Technical Analysis Lessons From Agilent Technologies' Stock Chart

When a stock trades sideways like a wave, how do you navigate through it all? During times of volatility, the trader can employ oscillators to help them analyze the stock.

We will also learn how using the 60 min time frame can help us to navigate the waves in the daily chart.

The chart above shows how the zig and zag in prices looks like in the stock chart of Agilent. If you are an investor in this stock, you will be extremely frustrated with the movements.

Oscillating between gains and losses can be a painful experience.

However, if you are a short to mid term trader in the stock, the ups and downs in the stock provides lots of trading opportunities for you.

It is as if there is a never ending cycle of ups and downs that allow you to long and short the stock to make profits.

When Stock Trades Sideways, Use Oscillators

One of the things we have to remember as traders is we need to use the correct tools depending on the behavior of the stock. If a stock is trending nicely, we can use trend following indicators like the moving average to guide us.

On the other hand, if a stock is trading sideways like what happened in Agilent, then we need to use oscillators.

I have put 2 oscillators on the chart.

They are the stochastics and the MACD.

Take a look at the chart again and you will notice how the stock tops out when the stochastics get overbought. Notice how the stock reverses back up when the stochastics get oversold.

How To Use Stochastics To Determine Overbought Oversold Levels

The MACD also helps us to determine when the stock is about to reverse direction. MACD Valleys and Mountains on the MACD Histogram are signs of bullish or bearish momentum. When they shorten, it can tell us that the bullish or bearish momentum is slowing down.

Supplement The Oscillators With Trend Lines

More often than not, you can draw short term trend lines that connect the highs and lows of prices. In the chart above, the purple lines are uptrend lines and downtrend lines.

Here is how to interpret the trend lines:

  • When a stock breaks an uptrend line, it might start to be bearish
  • When a stock breaks a downtrend line, it might start to be bullish

Notice how I word it. We anticipate the start of bearishness or bullishness. Just because a stock breaks a short term trend line, it does not mean that the stock will automatically be bullish or bearish. It just tells us to anticipate that a trend reversal might happen.

When you combine trend lines with oscillators, you can often get a pretty clear picture of what the stock might do next. Take a look at the chart again and see how these two technical concepts help to pinpoint reversal areas.

Why Not Zoom Into The 60 Min Chart Of The Stock?

The chart above is the 60 min chart of Agilent.

Try and look at the dates and then check it back with the daily chart above to know where the 60 min represents in the daily chart.

We will move from left to right of the chart and see what we can learn from the chart.

After gapping down heavily, Agilent tried to rally. However, when it broke an uptrend line, the stock starts to drop again. Breaking a short term uptrend line can have negative consequences for a stock.

The Significance Of Breaking An Uptrend Line

If you check the daily chart, the stock was actually rallying back up to a resistance area.

After the stock has been dropping awhile, it manages to break back above a downtrend line. This is a bullish sign and the stock started to rise from there. Notice how the stock also goes back above the 50 MA.

The stock had a nice run up but soon forms a rounded top kind of pattern and subsequently breaks an uptrend line. The stock also breaks below the 60 min 50 MA and we also have a bearish cross where the 20 MA cross below the 50 MA.

If you check the daily chart, this was when the daily stochastics became quite overbought. The MACD Histogram Mountain also hinted to a possible slowing down of bullish momentum when it shortened.

From there, the stock declined for 2 weeks.

Agilent then formed a 60 min triangle pattern. It broke out of this chart pattern and also traded back above the 60 min 50 MA. The stock also experienced a 60 min bullish cross.

What Is A Bullish Cross

Why not go and check what the daily chart was telling us at the time when a 60 min triangle formed?

Well, the daily stochastics was oversold and the MACD Histogram Valley hinted to a slowing down in bearish momentum. By combining the technical indicators in the daily chart with the technicals in the 60 min chart, traders can often be able to better spot a trading opportunity.

Hope this lesson has added some value to your technical analysis knowledge.

Charts with the Freestockcharts.com label are courtesy of Freestockcharts.com

Charts with the investing.com logo are courtesy of Investing.com powered by Trading View

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