Stock Technical Analysis

1. Since client T wants to trade the stock CTB over the next three months. So for the purpose of small moves with frequent small gains, it might be more effective to use the strategy based on volatility, momentum and trend. I would recommend this client to use Ichimoku Cloud, MACD, RSI and Bollinger Band to generate buy and sell signals.

Volatility: Bollinger Bands as one of the most useful and commonly used tools in spotlighting short-term prices designate the upper and lower bands as price targets. In a strong uptrend, prices usually fluctuate between the upper band and the 20-day moving average. Buying when stock prices cross below the lower Bollinger Band often helps traders take advantage of oversold conditions and profit when the stock price moves back up toward the center moving-average line.

Trend: Another powerful indicators I used to determine the stock trend is known as Moving Average Convergence Divergence (MACD). A bullish crossover occurs when the MACD turns up and crosses above the signal line. A bearish crossover occurs when the MACD turns down and crosses below the signal line. Therefore, buying when the MACD line crosses up through the signal line, or selling when it crosses down through the signal line.

Momentum: RSI is an extremely popular momentum indicator, which measures the stock's recent trading strength. Usually, the RSI over 70 can be treated as the selling signal, and the RSI below 30 is the buying signal.

2. After looking back to last 10 years SPX index through Bloomberg terminal, I found that the market trend during last two quarters is similar to what it performed in 2004, 2006 and 2011. Even in the bullish market, the average change over time in universe stock price is generally going downwards with a sharp decline in the trading volume. Besides, I discovered the implied seasonal trend over the past few years - the first and fourth quarters tend to be the most consecutive months for the stock market performance, while...