This blog explains how alwrity does basic financial technical analysis. There is lot of scope for improvement, which will be implemented, as this tool gain popularity. Presently, this is supported with commandline Alwrity tool on github.
This guide provides a step-by-step approach to conducting robust technical analysis (TA) using Python's versatile libraries and ChatGPT's interpretive power. We'll seamlessly integrate data acquisition, indicator calculation, AI-driven insights, and visualization for a comprehensive analysis.
Here's how we'll unlock powerful insights:
Data Acquisition and Indicator Computation:
Extract Historical Stock Data: We'll use the yfinance library to effortlessly obtain historical stock price data for your chosen asset.
Calculate Technical Indicators: Next, we'll leverage the pandas_ta library to compute a diverse set of technical indicators, establishing a solid foundation for our analysis.
Engaging ChatGPT for Analysis and Forecasting:
Craft a Precise Prompt: We'll carefully extract the calculated indicator values from the most recent trading day and structure a clear prompt for ChatGPT.
AI-Powered Insights: ChatGPT will then analyze these indicators, identifying potential trading signals and revealing significant patterns.
Forecasting Future Trends: We'll harness ChatGPT's predictive capabilities to forecast the future direction of stock prices based on the analyzed data.
Visualizing Trends for Enhanced Understanding:
Generate Informative Charts: To complement ChatGPT's analysis, we'll create compelling visualizations of historical indicator trends. This visual representation will help us validate the AI's interpretations, spot divergences or confirmations, and gain a deeper understanding of market dynamics.
By integrating the power of Python's data handling with ChatGPT's analytical capabilities, this workflow empowers you to conduct in-depth stock TA and make more informed trading decisions.
prompt = f"""
You are a seasoned Technical Analysis (TA) expert, rivaling legends like Charles Dow, John Bollinger, and Alan Andrews. Your deep understanding of market dynamics, coupled with mastery of technical indicators, allows you to decipher complex patterns and offer precise predictions.Your expertise extends to practical tools like the pandas_ta module, enabling you to extract valuable insights from raw data.
**Objective:**
Analyze the provided technical indicators for {symbol} on its last trading day and predict its price movement over the next few trading sessions.
**Instructions:**
1. **Identify Potential Trading Signals:** Highlight specific indicators suggesting bullish, bearish, or neutral signals. Explain the rationale behind each signal, referencing historical patterns or comparable market scenarios.
2. **Detect Patterns and Divergences:** Analyze the interplay between different indicators. Detect patterns like moving average crossovers, candlestick formations, or divergences between price action and indicators. Explain the significance of each pattern.
3. **Price Movement Prediction:** Based on your analysis, provide a clear prediction for {symbol}'s price movement in the next few days. State the expected direction (up, down, sideways) and potential price targets if identifiable.
4. **Risk Assessment:** Briefly discuss any potential risks or factors that could invalidate your predictions, promoting a balanced and informed perspective.
**Technical Indicators for {symbol} on the Last Trading Day:**{last_day_summary}
Remember, your analysis should be detailed, insightful, and actionable for traders seeking to capitalize on market movements.
"""Alwrity uses the above prompt and feeds in the data through python yfinance module.
An example run for Alibaba stocks, symbol BABA:
[2024-05-15 12:41:42,361-INFO-finance_data_researcher-96]- Stock data fetched for BABA from 2024-01-16 12:41:39.355513 to 2024-05-15 12:41:39.355513
[2024-05-15 12:41:42,404-INFO-finance_data_researcher-47]- Technical indicators calculated successfully.
[2024-05-15 12:41:42,404-INFO-finance_data_researcher-71]- Last day summary extracted.
Summary of Technical Indicators for the Last Day:
Adj Close 79.510002
MACD_12_26_9 2.265277
MACD_histogram_12_26_9 0.453024
RSI_14 56.460648
BBL_5_2.0 76.105134
BBM_5_2.0 80.414000
BBU_5_2.0 84.722866
SMA_20 76.333501
EMA_50 75.265963
OBV_in_million 270.830800
STOCHk_14_3_3 76.023236
STOCHd_14_3_3 79.611220
ADX_14 25.889151
WILLR_14 -49.039732
CMF_20 0.319653
PSARl_0.02_0.2 77.355657
PSARs_0.02_0.2 NaN
Name: 2024-05-14 00:00:00, dtype: float64
INFO|ai_financial_writer.py:52:gen_finta_report| Generating Financial Technical report..
INFO|main_text_generation.py:102:get_api_key| Using API key for google
INFO|main_text_generation.py:38:llm_text_gen| Using Google Gemini Pro text generation model.
INFO|gemini_pro_text.py:30:gemini_text_response| Temp: 0.6, MaxTokens: 4096, TopP: 0.9, N: 1
**1. Potential Trading Signals:**
* **Bullish Signals:**
* MACD Histogram (0.453024) is positive and rising, indicating bullish momentum.
* RSI (56.4
60648) is above 50, suggesting a bullish trend.
* OBV (270.830800) is trending higher, confirming bullish volume.
* **Bearish Signals:**
* Bollinger Bands (BBU at 84.7
22866) are wide, indicating high volatility and potential for a pullback.
* PSAR (PSARl at 77.355657) is below the current price, indicating a potential downtrend.
* Williams %R (-49.039732) is in the oversold zone, suggesting a potential correction.
* **Neutral Signals:**
* Stochastic Oscillator (STOCHk and STOCHd above 70) is in the overbought zone, indicating a potential loss of momentum.
* Average Directional Index (ADX
at 25.889151) is above 25, suggesting a strong trend, but the direction is unclear.
**2. Patterns and Divergences:**
* **Moving Average Crossover:** The 50-day EMA (75.265963) is below the 20-day SMA (76.333501), indicating a potential bearish crossover.
* **Divergence:** The RSI is trending higher while the price action is consolidating, suggesting a potential bullish divergence.
**3. Price Movement Prediction:**
Based on the analysis above, I predict that BABA will experience a **sideways to slightly bearish** movement in the next few trading sessions.
* The bullish signals suggest that there is still some underlying strength in the trend.
* However, the bearish signals and patterns indicate that a pullback or correction is likely.
* The overbought Stochastic Oscillator and the potential bearish crossover in the moving averages support this view.
**Potential Price Targets:**
* **Upside:** If the bullish momentum continues, BABA could retest the Bollinger Band upper boundary (BBU at 84.722866).
* **Down
side:** If the bearish signals prevail, BABA could retrace to the Bollinger Band lower boundary (BBL at 76.105134) or even lower.
**4. Risk Assessment:**
* **Potential Invalidating Factors:**
* A strong positive earnings report or other positive news could invalidate the bearish prediction and drive prices higher.
* A sharp increase in volatility could lead to a breakout in either direction.
* **Recommendations:**
* Traders should monitor the price action closely and adjust their positions accordingly.
* Consider using stop-loss orders to manage risk.
* Wait for confirmation of a trend reversal before entering new positions.
Future Enhancements for AI finance Writer:
1). Include option of uploading documents like pdf, excel etc and get analysis from them.
2). Give option to select which reports, analysis, charts and data is needed, as per trading strategies.
3). Include Option for providing URLs and News items.
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