tw-stock-technical

name	tw-stock-technical
description	Technical analysis for Taiwan-listed stocks — candlestick patterns, moving averages, MACD, RSI, KD, Bollinger Bands, volume-price relationships, support / resistance, and a multi-indicator confluence framework. Concept- focused; pairs best with fundamental and chip-flow analysis.
category	finance
tags	["stock","taiwan","tw-stock","technical-analysis","charting","indicators"]
keywords	["MACD","RSI","KD","Bollinger Bands","moving average","support","resistance","candlestick"]
related	["tw-stock-fundamental","tw-stock-chip","tw-stock-quant","tw-stock-data","tw-stock-options","tw-stock-trend"]

Taiwan Stock Technical Analysis

Technical analysis answers "what is the current price action implying?" It doesn't tell you whether the company is good (fundamentals), nor who is buying (chip flow); it tells you "where the market consensus is moving".

When to Use This Skill

• You have a fundamentals + chip-flow shortlist and need actual entry/exit prices
• Reading the tape and judging short-term (1–2 week) trend direction
• Setting technical-level stops and targets
• Reading TAIEX overall regime
• Avoiding entering against weak technicals

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1. Candlestick Basics

Single candles

Pattern	Visual	Meaning
Long red (long bull)	Long body, short wicks	Bulls dominate (in TW: red = up)
Long black (long bear)	Long body, short wicks	Bears dominate (in TW: black = down)
Doji	Tiny body, equal upper/lower wicks	Indecision; reversal hint
Long upper wick	Upper wick > 2x body	Selling pressure above (shooting star)
Long lower wick	Lower wick > 2x body	Buying pressure below (hammer)

TW convention: Taiwan candles are red-up / black-down (opposite of US convention). Calibrate when reading TA books.

Common combinations

Pattern	Where	Meaning
Morning Star	Bottom	Down → doji → up; bottom-reversal signal
Evening Star	Top	Up → doji → down; top-reversal signal
Engulfing	Top / Bottom	Second bar fully engulfs the first; strong reversal
Three white soldiers	Bottom	Three rising bull candles; bullish setup
Three black crows	Top	Three falling bear candles; bearish move
Island reversal	Top / Bottom	Gap up then gap down (or reverse); strong reversal

Usage rules

1. Don't decide on a single candle. It's a clue, not a conclusion.
2. Pair with location and volume. A doji mid-trend is not the same as a doji at a key support.
3. Daily for short term, weekly for medium term, monthly for long term. Signals across timeframes can conflict — defer to the longer frame.

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2. Moving Averages

Common MAs

MA	Tag	Type	Represents
5-day	MA5	Short	Weekly average — ultra-short trading line
10-day	MA10	Short	Two-week average
20-day	MA20	Short-mid	Monthly line — most-watched by retail
60-day	MA60	Mid	Quarterly line — institutional cost line
120-day	MA120	Mid-long	Half-year line
240-day	MA240	Long	Annual line — long-term bull/bear divider

MA stacking

Stack	Pattern	Meaning
Bullish stack	MA5 > MA20 > MA60 > MA120 > MA240	Strong uptrend
Bearish stack	MA5 < MA20 < MA60 < MA120 < MA240	Strong downtrend
Tangle	All MAs converged	Imminent breakout, direction unconfirmed

MA signals

Signal	Meaning	Note
Golden cross	Short MA crosses up through long MA	Bull start, but volume must confirm
Death cross	Short MA crosses down through long MA	Bear start
Reclaim MA20	Close > MA20	First step in short-term strength
Lose MA60	Close < MA60	Mid-term weakness; institutional cost line breached
Lose MA240	Close < MA240	Long-term bull/bear flip warning

Rules

4. MAs are lagging indicators. They confirm trend, not predict reversals.
5. After a break, watch for "holding" vs "false break". Three consecutive closes above/below is more reliable.
6. In bullish stacks, look for pullback buys (test MA, hold). In bearish stacks, look for rebound shorts.

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3. Indicators

MACD (Moving Average Convergence Divergence)

• Components: DIF, MACD (signal), histogram
• Default: 12, 26, 9

Signal	Meaning
DIF crosses up MACD (golden cross)	Bull momentum strengthening
DIF crosses down MACD (death cross)	Bear momentum strengthening
Histogram flips from negative to positive	Down momentum easing; potential reversal
Histogram shrinks consecutively	Current trend losing strength
Bearish divergence (price new high, DIF doesn't)	Top — pullback expected
Bullish divergence (price new low, DIF doesn't)	Bottom — rebound expected

Key: MACD divergence is one of the strongest reversal signals in TA.

RSI (Relative Strength Index)

• Range: 0–100
• Default: RSI(14)

Range	Meaning
RSI > 80	Overbought; short-term pullback risk high
RSI < 20	Oversold; rebound likely
Around RSI 50	Bull/bear divider; follow trend direction
RSI divergence	Same logic as MACD divergence

Note: strong stocks can stay above RSI 80 for weeks. Overbought ≠ "must drop" — it just means "risen too fast".

KD (Stochastic)

• Components: K and D lines (D = smoothed K)
• Range: 0–100
• Default: 9, 3, 3

Signal	Meaning
K crosses up D (golden cross)	Short-term buy
K crosses down D (death cross)	Short-term sell
KD > 80	Overbought zone
KD < 20	Oversold zone
Sustained low (KD < 20)	Oversold but pressure persists; don't catch a falling knife
Sustained high (KD > 80)	Overbought but momentum continues; don't fade the top

KD vs RSI: KD is more sensitive (short-term); RSI is steadier (mid-term).

Bollinger Bands

• Components: middle (MA20), upper (+2σ), lower (−2σ)
• Statistically ~95% of price action stays inside the bands.

Pattern	Meaning
Touches upper	Short-term hot, but strong trends can ride it (not a sell)
Touches lower	Short-term cold, but weak trends can ride it (not a buy)
Squeeze (narrowing)	Volatility low; breakout pending. Direction unknown.
Sudden expansion	Trend ignition; follow the breakout direction
Drops below lower then closes back inside	False break; rebound signal

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4. Volume-Price Relationships

Core principle

Volume leads price. Price moves without volume confirmation are unreliable.

Combination	Meaning
Up + volume up	Healthy advance, bulls confident
Up + volume down	Chase momentum fading; rally may top
Down + volume up	Panic selling, but could also be a shakeout (depends on level)
Down + volume down	Selling pressure easing; possibly approaching a bottom
Massive bull candle on huge volume	Breakout (most meaningful at the bottom of a range)
Massive bear candle on huge volume	Bull-to-bull capitulation / distribution (most dangerous at highs)
Up on flat volume	Suspicious advance; persistence questionable

Volume baselines

7. "Massive volume" = volume > 2× the 20-day average.
8. "Low volume" = volume < 50% of the 20-day average.
9. Use relative volume. TSMC's 30,000-lot daily average vs a small cap's 300-lot daily average aren't directly comparable.

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5. Support and Resistance

Support (where buyers tend to appear)

Source	Notes
Prior low	Buyers often catch the prior low
Moving averages	MA20, MA60, MA240 are dynamic supports
Upper edge of an unfilled gap	Unfilled gaps = strong support
Round numbers	Psychological levels (NT$100, NT$500)
Bottom of high-volume node	Lower bound of a big-volume zone

Resistance (where sellers tend to appear)

Source	Notes
Prior high	Sellers often take profit at the prior high
Moving averages (in bearish stack)	MAs become resistance in a downtrend
Lower edge of a downward gap	Gap-down lower edge = resistance
Trapped supply zone	Prior high-volume sideways zone — "trapped" longs sell on recovery

Support/resistance flip

10. Support broken becomes resistance; resistance broken becomes support. One of the most fundamental rules in TA.

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6. Price Patterns

Reversal patterns

Pattern	Where	Meaning
Head and shoulders top	Top	LS-Head-RS, breakdown of neckline confirms downside
Inverse head and shoulders	Bottom	Mirror; neckline breakout confirms upside
Double top (M)	Top	Two failed pushes through resistance
Double bottom (W)	Bottom	Two successful holds at support
Rounded top / bottom	Top / Bottom	Slow reversal, energy gradually shifting

Continuation patterns

Pattern	Meaning
Flag	Small counter-trend consolidation; resumes prior direction on completion
Triangle convergence	Highs and lows converge; breakout direction = trend direction
Box / range	Sideways within a band; long on upside break, short on downside break

Pattern usage

11. All patterns must be "confirmed" before they count. H&S top requires neckline break; triangle requires edge break. Until then, "tentative".
12. Volume must agree. Reversal completion should be accompanied by volume on the breakout side.
13. Timeframe matters. A weekly pattern beats a daily one (a weekly W-bottom is far more reliable).

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7. Multi-Indicator Confluence

A single indicator can deceive. Multiple indicators pointing the same way is what counts.

Entry signal (≥ 3 of 5)

• Trend: price above MA20; MAs in bullish stack (or at least not bearish)
• Volume: recent breakout on heavy volume, or volume-price agreement
• Indicators: MACD golden cross or histogram flip; RSI > 50
• Pattern: bottom-reversal candle near a support level
• No bearish divergence on MACD or RSI

Exit / caution signal (any 2 of 4)

• Price loses MA20 and doesn't reclaim within 3 days
• MACD death cross or bearish divergence
• Massive bearish candle on heavy volume
• Loses key support (prior low, gap, neckline)

Cross-timeframe integration

Larger frame (weekly)	Smaller frame (daily)	Strategy
Bullish	Bullish	Aggressive long
Bullish	Pullback	Wait for pullback to end (best buy)
Bearish	Rebound	Watch or scalp the bounce (high risk)
Bearish	Bearish	Sit in cash

14. The larger frame sets direction; the smaller frame sets timing. Don't size up on a weekly bear because of a daily golden cross.

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8. Common Traps

Trap	Description	Counter
False breakout	Price pokes through resistance and pulls back	Wait for close + next-day hold
Indicator saturation	KD / RSI stays in extreme zone for a long time	In strong trends saturation is normal — don't fade
Single-indicator decisions	Buying on RSI oversold or MACD golden cross alone	Wait for confluence
Ignoring index regime	A great single-stock setup can't survive an index crash	Read the index trend first
Screen addiction	Watching tick-by-tick, emotional decisions	Set entry/exit conditions, walk away
Hindsight bias	"It was so obvious here"	Decide only on what's visible at the moment
Predicting instead of following	"I think it'll reverse"	Wait for the signal

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9. Pre-Decision Checklist

Before any technical decision:

• TAIEX trend direction (above or below MA20)
• Stock's regime: up / down / range?
• MA stacking (bullish / bearish / tangled)
• Recent support and resistance levels
• Volume-price agreement (volume on rallies vs not)
• MACD direction (golden / death cross) and any divergence
• RSI / KD zone (normal / overbought / oversold)
• Bollinger width (squeeze or expanding)
• Any completed pattern (H&S top, W-bottom, etc.)
• Alignment with fundamentals and chip flow

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10. Integrating with Fundamentals and Chip Flow

Fundamentals	Chip flow	Technicals	Verdict
Good	Good	Good	Best entry
Good	Good	Bad	Wait for technicals to turn (reclaim support)
Good	Bad	Good	Technicals may be just a bounce; cautious
Bad	—	Good	Pure technical play, short-term mindset, hard stop

Three-way confluence is the highest-probability entry. Any leg missing → smaller size or wait.

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Related Skills

• tw-stock-fundamental — fundamentals: "is it worth owning?"
• tw-stock-chip — chip flow: "who's buying?"
• tw-stock-quant — turning patterns into a backtest
• tw-stock-data — sourcing the data
• tw-stock-options — TAIEX options
• rules/trading-discipline — entry/exit discipline