Investment Analysis and Portfolio Management

F22156-Niveditha S

What is a Candlestick?

Candlesticks, also known as Japanese candlesticks, are a popular method used in financial
markets to represent the price movements of assets, such as stocks, currencies, commodities,
and cryptocurrencies. They provide a visual representation of the trading activity over a specific
period, typically a day, week, or month.

Components of a Candlestick

Each candlestick consists of four main components:

• The body
• Upper shadow (also called upper wick)
• Lower shadow (or lower wick) and the
• Opening and closing prices. The length and shape of the candlesticks convey important
information about the price action during the given time period.
Trend Reversal analysis for the period 1st April 2022 to 31st March 2023

Trend reversal analysis, also known as trend reversal patterns or simply reversals, is a critical
aspect of technical analysis in financial markets. It involves identifying potential turning points
in a price trend, where the prevailing trend is likely to change direction.

There are two main types of trends in financial markets:

• Uptrend: An uptrend is characterized by a series of higher highs and higher lows. It

indicates that the price of the asset is generally increasing over time.
• Downtrend: A downtrend is characterized by a series of lower highs and lower lows. It
indicates that the price of the asset is generally decreasing over time.

The dynamic linear regression price indicator was used to perform the technical analysis.
The horizontal blue line indicates support level and the horizontal red line indicates the
resistance level of this stock at the particular period of time.
• From 4thApril 2022 to 28th April 2022 the stock experienced a downtrend. The
downtrend pattern was broken on 29th April 2022 with a bullish engulfing
candlestick.
• A bullish engulfing pattern is a candlestick chart pattern that is considered a strong
bullish reversal signal in technical analysis. It typically forms at the end of a
downtrend and indicates a potential shift in market sentiment from bearish to
bullish.
• The hanging man candlestick pattern on 7th June 2022 at the peak of uptrend
signalled a potential downtrend in forthcoming weeks. Similarly, the stock
witnessed a downtrend from 10th June 2022.

• The trend sustained till 6th July 2022, the bullish engulfing candlestick pattern on
30th June 2022 during downtrend indicates trend reversal from bearish to bullish.
• The stock witnessed steady uptrend on 7th July 2022 and the trend sustained till 21st
September 2022. On 27th July the bearish inverted candlestick indicates trend
reversal. But, in spite of several bearish trend reversal candlesticks the stock
witnessed sustained bullish phase.
• On 19th October 2022, the Doji Candle shows the playout of buyer and seller
indecision. Thus, trend reversal cannot be confirmed in this phase. The bearish
engulfing pattern on 1st December 2022 signifies trend reversal. Subsequently, the
stock witnessed a downtrend from 8th December to 25th January 2023.

• The Doji candlestick pattern on 25th December and 5th Jan indicates indecision and
potential trend reversal. This is further confirmed by the bullish engulfing pattern
on 2nd and 18th Jan 2023.
• The stock witnessed a short uptrend from 27th Jan to 17th February. The Doji
candlestick on 1st and 14th February 2023, the bearish engulfing pattern formed on
2nd February indicates trend reversal. Yet, the stock had no drastic trend reversal
from 20th February to 10th April 2023.
Candle Stick Analysis for a period of 10 days (4th July 2023 to
14th July 2023)

• 5th July 2023

Interpretation:
A "Bullish Doji" candlestick pattern is a significant candlestick formation that suggests a
potential trend reversal from a downtrend to an uptrend. The pattern consists of a Doji
candlestick, which has the same or nearly the same open and close price, creating a cross-like
appearance. It occurs when the market opens and closes at or near the same level, but there is
significant price movement (high and low) during the trading session.

• 11th July 2023

Interpretation:
A "Bearish Inverted Hammer" candlestick pattern is a significant formation that suggests a
potential trend reversal from an uptrend to a downtrend. It is similar to a regular Inverted
Hammer, but in this case, it appears after an uptrend rather than a downtrend. The pattern
consists of a single candlestick with specific characteristics that indicate a possible shift in
market sentiment.
STOCK PERFORMANCE FROM JULY 4TH TO JULY 15TH 2023

Candle Stick
Date Opening price Closing price Change
Pattern

Jul-04 1820.1 1823.3 +3.15 Bullish

Jul-05 1862.8 1864.9 +2.05 Bullish

Jul-06 1860 1877.3 +17.3 Bullish

Jul-07 1872 1853.5 -18.5 Bearish

Jul-10 1853 1866.9 +0.49 Bullish

Jul-11 1874 1866.6 +13.9 Bullish

Jul-12 1874.9 1878.1 +3.2 Bullish

Jul-13 1899 1869.7 -29.3 Bearish

Jul-14 1870.1 1869 -1.1 Bearish

Jul-15 1871.2 1897.1 25.85 Bullish