistance, trend lines, KDJ and momentum-based indicators.
Candlestick charts
Candlestick charts are used by traders to determine possible price movement based on past patterns. Candlesticks are useful when trading as they show four price points (open, close, high, and low) throughout the period of time the trader specifies. here below is canlle chart for Evofem Biosciences, Inc. (EVFM) Stock Price. Shares of the small-cap biotech Evofem Biosciences (NASDAQ:EVFM) rose by as much as 42.5% in pre-market trading Tuesday morning ad volume of stock reached to over 12M. The company’s stock is taking flight in response to the Food and Drug Administration’s (FDA) approval for the non-hormonal contraceptive vaginal gel Phexxi last Friday. This is a good example how one stock overbought and how couldn’t respond immediately to increase of capital.
Stochastic oscillator
Stochastic oscillator is a momentum indicator introduced by George Lane in the 1950s. Stochastic oscillator helps with comparing the closing price of a commodity to its price range over a given time span. If you try one of stock application, you have seen these plots in different sections of that application.
Exponential Moving Average (EMA)
An exponential moving average (EMA) is a type of moving average (MA) that places a greater weight and significance on the most recent data points. The exponential moving average is also referred to as the exponentially weighted moving average. The 50-day moving averages is probably the most commonly found lines drawn on any trader or analyst’s charts. The 50-day moving average is the leading of the three averages and is, therefore, the first line of major moving average support in an uptrend or the first line of major moving average resistance in a downtrend. Linear chart below shows the 20-day EMA and 50-day EMA for e.l.f. Beauty, Inc. (ELF) stock.
Moving Average Convergence Divergence(MACD)
Moving Average Convergence Divergence (MACD — blue line) is a trend-following momentum indicator that shows the relationship between two moving averages of a security’s price. The MACD is calculated by subtracting the 26-period Exponential Moving Average (EMA) from the 12-period EMA. I plotted the 50-day EMA and 20-day EMA in the previous section.
The result of that calculation is the MACD line. A nine-day EMA of the MACD called the “signal line,”(orange line) is then plotted on top of the MACD line, which can function as a trigger for buy and sell signals.
The result of that calculation is the MACD line. A nine-day EMA of the MACD called the “signal line,” is then plotted on top of the MACD line, which can function as a trigger for buy and sell signals. Traders may buy the security when the MACD crosses above its signal line and sell — or short — the security when the MACD crosses below the signal line. Moving Average Convergence Divergence (MACD) indicators can be interpreted in several ways, but the more common methods are crossovers, divergences, and rapid rises/falls.
Relative Strength Index (RSI)
the Relative Strength Index (RSI) is a momentum oscillator that measures the speed and change of price movements. RSI oscillates between zero and 100. According to Wilder, RSI is considered overbought when above 70 and oversold when below 30. In this graph below overbought zone is above red dashdot line, on the other hand oversold zone is below green dashdot line.
KDJ
KDJ indicator is a technical indicator used to analyze and predict changes in stock trends and price patterns in a traded asset. KDJ indicator is otherwise known as the random index. It is a very practical technical indicator which is most commonly used in market trend analysis of short-term stock. KDJ is a derived form of the Stochastic Oscillator Indicator with the only difference of having an extra line called the J line. Values of %K and %D lines show if the security is overbought (over 80) or oversold (below 20). The moments of %K crossing %D are the moments for selling or buying. The J line represents the divergence of the %D value from the %K. The value of J can go beyond [0, 100] for %K and %D lines on the chart.
Integrated Technical Analysis
You can see a snapshot of the technical indicators for more than 5000 stocks in the table below for May 26th. There are different approaches and analysis can be built base on these indicators and numbers. One can analyze this table to find out which stocks to buy, sell or hold at a particular time.
Conclusion
Therefore, we see that a technical analysis by itself is not sufficient to trade efficiently and successfully. Through this data science study, we also see that one can build stock, fund, and trading tools for customers. These tools are available through trading platforms like Robinhood, Webull, and Trading View. Crucially, we’ve seen the integration of technical indicators on more than 5,000 stocks which can help traders buy or sell stock at the right time, profitably and efficiently. In my subsequent article, I will combine technical analysis with fundamental analysis for these stocks.
Sources for definition of indicators:
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https://www.linkedin.com/in/hamid-gholizadegan-mba-29ba268a/detail/recent-activity/posts/
