B a s i c T e c h n i c a l A n a l y s i s

f o r S t o c k I n v e s t i n g

Unpreparedness
is the recipe for failure

Sarvesh Srivastava
Foreign
Markets
 Foreign Markets
On Friday, the U.S. stock indexes saw mixed
movements. The Dow Jones Industrial Average
rose by 0.16% (62.42 points) to close at
39,131.53 points on February 23rd, continuing
to set a new record high for closing. The S&P
500 index increased by 0.03% (1.77 points) to
close at 5,088.80 points, also reaching a new
record high for closing. The Nasdaq Composite
Index fell by 0.28% (44.80 points) to close at
15,996.82 points. The Philadelphia
Semiconductor Index dropped by 1.12% (52.33
points) to close at 4,615.03 points.

Last week, the Dow Jones index rose by 1.30%,

the S&P 500 index increased by 1.66%, and the
Nasdaq index rose by 1.40%.
 Foreign Markets
Technology stocks are expected to continue rising,
and Goldman Sachs provides three reasons:

1. There is room for re-entry. Before NVIDIA announced

its earnings report, Goldman Sachs' trading
department noticed hedge funds reducing their
holdings in technology stocks. It was previously noted
that hedge funds had reduced holdings of the "Big
Seven" technology stocks last quarter.

2. Technology stocks have completely decoupled from

earnings rates. The Nasdaq index has not been
affected by rising interest rates.

3. The market is entering a period with fewer scheduled

news events and traders adopting the Gamma trading
strategy, indicating that the market will rise at a slower
pace, and volatility will compress or normalize.
Domestic
Stock Market
Domestic Stock Market
 Domestic Stock Market

Due to weakness in banking and

heavyweight stocks, the stock benchmarks
Sensex and Nifty 50 indices extended their
initial declines on February 26th.

The Sensex and Nifty fell by 0.4% each, to

72,790 points and 22,122 points,
respectively. The fear gauge India VIX
(Volatility Index) surged over 4%, trading
above 15.
Trend
 Trend
Ashoka was an important emperor in Indian history,
known for his transformation from a ruthless
conqueror to a ruler who embraced Buddhism and
non-violence. After the Kalinga War, he deeply
regretted the destructive nature of warfare and
resolved to change his style of governance. He
established hospitals, monasteries, and conveyed
ideas of kindness and tolerance through inscriptions
on stone pillars.

Ashoka's transformation became a significant story in

Indian history, demonstrating how individuals can
achieve success through positive change. The same
principle applies in the stock trading market.
Trend
Trend
The similarity in the trends of the S&P 500 index and the NIFTY index can be explained from
multiple perspectives. This similarity is primarily due to the close connections of global
financial markets and the consistency in the behavior of market participants.

Globalization Impact: With the deepening of globalization, financial markets around the world
have become increasingly interdependent. Many companies operate globally, leading to
mutual influences on the interests and capital flows of global investors.

Similar Behavior of Market Participants: Whether in the S&P 500 index in the United States
or the NIFTY index in India, the behavior of market participants (such as institutional investors,
mutual funds, and retail investors) is largely similar.

Capital Flow: Global investors seek opportunities to maximize returns, leading to capital
flows between different markets. This liquidity of capital enhances the correlation between
different markets. When one market rises, capital may flow to other markets in search of
opportunities, leading to upward trends in those markets as well.
Trend
Block trading plays a significant role in the national securities market in the United States, and the
proportion of its trading volume and transaction value indicates its significant influence on overall market
activity. According to the data you provided, block trading accounts for 17.4% of the trading volume, and
its share of transaction value reaches 21%. This indicates that block trading is not only frequent but also
involves substantial amounts, making it an indispensable part of the securities market.

Reducing Market Impact: By conducting large transactions outside the open market, block trading helps
reduce immediate impacts on stock prices. This is because these trades do not immediately reflect in the
trading volume and price movements of the open market, thus avoiding market fluctuations and panics
that large-scale buying and selling might trigger. This approach is particularly important for maintaining
market stability, especially during periods of high volatility.

Locking in Profits for Trading Parties: Block trades typically involve agreement on prices between
buying and selling parties before the execution of the transaction. This pre-agreed pricing mechanism
allows both parties to lock in profits based on current market information and expectations, thereby
reducing the impact of market price movements on the transaction outcome. For the seller, this means
ensuring the sale of a large number of shares at a reasonable price; for the buyer, it may mean
purchasing shares at a price lower than the highest price market fluctuations could bring, thus realizing
future value growth.
Trend
Block Trading Process
1. Initiating Transaction Invitation:
Both parties to the transaction need to initiate the
transaction invitation through seat trading. Block
trading cannot happen every day. Everyone should
cherish every trading opportunity.
2. Agreement on Price and Quantity:
Block trading is conducted through seat trading, and
both parties to the transaction need to agree on the
price and quantity in advance. The greater the
quantity, the greater the price advantage.
3. Agreement on Holding Period:
Block trading generally involves institutional holding,
so there are some requirements for the holding
period for the buyer. Generally, the longer the
holding period, the greater the price advantage.
Trend
Block Trading Profits

1. "Discount" Profit
Block trading involves negotiations between both parties, so there is usually a certain
"discount" in the price, while the buyer sells at the normal market price. Therefore, the
"discount" becomes the primary profit in block trading.

2. Profit from Stock Price Increases

Most of the stocks involved in block trading are speculated by institutions, and there is
a possibility of sharp increases in the short term. Therefore, profit from stock price
increases is another component of profit in block trading.
Learning
by Doing
Learning by Doing
Characteristics of a Descending Channel

Directionality: The main characteristic of a descending channel is its downward direction,

indicating a general downtrend in asset prices during that period.

Two Parallel Trendlines: The two lines forming the channel must be parallel, with one line
connecting consecutive lows and the other line connecting consecutive lower highs.

Volatility: Despite price fluctuations between the two trendlines, the overall trend is
downward. Prices may attempt to break above or below these lines, but the downtrend is
only likely to end when prices significantly break and sustain outside the channel.
Learning by Doing
How to Identify a Descending Channel

1. Identify Consecutive Lows and Lower Highs: First, identify consecutive lows and lower highs in
the market prices.

2. Draw Trendlines: Use these points to draw two parallel trendlines, ensuring that these lines are
parallel and accurately reflect the downward trend in prices.

3. Confirm Channel Formation: The descending channel forms when prices fluctuate repeatedly
between these two lines.
Learning by Doing
Learning by Doing
Trading Applications of a Descending Channel

Sell Signal: When the price approaches the upper boundary of the descending channel, it may be a
good opportunity to sell or short, as the price may resume its downward movement from this point.

Buy Signal: If the price breaks above the lower boundary of the descending channel and shows
signs of sustained upward movement, it may indicate that the downtrend has ended, serving as a buy
signal.

Risk Management: Traders can use the upper and lower boundaries of the channel as stop-loss
points to manage risk.
Learning by Doing
Learning by Doing
When using a descending channel in technical analysis, there are several key considerations that can
help traders make more effective use of this tool. These considerations not only aid in improving the
accuracy of trading decisions but also help in risk management.

1. Watch Out for False Breakouts

Be cautious of false breakouts: Prices may briefly break through the boundaries of the channel and
then return to the inside of the channel, a situation known as a false breakout. Traders should be wary
of this occurrence and avoid making trading decisions hastily without other confirming signals.

2. Set Reasonable Stop Losses and Targets

Risk management: Before entering any trade, setting clear stop-loss points and profit targets is crucial.
The upper and lower boundaries of the descending channel can provide reference points for stop-
losses, but traders should adjust them based on their own risk tolerance.

3. Exercise Patience for the Optimal Trading Opportunities

Be patient: In a descending channel, the best buying opportunities often occur near the support line,
while selling or shorting opportunities arise near the resistance line. Patiently waiting for prices to
approach these areas can offer a more favorable risk-reward ratio.
Thank you

Sarvesh Srivastava