TECHNICAL ANALYSIS

Introduction: -Process of understanding trend reversals to strategize BUY-SELL Decision - Price & Volume relationship - Demand & Supply relationship

Assumptions: 1. Price of the share is determined by interaction by Demand and Supply 2. Market moves in trend 3. Historic occurrence will facilitate the layman to predict the possible share price in the future (History repeats) 4. Price quoted for a prospective BUY, will consists of all information, perhaps directs the Demand and Supply of shares

DOW Theory
Introduction: -Charles H Dow, 1984 Hypotheses: 1. No individual investor can influence trend of the market 2. Market Discounts everything 3. It is a tool to structure our investment decision but not to beat the market
P3

Primary Trend: Bull Market

Price

P2 P1 B2 B1

Artificial or Speculative

Competitive Edge

Winning Investors Confidence Days

DOW Theory

Primary Trend: Bear Market

Price

P1

Loss of Confidence P2 Business slow down B1 B2 P3 Aggressive Selling

Days

DOW Theory

Secondary Trend:
Price
33% to 66% 33% to 66% Days

Support and Resistance Level

Indicators
1. Volume of trade 2. Market Breadth

3. Short Sales

MOVING AVERAGE STOCK BUY-SELL DECISION

Relative Strength Index - RSI

-Developed by Wells Wilder - Used to identify the inherent strength and weakness of the scrip
RSI = 100-[100/1+RS] RS = Average gain per day/Average Loss per day
Date 08/11/11 09/11/11 10/11/11 11/11/11 14/11/11 15/11/11 Average Price 200 210 208 205 213 214 Gain -10 --8 1 19/3=6.33 Loss --2 3 --5/2=2.5 RS = 6.33/2.5 = 2.532 RSI = 100-[100/1+2.532] RSI = 100-28.31 RSI = 71.69

Charts Point & Figure Chart

20 25 26 31 22 24 27 30 23 23 28 31 19 25 29 29 20 26 30 28 21 28 31 27 22 30 26 25 23 27 27 29 25 26 28 30 26 25 30 31

P 31 30 29 28 27 26 25

H +

H + +

H +

H + +

+ +

0 0

+ 0 + + 0 + + 0 0

+ + + 0

+ +

0 0

24
23 22 21 20 19 + 0 + + + + + +

0
0

Japanese Candle stick

- 16th Century Japanese rice trader - Introduced to western by Steve Nison

Examples of DOJI Candle stick