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(Submitted in Partial Fulfillment of the Award of the Degree of Master in Management Studies of University of Mumbai)
(Lokesh Oswal) Roll No. 162
UNDER THE GUIDANCE OF (Dr. Kaustubh Sontakke)
MMS 2011-13 PILLAI INSTITUTE OF MANAGEMENT STUDIES AND RESEARCH, NEW PANVEL
I, Mr. Lokesh Oswal of Pillai‟s Institute of Management Studies and Research hereby declare that the Project Work titled “Commodity Market” submitted as part of my curriculum of MMS degree is the original work done by me the project has not formed the basis for an award of any degree, associate ship, fellowship or any similar titles.
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This project work is original and not submitted earlier for the award of any degree/ diploma of this or any other University/ Institution.CERTIFICATE This is to certify that the Project Work titled “Technical Analysis” is a bonafide work of Mr. Lokesh Oswal carried out in partial fulfillment for the award of degree of MMS under my guidance. Name of the Guide Dr. Kaustubh Sontakke Director Place: Date: 4 .
I got an opportunity to understand the capital market at Edelweiss financial ltd. So I am very thankful to Edelweiss financial ltd for giving me such opportunity. Also I would like to acknowledge my deepest sense of gratitude all my faculty members and Mentor (Dr. Kaustubh Sontakke) under whose guidance I was able to complete my project. Date Signature of Student 5 .ACKNOWLEDGEMENT If words are considered as a symbol of approval and token of appreciation then let the words play the heralding role expressing my gratitude. While training I learnt many things about capital market and its structure.
NO. 07 09 11 12 14 27 34 35 46 59 60 6 .TABLE OF CONTENTS S. 1 2 3 4 5 6 7 8 9 10 11 PARTICULARS Introduction Company Profile Technical analysis Drawbacks / limitations of technical analysis Tools & Instruments in technical analysis Trends In Technical Analysis Why Volume Is Important Chart Patterns Technical analysis of Stock “Power Grid” Conclusion Bibliography PAGE NO.
Be ruthless & calculating. calculations are based on considered FACTS & not on HOPE. you are out to make money. Decision should be based on actual movement of share price measured both in money & percentage term & nothing else. Technical analysis refers to the study of market generated data like prices & volume to determine the future direction of prices movements. the attempt to determine future share price movement & its reliability by references to historical data is a vast one. i. The financial analysts always need yardsticks to evaluate the efficiency & performances of any business unit at the time of investment. 7 . but does discuss a method which enables the investor to arrive at buying & selling decision. The focus of technical analysis is mainly on the internal market data.e. i. In Fundamental analysis a company‟s goodwill. It should be pointed out that. Technical analysis mainly seeks to predict the short term price travels. turnover. watchful attention. its performances. leverage.e. It is the oldest approach to equity investment dating back to the late 19th century.INTRODUCTION :WHAT’S THIS EQUITY ANALYSIS? Professional investor will make more money & less loss than. Their head eliminate all emotions for decision making. A general investor can apply the principles by using the simplest of tools: pocket calculator. namely fundamental analysis & Technical analysis. covering many aspect from the calculating various FINANCIAL RATIOS. this equity analysis does not discuss how to buy & sell shares. plotting of CHARTS to extremely sophisticated indicators. The subject of Equity analysis. Fundamental analysis is useful in long term investment decision. profitability & financial health was checked & analysis with the help of ratio analysis for the purpose of long term successful investment. It appeals mainly to short term traders. Equity analysis is basically a combination of two independent analyses. Greed must be avoided Patience may be a virtue. but impatience can frequently be profitable. In Equity Analysis anticipated growth. who let their heart rule. liquidity. prices & volume data. pencil. chart paper & your cautious mind. ruler.
8. but with low reliability. 9. risk management was up to the investor s knowledge. it also works in abnormal share-market conditions. tradition s & trust. so don t are curious or panic to do Post-mortem of companies performances. Although the equity analysis is art as well as sciences so. Capital market trend is always a friend. whether it is short run or long run. Cash management gets the magnitude role. 6. because the scenario of equity analysis is revolving around the term money 4. Works only in normal share-market conditions with great reliability. Capital market has a typical market psychology along with other issues like. 3. EQUITY ANALYSIS. 7. so the investment object has vital importance associated to return along with risk. the crowd Vc the individual. FUNDAMENTAL ANALYSIS TECHNICAL ANALYSIS 8 . Equity analysis is purely based on the INVESTMENT PHILOSOPHY . You are buying stock & not companies. perceptions. Portfolio management. ENVIRONMENT & ECONOMICAL ANALYSIS. 5. 2. History repeats: investors & speculators react the same way to the same types of events homogeneously. 10.Assumptions for the Equity Analysis. it also has some exceptions. An individual perceptions about the investment return & associated risk may differ from individual to individual. 1.
Housing Finance and Insurance services. Independent Director Mr. Independent Director Mr. Executive Director Mr. Kunnasagaran Chinniah. Sanjiv Misra.Company Profile Edelweiss is one of India's leading Financial Services Groups. Executive Director Mr. Rashesh Shah. Narendra Jhaveri. Mission To be the most preferred financial hub for wealth creation Vision To figure among the top Five Financial Powerhouses in India in next five years Management Mr. Credit. Capital Markets. Independent Director Their operations straddle the entire spectrum of financial services in the wholesale and retail market segments including Asset Management. Himanshu Kaji. Berjis Desai. Venkat Ramaswamy. Independent Director Mr. Independent Director Mr. one of the youngest populations in the world and strong domestic consumption. with operations that span more than forty different lines of business and subsidiaries. Sunil Mitra. Non-Executive Director Mr. 9 . Chairman & CEO Mr. P N Venkatachalam. India‟s growth story is driven by a savings rate of about 32%.
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It is because of this assumption that many think technical analysis is a tool. He recognized that the movement is caused by the action/reaction of the people dealing in stocks rather than the news in itself. For that matter a verity of tools was consider. such as past prices and volume. It is the tool of financial analysis. Technical analysts do not attempt to measure a security's intrinsic value. It also provides the base for decision-making in investment. The one of the most frequently used yardstick to check & analyze underlying price progress. Technical analysis involves the use of various methods for charting. History of Technical Analysis: Technical Analysis as a tool of investment for the average investor thrived in the late nineteenth century when Charles Dow. prices & volume data. Technical Analysis assumes that the market is efficient and the price has already taken into consideration the other factors related to the company and the industry. which not only studies but also reflecting the numerical & graphical relationship between the important financial factors. 11 .Technical analysis :“Technical analysis refers to the study of market generated data like prices & volume to determine the future direction of prices movements. calculating & interpreting graph & chart to assess the performances & status of the price. It appeals mainly to short term traders. It is important criteria for selecting the company to invest.e. This Technical analysis is helpful to general investor in many ways. i. which is effective for short-term investing. In fact the decision made on the basis of technical analysis is done only after inferring a trend and judging the future movement of the stock on the basis of the trend. Technical analysis is a method of evaluating securities by analyzing the Statistics generated by market activity. It provides important & vital information regarding the current price position of the company. then editor of the Wall Street Journal. The focus of technical analysis is mainly on the internal market data. It is the oldest approach to equity investment dating back to the late 19th century. Just as there are many investment styles on the fundamental side.” Technical analysis mainly seeks to predict the short term price travels. It uses charts and computer programs to study the stock‟s trading volume and price movements in the hope of identifying a trend . but instead use charts and other tools to identify patterns that can suggest future activity. proposed the Dow theory.
Drawbacks / limitations of technical analysis: 1. Basic premises of technical analysis: 1. The technical analysis must be a self defeating proposition. The persistence of trends & patterns analysis of past market data can be used to predict future prices behavior. most traders will focus on using technical indicators to find and place their trades. The technical analysis failed to signal an uptrend or downtrend in time. 3. 2. Supply & demand are influenced by variety of supply & demand affiliated factors both rational & irrational. a trend is forming. 5. 4. Technical analysis does not able to explain the rezones behind the employment or selection of specific tool of Technical analysis. 3. others use technical indicators and oscillators. 2) On a chart. These include fundamental factors as well as psychological factors. technical analysts don't care whether a stock is undervalued the only thing that matters is a security's past trading data and what information this data can provide about where the Security might move in the future. As more & more people use. Market prices are determined by the interaction of supply & demand forces. 2. the trader can see where momentum is rising. 12 . With the constant movement of various currencies against each other in the Forex market. Some rely on chart patterns. 6. and most use some combination of the two. employ it the value of such analysis trends to reduce. Why we use TECHNICAL ANALYSIS? 1) Technical analysis provides information on the best entry and exit points for a trade. Barring minor deviations stock prices tend to move in fairly persistent trends. a price is dipping or other events are developing that show the best entry point and time for the most profitable trade. Shifts in demand & supply bring about change in trends. Unlike fundamental analysts.there are also many different types of technical traders.
Technical analysis is the process of analyzing a security's historical prices in an effort to determine probable future prices. The future can be found in the past If prices are based on investor expectations. That's not to say that knowing what a security should sell for isn't important--it is. technical analysis looks at the price movement of a security and uses this data to predict its future price movements. current expectations) with comparable historical price action to predict a reasonable outcome.IS TECHNICAL ANALYSIS DIFFICULT? 1) Technical analysis is not difficult. Fundamental analysis. fundamental analysis) becomes less important than knowing what other investors expect it to sell for. 2) Computers and the Internet have made this process much easier.e. then knowing what a security should sell for (i. Fundamental analysis takes a relatively long-term approach to analyzing the market compared to technical analysis.e. knowing which technical indicators to use and how to use them. This is done by comparing current price action (i. colors. The devout technician might define this process as the fact that history repeats itself while others would suffice to say that we should learn from the past. But there is usually a fairly strong consensus of a stock's future earnings that the average investor cannot disprove. looks at economic factors. 3) One way to avoid getting frustrated by all the lines. While technical analysis can be used on a timeframe of weeks. As we've mentioned. but it requires studying different types of charts such as the hourly or daily charts. known as fundamentals. days or even minutes.. on the other hand. Fundamental vs. and graphics is to focus on using only a few indicators that will provide you with the information needed. 13 .. fundamental analysis often looks at data over a number of years. Try not to clutter your chart with too much information. Technical Analysis Technical analysis and fundamental analysis are the two main schools of thought in the financial markets. Most brokers provide basic charts and technical indicators for free or at a very low cost.
Close .e.e.e.. This relationship is emphasized in candlestick charts. Open interest is often used as an indicator. those that have not been exercised.This is the last price that the security traded during the period.e. 14 . When analyzing daily data. It is the point at which there were more sellers than buyers (i. It is the point at which there were more buyers than sellers (i.g. but the Low represents the lowest price sellers were willing to accept). Bid . closed. but the High represents the highest price buyers were willing to pay)." High .. the first trade of the day). the price you will pay to buy the security).This is the price a market maker is willing to accept (i..This is the price a market maker is willing to pay for a security (i. increasing prices accompanied with increasing volume) is important. the Open is especially important as it is the consensus price after all interested parties were able to "sleep on it. Volume . Low ..This is the highest price that the security traded during the period. Due to its availability. there are always buyers willing to buy at lower prices.This is the total number of outstanding contracts (i.This is the price of the first trade for the period (e.e..g.This is the lowest price that the security traded during the period. The relationship between the Open (the first price) and the Close (the last price) are considered significant by most technicians. or expired) of a future or option.Usually the following tools & instruments are used to do the technical analysis: Price Fields Technical analysis is based almost entirely on the analysis of price and volume. The relationship between prices and volume (e. there are always sellers willing to sell at higher prices. Open . Open Interest .. the price you will receive if you sell).. The fields which define a security's price and volume are explained below. Ask . the Close is the most often used price for analysis.This is the number of shares (or contracts) that were traded during the period.
Point and Figure Charts 1) Bar Charts : The highs and lows of a foreign currency are plotted in a diagram and the points are joined with vertical lines (bars). 3. A small horizontal tick to the left denotes the opening level while a small horizontal tick to the right represents the closing price of each interval.Price Styles Price in a chart can be displayed in four styles: 1. Line Chart. 4. Candlestick Chart. 2. 15 . Bar Chart.
official fixings. A candlestick is white if the closing price is higher than the opening price. Prices on the y-axis. This problem was remedied with the development of bar charts that represent amore sophisticated form of line chart 3) Candlestick Chart. It gives the detailed information about every aspect. 16 . The exchange rates for each time period are plotted in a diagram and the points are joined.2) Line Chart. A candlestick is black if the closing price is lower than the opening price. The line chart chooses for example the closing price of consecutive time periods. but can also work with daily. The relatively easy handling of line charts is a great advantage. This can be a problem because important information for exchange rate analysis can be lost. time on the x-axis. Line chart sdo not show price movements within a time period.
In the 1600s, the Japanese developed a method of technical analysis to analyze the price of rice contracts. This technique is called candlestick charting. Steven Nison is credited with popularizing candlestick charting and has become recognized as the leading expert on their interpretation. Candlestick charts display the open, high, low, and closing prices in a format similar to a modern-day bar chart, but in a manner that extenuates the relationship between the opening and closing prices. Candle stick charts are simply a new way of looking at prices, they don't involve any calculations. Because candlesticks display the relationship between the open, high, low, and closing prices, they cannot be displayed on securities that only have closing prices, nor were they intended to be displayed on securities that lack opening prices .
Bullish Patterns 1) Long white (empty) line. This is a bullish line. It occurs when prices open near the low and close significantly higher near the period's high.
2) Hammer. This is a bullish line. It occurs after a significant downtrend. If the line occurs after a significant up-trend, it is called a Hanging Man. A Hammer is identified by a small real body (i.e., a small range between the open and closing prices) and a long lower shadow (i.e., the low is significantly lower than the open, high, and lose).
3) Piercing line. This is a bullish pattern and the opposite of a dark cloud cover. The first line is a long black line and the second line is a long white line. The second line opens lower than the first line's low, but it closes more than halfway above the first line's real body.
4) Bullish engulfing lines. This pattern is strongly bullish if it occurs after a significant downtrend (i.e., it acts as a reversal pattern). It occurs when a small bearish (filled-in) line is engulfed by a large bullish (empty) line.
5) Morning star. This is a bullish pattern signifying a potential bottom. The "star" indicates a possible reversal and the bullish (empty) line confirms this. The star can be empty or filled-in.
This is a bearish line.. They are identified by small real bodies (i. 2) Hanging Man. These lines are bearish if they occur after a significant uptrend. The bodies can be empty or filled-in. It occurs when prices open near the high and close significantly lower near the period's low. 3) Dark cloud cover. The pattern is more significant if the second line's body is below the center of the previous line's body (as illustrated).e. If this pattern occurs after a significant downtrend. and close).. it is called a Hammer. the low was significantly lower than the open.e.Bearish Patterns 1) Long black (filled-in) line. 20 . This is a bearish pattern. a small range between the open and closing prices) and a long lower shadow (i. high.
e. The "star" indicates a possible reversal and the bearish (filled-in) line confirms this. This is a bearish pattern signifying a potential top.. 21 . This pattern is strongly bearish if it occurs after a significant uptrend (i. The star can be empty or filled in. It occurs when a small bullish (empty) line is engulfed by a large bearish (filled-in) line. 5) Evening star. it acts as a reversal pattern).4) Bearish engulfing lines.
Thus. A star indicates a reversal and a doji indicates indecision. as in the evening star illustration) before trading a doji star. 22 . It occurs when the open and close are the same. 2) Dragon-fly doji. This line also signifies a turning point. You should wait for a confirmation (e. Reversal Patterns 1) Long-legged doji. and the range between the high and low is relatively large.g..6) Doji star. It occurs when the open and close are the same. this pattern usually indicates a reversal following an indecisive period. This line often signifies a turning point. and the low is significantly lower than the open. high. and closing prices.
and the high is significantly higher than the open. A star indicates a reversal and a doji indicates indecision. Thus. It occurs when the open. and low are the same. Stars indicate reversals. where the real bodies do not overlap. as in the evening star illustration) before trading a doji star. 5) Doji star. and closing prices. 4) Star. low. A star is a line with a small real body that occurs after a line with a much larger real body. close.3) Gravestone doji.g. 23 . This line also signifies a turning point. The shadows may overlap. You should wait for a confirmation (e. this pattern usually indicates a reversal following an indecisive period..
2) Doji. These are neutral lines. This pattern indicates a decrease in momentum. are relatively small.Neutral Patterns 1) Spinning tops. The security opened and closed at the same price. They occur when the distance between the high and low. In this example. 24 . This implies a decrease in the bullish momentum. These lines can appear in several different patterns. This line implies indecision. a bullish (empty) line with a long body is followed by a weak bearish (filled in) line. It occurs when a line with a small body falls within the area of a larger body. 3) Harami ("pregnant" in English). and the distance between the open and close. Double doji lines (two adjacent doji lines) imply that a forceful move will follow a breakout from the current indecision.
or insignificant price movements. in the stock. This type of chart reflects price movements and is not as concerned about time and volume in the formulation of the points. except the second line is a doji (signifying indecision).4) Harami cross. These types of charts also try to neutralize the skewing effect that time has on chart analysis. which can distort traders' views of the price trends. The pattern is similar to a harami. Example Point And Figure Charts The point and figure chart is not well known or used by the average investor but it has had a long history of use dating back to the first technical traders. This pattern also indicates a decrease in momentum. The point and figure chart removes the noise. 25 .
26 . On most charts where the price is between $20 and $100. these represent months.When first looking at a point and figure chart. signaling a trend change. The reversal criteria set how much the price has to move away from the high or low in the price trend to create a new trend or. or vice versa. in other words. or 1 point for the stock. which adjusts depending on the price of the stock: the higher the stock's price the more each box represents. The Xs represent upward price trends and the Os represent downward price trends. There are also numbers and letters in the chart. The other critical point of a point and figure chart is the reversal criteria. a box represents $1. how much the price has to move in order for a column of Xs to become a column of Os. When the price trend has moved from one trend to another. and give investors an idea of the date. Each box on the chart represents the price scale. This is usually set at three but it can also be set according to the chartist's discretion. it shifts to the right. you will notice a series of Xs and Os.
Take a look at the chart below: Isn‟t it hard to see that the trend is up.TRENDS IN TECHNICAL ANALYSIS The Use of Trends One of the most important concepts in technical analysis is that of trend. it's not always this easy to see a trend: 27 . However. The meaning in finance isn't all that different from the general definition of the term .a trend is really nothing more than the general direction in which a security or market is headed.
defining a trend goes well beyond the obvious. you will probably notice that prices do not tend to move in a straight line in any direction. A More Formal Definition Unfortunately. but there isn't a clear indication of which direction this security is headed. an uptrend is classified as a series of higher highs and higher lows. it is the movement of the highs and lows that constitutes a trend. For example. trends are not always easy to see.There are lots of ups and downs in this chart. while a downtrend is one of lower lows and lower highs. but rather in a series of highs and lows. 28 . In other words. In technical analysis. In any given chart.
29 . Point 3 is the low that is established as the price falls from the high. For this to remain an uptrend each successive low must not fall below the previous lowest point or the trend is deemed a reversal. Point 2 in the chart is the first high.It is an example of an uptrend. which is determined after the price falls from this point.
Take a look a Figure 4 to get a sense of how these three trend lengths might look. Trend Lengths Along with these three trend directions.Uptrend 2. but a lack of a well-defined trend in either direction. A long-term trend is composed of several intermediate trends. a major trend is generally categorized as one lasting longer than a year. which often move against the direction of the major trend. A trend of any direction can be classified as a long-term trend. If you want to get really technical. the correction is considered to be an intermediate trend. it's referred to as an upward trend. it's a sideways or horizontal trend. 30 . it's a downtrend.Types of Trend There are three types of trend: 1. If the peaks and troughs are getting lower.Sideways/Horizontal Trends As the names imply. there are three trend classifications. you might even say that a sideways trend is actually not a trend on its own. when each successive peak and trough is higher. When there is little movement up or down in the peaks and troughs. The short-term trends are components of both major and intermediate trends. intermediate trend or a short-term trend. In terms of the stock market. If the major trend is upward and there is a downward correction in price movement followed by a continuation of the uptrend. An intermediate trend is considered to last between one and three months and a near-term trend is anything less than a month.Downtrend 3.
Daily data charts are best used when analyzing both intermediate and short-term trends. This line represents the support the stock has every time it moves from a high to a low. Trend Lines A trend line is a simple charting technique that adds a line to a chart to represent the trend in the market or a stock. Notice how the price is propped up by this support. it is important that the chart is constructed to best reflect the type of trend being analyzed. weekly charts or daily charts spanning a five-year period are used by chartists to get a better idea of the long-term trend.When analyzing trends. Drawing a trend line is as simple as drawing a straight line that follows a general trend. for example. the more important it is. These lines are used to clearly show the trend and are also used in the identification of trend reversals. This type of trend line helps traders to 31 . a one-month trend is not as significant as a five-year trend. An upward trend line is drawn at the lows of an upward trend. It is also important to remember that the longer the trend. To help identify long-term trends.
A channel can slope upward. in which case traders can expect a sharp move in the direction of the break. downward or sideways but. 32 . Traders will expect a given security to trade between the two levels of support and resistance until it breaks beyond one of the levels.anticipate the point at which a stock's price will begin moving upwards again. a downward trend line is drawn at the highs of the downward trend. Channels A channel. channels are mainly used to illustrate important areas of support and resistance. the interpretation remains the same. or channel lines. The upper trend line connects a series of highs. is the addition of two parallel trend lines that act as strong areas of support and resistance. Similarly. This line represents the resistance level that a stock faces every time the price moves from a low to a high. regardless of the direction. Along with clearly displaying the trend. while the lower trend line connects a series of lows.
The Importance Of Trend It is important to be able to understand and identify trends so that you can trade with rather than against them. the upper trend line has been placed on the highs and the lower trend line is on the lows. Two important sayings in technical analysis are "the trend is your friend" and "don't buck the trend. the range-bound downtrend is expected to continue. and has remained range-bound for several months." illustrating how important trend analysis is for technical traders.A descending channel on a stock chart. 33 . The price has bounced off of these lines several times. As long as the price does not fall below the lower line or move beyond the upper resistance.
Volume bars illustrate how many shares have traded per period and show trends in the same way that prices do. Why Volume Is Important? Volume is an important aspect of technical analysis because it is used to confirm trends and chart patterns. that a stock jumps 5% in one trading day after being in a long downtrend. usually a day. more relevant move than a similar move with weak volume. Say. the more active the security. The higher the volume. Is 34 . Any price movement up or down with relatively high volume is seen as a stronger. for example.IMPORTANCE OF VOLUME :What Is Volume? Volume is simply the number of shares or contracts that trade over a given period of time. To determine the movement of the volume (up or down). chartists look at the volume bars that can usually be found at the bottom of any chart.
which refers to a contradiction between two different indicators. Volume should move with the trend. if the volume is not there to confirm the pivotal moments of a chart pattern. and that these patterns signal a certain high probability move in a stock. there are several pivotal points that are vital to what the chart is able to convey to chartists. When volume tells a different story. This creates some leeway and debate as to what a good pattern looks like. Patterns such as head and shoulders. it is a sign that the reversal is probably for real. For example. it is usually a sign of weakness in the trend. triangles. volume should increase (and vice versa). history repeats itself. Chartists use these patterns to identify current trends and trend reversals and to trigger buy & sell signals. Based on the historic trend of a chart pattern setting up a certain price movement. Basically. The simplest example of divergence is a clear upward trend on declining volume. a process which we'll describe in more detail later in this tutorial. If prices are moving in an upward trend. flags and other price patterns can be confirmed with volume. Volume And Chart Patterns The other use of volume is to confirm chart patterns. we talked about the three assumptions of technical analysis.this a sign of a trend reversal? This is where volume helps traders. If the previous relationship between volume and price movements starts to deteriorate. In the first section of this tutorial. it is a sign that the trend is starting to lose its legs and may soon end. chartists look for these Patterns to identify trading opportunities. or a sign of future price movements. If volume is high during the day relative to the average daily volume. there is no chart pattern that will tell you with 100% certainty where a security is headed. the quality of the signal formed by the pattern is weakened. In most chart patterns. if the volume is below average. While there are general ideas and components to every chart pattern. On the other hand. and is a major reason why charting is often seen as 35 . The theory behind chart patterns is based on this assumption. if the stock is in an uptrend but the up trading days are marked with lower volume. CHART PATTERNS:A chart pattern is a distinct formation on a stock chart that creates a trading signal. there may not be enough conviction to support a true trend reversal. the third of which was that in technical analysis. The idea is that certain patterns are seen many times. it is a case of divergence.
signals that the security is likely to move against the previous trend. Remember that an upward trend is a period of successive rising 36 . the neckline is a level of support or resistance. These patterns can be found over charts of any timeframe. There are two types of patterns within this area of technical analysis. we will review some of the more Popular chart patterns. there are two versions of the head and shoulders chart pattern. As you can see. but is used to signal a reversal in a downtrend. Head and shoulders is a reversal chart pattern that when formed. Head and shoulders top is shown on the left. A reversal pattern signals that a prior trend will reverse upon completion of the pattern. each individual head and shoulder is comprised of a high and a low. Both of these head and shoulders patterns are similar in that there are four main parts: two shoulders. For example. Head and shoulders bottom or inverse head & shoulder is on the right. In this section. in the head and shoulders top image shown on the left side.Head And Shoulders This is one of the most popular and reliable chart patterns in technical analysis. on the other hand. a head and a neckline. In this pattern. the left shoulder is made up of a high followed by a low. also known as inverse head and shoulders (shown on the right) is the lesser known of the two. A continuation pattern. 1.more of an art than a science. Head and shoulders top (shown on the left) is a chart pattern that is formed at the high of an upward movement and signals that the upward trend is about to end. signals that a trend will continue once the pattern is complete. Also. reversal and continuation. Head and shoulders bottom.
The head and shoulders chart pattern. These patterns are formed after a sustained 37 .Cup And Handle A cup and handle chart is a bullish continuation pattern in which the upward trend has paused but will continue in an upward direction once the pattern is confirmed. The price pattern forms what looks like a cup. therefore. illustrates a weakening in a trend by showing the deterioration in the successive movements of the highs and lows.it is considered to be one of the most reliable and is commonly used.highs and rising lows. 3. the upward trend can continue. The handle follows the cup formation and is formed by a generally downward/sideways movement in the security's price. 2. which is preceded by an upward trend. Once the price movement pushes above the resistance lines formed in the handle.Double Tops And Bottoms This chart pattern is another well-known pattern that signals a trend reversal .
which vary in construct and implication. A double top pattern is shown on the left.In the case of the double top pattern.trend and signal to chartists that the trend is about to reverse. the trend reverses and the price heads lower. are the symmetrical triangle. 38 . In the case of a double bottom (shown on the right). The three types of triangles. This pattern is often used to signal intermediate and long-term trend reversals. 4. the price movement has tried to go lower twice. These chart patterns are considered to last anywhere from a couple of weeks to several months.Triangles Triangles are some of the most well-known chart patterns used in technical analysis. the price movement has twice tried to move above a certain price level. After the second bounce off of the support. The pattern is created when a price movement tests support or resistance levels twice and is unable to break through. ascending and descending triangle. while a double bottom pattern is shown on the right. After two unsuccessful attempts at pushing the price higher. but has found support each time. the security enters a new trend and heads upward.
In a descending triangle. In an ascending triangle. the lower trend line is flat and the upper trend line is descending. This pattern is neutral in that a breakout to the upside or downside is a confirmation of a trend in that direction. 5. the upper trend line is flat.The symmetrical is a pattern in which two trend lines converge toward each other. Flag And Pennants These two short-term chart patterns are continuation patterns that are formed when there is a sharp price movement followed by a generally sideways price movement. The patterns are generally thought to last from one to three weeks. This is generally seen as a bearish pattern where chartists look for a downside breakout. This pattern is then completed upon another sharp price movement in the same direction as the move that started the trend. 39 . while the bottom trend line is upward sloping. This is generally thought of as a bullish pattern in which chartists look for an upside breakout.
There is little difference between a pennant and a flag. with no convergence between the trend lines. 40 . much like what is seen in a symmetrical triangle. the trend is expected to continue when the price moves above the upper trend line 6. shows a channel pattern. usually between three and six months. The other difference is that wedges tend to form over longer periods. on the other hand. In both cases. In a pennant. It is similar to a symmetrical triangle except that the wedge pattern slants in an upward or downward direction. the middle section is characterized by converging trend lines.Wedge The wedge chart pattern can be either a continuation or reversal pattern. The middle section on the flag pattern. The main difference between these price movements can be seen in the middle section of the chart pattern. while the symmetrical triangle generally shows a sideways movement.
a falling wedge is bullish and a rising wedge is bearish. it would form a continuation pattern. or the struggle between buyers (demand) and sellers (supply). while a move below the lower trend line would signal a reversal pattern SUPPORT AND RESISTANCE : Once you understand the concept of a trend.The fact that wedges are classified as both continuation and reversal patterns can make reading signals confusing. If the price was to rise above the upper trend line. the next major concept is that of support and resistance. 41 . This is revealed by the prices a security seldom moves above (resistance) or below (support). You'll often hear technical analysts talk about the ongoing battle between the bulls and the bears. at the most basic level. However. We have a falling wedge in which two trend lines are converging in a downward direction.
On the other hand. 35. major psychological points as well. 50.000 tend be important in support and resistance levels because they often represent the major psychological turning points at which many traders will make buy or sell decisions. 100 and 1. in many cases. on the other hand. Buyers will often purchase large amounts of stock once the price starts to fall toward a major round number such as $50. Round numbers like 10. is the price level that a stock or market seldom surpasses (illustrated by the Red Arrows). the supply and demand and the psychology behind the stock's movements is thought to have shifted. in which case new levels of support and resistance likely be established. sellers start to sell off a stock as it moves toward a round number peak. 20. making it difficult to move past this upper level as well. It is the increased buying and selling pressure at these levels that makes them important points of support and resistance and. 42 . When these trend lines are broken.These support and resistance levels are seen as important in terms of market psychology and supply and demand. Support and resistance levels are the levels at which a lot of traders are willing to buy the stock (in the case of a support) or sell it (in the case of resistance). Round Numbers and Support and Resistance:One type of universal support and resistance that tends to be seen across a large number of securities is round numbers.Support is the price level through which a stock or market seldom falls (illustrated by the blue arrows). which makes it more difficult for shares to fall below the level. Resistance.
If the price falls below a support level. as you can see. causing the breached level to reverse its role. For example. Many traders who begin using technical analysis find this concept hard to believe and don't realize that this phenomenon occurs rather frequently. this phenomenon is evident on the Wal-Mart Stores Inc. Notice how the role of the $51 level changes from a strong level of support to a level of resistance. it is important that the price make a strong move through either the support or resistance. it will often become support. however. the dotted line is shown as a level of resistance that has prevented the price from heading higher on two previous occasions (Points 1 and 2). it is thought that supply and demand has shifted. that level will become resistance.Role Reversal Once a resistance or support level is broken. (WMT) chart between 2003 and 2006. it becomes a level of support (shown by Points 3 and 4) by propping up the price and preventing it from heading lower again. 43 . its role is reversed. even with some of the most well-known companies. However. If the price rises above a resistance level. For a true reversal to occur. As the price moves past a level of support or resistance. For example. once the resistance is broken.
Traders should avoid placing orders at these major points. however. not reversed.In almost every case. that a break beyond a level of support or resistance does not always have to be a reversal. it is important that you follow this simple rule: do not place orders directly at 44 . For example. the trend have accelerated. If you feel confident about making a trade near a support or resistance level. Being aware of these important support and resistance points should affect the way that you trade a stock. a stock will have both a level of support and a level of resistance and will trade in this range as it bounces between these levels. It is important to note. The Importance of Support and Resistance Support and resistance analysis is an important part of trends because it can be used to make trading decisions and identify when a trend is reversing. the trend is likely to continue. if prices moved above the resistance levels of an upward trending channel. Support and resistance levels both test and confirm trends and need to be monitored by anyone who uses technical analysis. As long as the price of the share remains between these levels of support and resistance. This means that the price appreciation is expected to be faster than it was in the channel. as the area around them is usually marked by a lot of volatility.
This is because in many cases.the support or resistance level. the price never actually reaches the whole number. Instead. but within a few points. if you are placing stops or short selling. place it above the support level. do not place the trade at the support level. So if you're bullish on a stock that is moving toward an important support level. but flirts with it instead. On the other hand. set up your trade price at or below the level of support Summary of charts 45 .
00% which is at par with the International Utilities. POWERGRID is committed to: a) Establish and maintain an efficient and effective "national grid " with due regard to time. to the satisfaction of stake holders in all areas of its activities and shall endeavor to continually improve its management systems and practices in conformity to legal and regulatory provisions. Power Grid has consistently maintained the transmission system availability over 99. cost. Power Grid wheels about 51% of the total power generated in India on its transmission network. technology. of EHVAC & HVDC sub-stations with a total transformation capacity of 91. minimization and mitigation c) Ensure safe. (NSE: POWERGRID. The Inter-regional capacity is enhanced to 22400 MW. India.185 Circuit-km of Transmission network and 135 nos. BSE: 532898) is an Indian state-owned electric utilities company headquartered in Gurgaon. occupational hazard free and healthy work environment.TECHNICAL ANALYSIS OF A STOCK:- Power Grid Corporation of India Limited (POWERGRID). Power Grid has also diversified into Telecom business and established a telecom network of more than 21. and value additions. b) Sustainable development through conservation of natural resources and adopting environment friendly technology on principle of avoidance. Power Grid has a pan India presence with around 94. 46 .000 km across the country.945 MVA.
64% 0.50 47 .40 103.65 108.65 112.00 105.60 100.70 101.00 97.50 113.00 97.40 103.80 Close 107.20 111.60 100.50 105.Share Holding Patterns Promoter (India) Institution Non-Institution Custodians Promoter (For) 69.00 105.30 103.00% Price’s of Power Grid Month Aug‟2011 Sep‟2011 Oct‟2011 Nov‟2011 Dec‟2011 Jan‟2012 Feb‟2012 March‟2012 April‟2012 May‟2012 June‟2012 July‟2012 Open 105.65 112.95 99.43% 20.70 101.00% 0.95 99.20 111.93% 9.30 103.65 108.
But for now looking at this indicator is showing downward trend in the prices.Technical Analysis of Power Grid: Accumulation/Distribution: This chart is showing the pattern of accumulation/distribution with the price pattern of Power Grid and we can easily see that the indicator is following the same pattern as the price of power grid. 48 . Because as an when price move to 10m in indicator the price tend to fall and there is one another reason that is prices are going down and indicator is going up that also shows the negative trend in the prices.
During the Oct – Nov 2011 and May – June 2012 the Script seems to be more trading months. But for now one should sell the particular script to gain a profit of about 5 – 10% in near future.Bollinger Bands The chart shows that prices are moving within Bollinger band and trading days where this script is very volatile and at some point of time its less volatile. 49 . But looking at the current situation the script shows a selling signal but as the prices reaches below the Bollinger band the prices would again tend to move upside but it all depends on the sentiments and situation which would be prevailing in the market at that point of time.
if we are looking for the current trend its moving downward for short run but it still bullish for medium term. By the chart.Commodity Channel Index: The chart shows that the CCI is moving in line with the prices and the as prices goes up the CCI also goes up and vice versa. 50 .
Envelope: Currently stock is showing that prices will go down but as it will touch its lower envelope band its will move upward 51 .
MACD:- Currently looking at the chart the MACD has crossed the EMA 9 from the upside and this is a kind of negative sign and this negativity is going to be there until the MACD move above the EMA cutting it from below 52 .
Now the chart is showing selling indication for intraday basis and for short term its good when indicator goes to the lower level as it has made earlier 53 .Momentum:- Earlier chart has shown some indication about sell and buy and they come true as it can be seen from the chart itself.
Sometime it shows indication of sale and buy at given point of time.Moving Average:- Looking at the chart one can easily interpret that moving average is roaming around the price but still giving some indication about price movement for near future. It shows a downturn for short term period and if price cross moving from below and goes above the moving average that would be the best time to buy the stock. 54 . Looking for future price we cannot easily interpret the movement at this point of time but still some indication of sale is shown in the graph as the price of share take support at the 15 days moving average and further going down.
But as it breaks the current trend prices tend to move upside with a bang.On Balance Volume:- Currently the indicator is making low high than the previous high and its indicates the downturn in intraday basis. 55 .
Price Oscillator:- Currently the share prices according to the indicator is trading high and it gave a signal of selling share prices for short term and for long term 56 .
After that we need to see the chart again because the indicator is not so trustworthy as others 57 .Volume:- Current trend of volume shows that price tend to move upward but the rally will not exceed 2-3 days.
58 .Volume Oscillator:- The chart shows that price will tend to move downside in short term but on intraday basis it will move upside.
Technical analysis is useful for short term trading. It helps to study d emotions in the market by studying market itself Provides information on the best entry and exit points for a trade. Is based almost entirely on the analysis of price and volume 59 . try and predict the actions of security costs by charting and studying the different variables at work within the market. Technical analysis helps to check the fundamentals of companies. those who practice technical analysis.CONCLUSION Technicians. They believe performance is largely cyclical and reliant on outside forces that can be determined. Technical analysis is a particular approach for investing which appeal to investors. Technical analysis is concerned with the share price.
com www.com www.com 60 .com www.com www.googlefinance.yahoofinance.bseindia.nseindia.moneycontrol.com www.technicalanalysis.BIBLIOGRAPHY www.
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