THE HAnDbook of TECHniCAl AnAlysis
26.9 Reconciling Technical Outlook with Client Interest
After collecting and organizing the relevant technical data according to duration
and sentiment, we proceed to apply the data in accordance with the client’s objec-
tive, market, and performance expectations and risk capacity. See Figure 26.14.
The Process
- Analyze the long‐, medium‐, and short‐term charts of the stock in question,
isolating all the bullish and bearish signals and price‐based triggers
- From the price‐based triggers, identify potential price levels in the stock for
the execution of the five participatory options, that is, price levels whereby we
may enter a position, add to a position, reduce a position, exit the market, or
initiate a hedge
- Also identify suitable price levels for the placement of stop losses and profit
targets in the stock (which are essentially the price‐based trigger levels)
- Then analyze the long‐ and medium‐term charts of the index, isolating all the
bullish and bearish signals
- With the information from both the stock and index action, formulate an ar-
gument as to why the stock and index are both bullish or bearish
- Provide technical reasons or evidence why a stock and its index are believed to
be bullish and present that to the investors and medium‐term and short‐term
bullish traders (repeat for the medium‐ and short‐term bearish traders)
- Present the clients with various scenarios for initiating, adding, reducing,
hedging, and exiting the market at technically significant price levels
- Finally, depending on the risk capacity of the client, you may have to recon-
sider certain trade recommendations. For example, you may advise against
adding new positions in an upside breakout for a client who is especially risk
averse with respect to the price on entry. Or you may, for another client who
has an extremely bullish outlook, advise buying into a correction, especially
since the client is also risk seeking with respect to price on entry. See Section
26.12 for a sample write-up.
Figure 26.14 Decision Making Flow Chart.
