Technical Analysis means studying price charts, volume, and patterns to estimate where a stock or ETF price may move next.
Instead of asking:
- “Is this company good?” (Fundamental Analysis)
You ask:
- “Is this a good time to buy or sell based on price behavior?”
Think of it like:
Real-World Example
Imagine driving a car.
- Fundamental analysis = checking engine quality.
- Technical analysis = reading traffic conditions, road signs, speed, turns.
A great car can still get stuck in traffic.
A great company can still have bad timing.
Core Building Blocks of Technical Analysis
Lesson 1: Price Trend
A trend is the general direction of price.
Meaning
- Uptrend = buyers stronger
- Downtrend = sellers stronger
- Sideways = no clear direction
Beginner Rule
Buy in uptrend, avoid fighting downtrend.
Lesson 2: Support and Resistance
Support = Floor
Price tends to stop falling here.
Resistance = Ceiling
Price tends to stop rising here.
Example
If a stock keeps bouncing around $10, that is support.
If it keeps failing near $12, that is resistance.
Lesson 3: Volume
Volume = number of shares traded.
Think of it as crowd strength.
Example
- Price rises + high volume = strong move
- Price rises + low volume = weak move
Lesson 4: Moving Averages
Average price over time.
Common ones:
- 20-day MA = short term
- 50-day MA = medium term
- 200-day MA = long term
Example
If price is above 200-day MA = healthier trend.
Moving average helps remove noise.
Common Indicators (Simple Version)
RSI (Relative Strength Index)
Measures speed of price move.
Scale: 0 to 100
- Above 70 = overbought
- Below 30 = oversold
Not automatic buy/sell.
MACD
Shows momentum changes.
Used to detect trend shifts.
Good for beginners later, not first tool.
Step-by-Step Beginner Method
Before Buying Any Share
Step 1: Check Trend
Is it rising?
Step 2: Check Support
Can you buy near support instead of chasing high price?
Step 3: Check Volume
Is buying interest strong?
Step 4: Set Risk
Where will you exit if wrong?
Example:
Buy at $10
Stop loss at $9.50
Risk = $0.50
Step 5: Target
Resistance at $11.20
Reward = $1.20
Good risk-reward.
Real-World Example (Singapore ETF)
Suppose you look at SPDR STI ETF
Chart shows:
- Rising trend
- Support near SGD 3.50
- Resistance near SGD 3.70
- Strong volume
Possible plan:
- Buy near 3.52–3.55
- Stop loss 3.45
- Take profit 3.68+
(Not financial advice—example only.)
Common Mistakes Beginners Make
Mistake 1: Buying After Huge Jump
Emotion says “I’m missing out!”
Fix:
Wait for pullback to support.
Mistake 2: Ignoring Trend
Buying falling stocks because “cheap.”
Fix:
Cheap can become cheaper.
Wait for reversal confirmation.
Mistake 3: No Stop Loss
Holding losers too long.
Fix:
Decide exit before entering.
Mistake 4: Too Many Indicators
Using RSI + MACD + Bollinger + 10 others.
Fix:
Master 3 tools first:
- Trend
- Support/Resistance
- Volume
Easy Chart Reading Formula
Buy Setup
Uptrend +
Pullback to support +
Volume returns =
Better setup
Sell Warning
Downtrend +
Break support +
High selling volume =
Danger
Practice Questions
Q1 Stock keeps making higher highs and higher lows. What trend?
Answer:
Uptrend.
Q2 Price reaches $20 three times but falls each time. What is $20?
Answer:
Resistance.
Q3 Price breaks above resistance with very high volume. Strong or weak?
Answer:
Usually stronger breakout.
Q4 You buy at $5 and set stop loss at $4.70. Risk per share?
Answer:
$0.30
Mini Case Study
Stock ABC:
- Price above 200-day MA
- Pullback to support
- Volume increases
- Market overall strong
Would this be better than random buying?
Answer:
Yes. Probability may improve because setup is structured.
Beginner 30-Day Practice Plan
Week 1
Learn trends and draw trendlines.
Week 2
Mark support/resistance on 10 charts daily.
Week 3
Study volume + moving averages.
Week 4
Paper trade only (no real money).
Golden Rules
- Protect capital first
- Trend matters
- Entry matters
- Risk management matters more than prediction
- No setup = no trade
Technical Analysis for Singapore Investors using STI ETF DBS OCBC Singtel as case study
Many investors buy good companies at the wrong time.
Example:
- Buy DBS Group after a big rally → short-term drop
- Buy during pullback near support → better entry price
Technical analysis helps with timing.
Part 1: Understand Singapore Market Behavior
The Straits Times Index often moves based on:
- Bank stocks (DBS, OCBC, UOB)
- REITs
- Singtel
- Global market sentiment
- Interest rates
- China / US economic news
So when banks move, STI often moves.
Part 2: Example – DBS Group
Beginner Chart Reading
Imagine DBS chart:
$48 resistance
——————
/\ /\
/ \ / \
$44 support
——————
What This Means
- Around $44 = buyers appear
- Around $48 = sellers appear
Smart Plan
Instead of buying at $48 after excitement:
- Wait near $44–45 zone
- Buy partial position
- Add only if price rebounds
Part 3: Example – OCBC Bank
OCBC often trends slower than DBS.
Strategy:
If chart shows:
- steady uptrend
- above 200-day moving average
- healthy pullbacks
Then suitable for patient investors.
Real World Thought
DBS = stronger mover
OCBC = steadier style (sometimes)
Part 4: Example – Singtel
Often income investors buy for dividends.
Technical analysis can help avoid buying right before a drop.
Example:
If Singtel rises sharply before ex-dividend:
Wait for pullback after dividend adjustment.
Part 5: Example – SPDR STI ETF
Good for diversification.
Instead of guessing tops:
Use Dollar Cost Averaging + Technical Timing
Example:
Normal month: Buy fixed amount
If chart near support: Buy extra amount
If overextended rally: Buy normal amount only
Very practical for long-term investors.
Best Indicators for Singapore Beginners
1. 50-Day Moving Average
If price above it = healthier medium trend
2. 200-Day Moving Average
Long-term strength
3. Volume
Breakout with volume = stronger signal
4. RSI
Use only as helper.
Sample Buying Process (Simple)
Looking at DBS
Step 1: Trend
Above 200 MA? Good sign.
Step 2: Pullback
Has price returned near support?
Step 3: Volume
Are buyers returning?
Step 4: Risk
Buy $45.20
Stop loss $44.30
Step 5: Target
Previous high $47.80
Common Singapore Investor Mistakes
Mistake 1: Buy only because dividend coming
Fix:
Check chart first.
Mistake 2: Buy after Straits Times article excitement
Fix:
Wait for pullback.
Mistake 3: All money one stock
Fix:
Spread among ETF + selected stocks.
Mistake 4: Ignore US market impact
Fix:
Singapore market often reacts to overnight US moves.