Learning Guide
How to Read a
Stock Prediction
This guide teaches you how Murphy Trend analyses any stock — what each indicator means, how the outlook score is calculated, and how to interpret the 30, 60, and 90-day price predictions. Based on John J. Murphy's Technical Analysis of the Financial Markets.
Try an AnalysisHow to Use the App — Step by Step
Follow these four steps each time you analyse a stock.
Go to Analyze and type any US stock or ETF ticker (e.g. AAPL, SPY, NVDA).
The app fetches 2 years of daily price data from Yahoo Finance and runs all indicators automatically.
The headline result is a score from −1.0 to +1.0 and a verdict:
The signals table shows every indicator (trend, MAs, RSI, MACD, volume, Bollinger Bands) and whether it is bullish, bearish, or neutral. Look for agreement — when 7+ signals point the same way, the case for that direction is stronger.
The 30, 60, and 90-day price targets are calculated using measured-move rules and Fibonacci extensions from the most recent swing. They represent potential paths if the current trend continues — not guaranteed outcomes. Always use alongside the outlook score.
How the Outlook Score Works
Each technical signal is scored +1 (bullish), 0 (neutral), or −1 (bearish) and multiplied by its importance weight. The final outlook is the weighted average of all active signals:
A score near +1.0 means almost every weighted indicator is bullish. Near −1.0 means almost everything is bearish. Near 0 means the market is sending mixed signals — often the most honest answer.
Signal Weights
| Signal | Weight | Why it matters |
|---|---|---|
| Golden / Death Cross | 2.0 | Long-term structural shift confirmed by both MAs |
| Price Trend (HH/HL) | 1.5 | Dow Theory primary trend structure |
| RSI (14) | 1.5 | Momentum extremes and divergences |
| MACD Signal Cross | 1.5 | Trend + momentum confirmation |
| Price vs 50-day MA | 1.0 | Intermediate-term trend |
| Price vs 200-day MA | 1.0 | Long-term trend benchmark |
| MACD Histogram | 1.0 | Momentum acceleration / deceleration |
| Bollinger Bands %B | 1.0 | Volatility-adjusted price position |
| Volume Trend | 1.0 | Confirms or contradicts price direction |
| OBV (On-Balance Volume) | 1.0 | Accumulation vs. distribution pressure |
| Chart Patterns | varies | Each pattern contributes 1.0–1.5 when detected |
How 30 / 60 / 90-Day Predictions Work
Price targets are not guesses — they are calculated from Murphy's measured-move technique combined with Fibonacci extensions:
- Identify the most recent significant swing low and swing high
- Calculate the range of that swing (high − low)
- Project the range forward from the breakout / current price
- Scale the projection by 50 %, 100 %, and 150 % for the 30, 60, and 90-day horizons
- Clamp targets using Fibonacci 38.2 % / 61.8 % / 100 % extension levels
Example: Reading a Prediction
If the stock has risen $20 from its last swing low and is breaking out, the 30-day target projects a further 50 % of that range ($10) from the breakout point.
Projects 100 % of the measured move — the "full target" Murphy describes as the minimum expected if the pattern completes.
Projects 150 % of the measured move — an extended target if momentum continues, anchored by the nearest Fibonacci extension level.
Core Concepts from Murphy's Book
Understand what each indicator is telling you about the stock.
Dow Theory states the market moves in three trend types: primary (months–years), secondary (weeks–months), and minor (days).
- Uptrend: higher highs and higher lows — buyers in control
- Downtrend: lower highs and lower lows — sellers in control
- A trend stays in force until a significant support or resistance level breaks
- Murphy's rule: "the trend is your friend — until it ends"
- 50-day SMA: intermediate trend. Price above = bullish intermediate outlook.
- 200-day SMA: long-term benchmark — the most-watched MA on Wall Street.
- Golden Cross: 50-day crosses above 200-day. Major bullish signal — often marks the start of a new bull phase.
- Death Cross: 50-day crosses below 200-day. Major bearish signal. Weight of 2.0 in the outlook score.
RSI(14) measures momentum on a 0–100 scale. It answers: "Is the stock overbought or oversold?"
- Above 70: overbought — price stretched, watch for pullback
- Below 30: oversold — selling may be exhausted, watch for bounce
- Bullish divergence: price makes lower low, RSI makes higher low — downtrend weakening
- Bearish divergence: price makes higher high, RSI makes lower high — uptrend losing steam
Moving Average Convergence Divergence combines trend-following with momentum. It answers: "Is momentum accelerating or fading?"
- Signal line cross: MACD above signal = bullish momentum; below = bearish
- Zero line cross: MACD crossing zero confirms the trend direction
- Histogram: growing bars = accelerating momentum; shrinking = fading move
Bands = 20-day SMA ± 2 standard deviations. They adapt to volatility. Key question: "Where is price relative to its normal range?"
- Upper band touch: overbought in ranging market; trend continuation in strong trend
- Lower band touch: oversold; potential support
- Squeeze: narrow bands signal low volatility — a big move is coming. The breakout direction is the signal.
- %B > 1: price above upper band (rare, extreme momentum)
Murphy's rule: volume should expand in the direction of the trend. It answers: "Is smart money behind this move?"
- Rising price + rising volume = healthy uptrend (institutional buying)
- Rising price + falling volume = distribution; rally losing conviction
- OBV: running total — up-day volume minus down-day volume
- OBV trending up before price = accumulation — a leading bullish signal
- Support: price level where buyers have historically stepped in to stop a decline
- Resistance: price level where sellers have historically capped a rally
- Role reversal: once broken, support becomes resistance and vice versa — one of Murphy's most reliable principles
- The more times a level is tested without breaking, the stronger it is
- Support and resistance levels shown on the chart as dashed lines
After a big move, markets often pull back a predictable fraction before resuming. Question: "How deep is this pullback likely to go?"
- 38.2% — shallow retracement; strong underlying trend
- 50.0% — most common; Dow Theory "half-way" rule
- 61.8% — "Golden ratio"; deepest normal pullback before trend resumes
- A break below 61.8% often signals trend reversal, not just a pullback
Reversal patterns — signal the trend is changing:
- Head & Shoulders: three peaks (higher centre) — bearish reversal on neckline break
- Double Top / Bottom: two tests of the same level — trend exhaustion
Continuation patterns — trend pausing before resuming:
- Flags / Pennants: brief consolidation after a sharp move — highly reliable
- Triangles: converging highs and lows; breakout direction = signal
A gap occurs when today's price range does not overlap with yesterday's — leaving a blank on the chart.
- Breakaway Gap: at the start of a new trend on high volume — most significant
- Runaway Gap: mid-trend acceleration; often marks the midpoint of the move
- Exhaustion Gap: near the end of a trend, followed by a quick reversal
Key Reversal Day:
- Bearish: new high for the move, closes below prior day's close — buying exhaustion
- Bullish: new low for the move, closes above prior day's close — selling exhaustion
When you run an analysis, look for these patterns in the result:
- Strong agreement: if 8 or more signals align in the same direction, the thesis is strong
- Conflicting signals: a neutral score does not mean "do nothing" — it means uncertainty. The chart and volume may reveal which side has the edge.
- High-weight signals: a Golden/Death Cross (weight 2.0) matters more than a single RSI reading. Check which high-weight signals are active.
- Price targets vs. score: always read targets in the context of the outlook score. A bearish score with a bullish target = use caution.
- Support / resistance levels: price targets near major resistance levels are more likely to stall — factor that in.
Ready to Analyse a Stock?
Enter any ticker to get a full Murphy technical analysis — outlook score, all signals, chart patterns, and 30/60/90-day price targets.