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Technical

Analysis
What is Technical Analysis?

• Method of Evaluating securities by analyzing the


statistics generated by market activity, past prices
& Volume
• Do not measure the intrinsic value
• It only Suggest future activity
• Do not care whether a stock is undervalued
3 Assumptions

• The Market Discounts Everything


• Price moves in Trends
• History tends to repeat itself
Charts

-Ronak Doshi
Charts

• The Line Chart


• The Bar Chart
• The Candlestick Chart
• Point & Figure Chart
The Line Chart
The Bar Chart
The Bar Chart

Red : Stock Goes Down


Black: Stock Goes Up
The Candlestick Chart
The Candlestick Chart

Body Black or Red – Stock Closed Lower


Body is White or Green – Stock Closed Higher
The Point & Figure Chart
Example

High Low

Day 1 15 11

Day 2 12 11

Day 3 12 10

Day 4 15 11

Day 5 15 12
High Low

Day 1 15 11

Day 2 12 11

Day 3 12 10

Day 4 15 11

Day 5 15 12

15 O 15 O 15 O 15 O X 15 O X

14 O 14 O 14 O 14 O X
14 O X O
13 O 13 O 13 O X
13 O 13 O X O

12 O 12 O 12 O X 12 O X O
12 O
11 O 11 O 11 O X 11 O X
11 O
10 10 10 O
10 O
10 O
20

19

18 X X

17 X X O X O
• Key Points Before You Start:
16 X O X O X O Remember, X's represent increasing
price. O's represent decreasing
15 O X X O X O X O X price.
You can only have X's or Os in any
14 O X O X O O X O
one column, not both.
X O X

13 O X O X O O X O X O

12 O X O O X O X O

11 O X O O O

10 O
Candlestick Patterns

-Viral Shah
Hanging Man
Shooting Star
Hammer
Inverted Hammer
Doji
Bullish Engulfing Pattern
Bearish Engulfing Pattern
Chart Patterns
Head and Shoulders
Cup and Handle
Double Tops and Bottoms
Triangles
Flag and Pennant
Wedge
GAPS AND GAP ANALYSIS

There are four main types of gaps:


• Common gap
• Breakaway gap
• Runaway gap
• Exhaustion gap
Triple Tops and Bottoms
Rounding Bottom
Trend lines

-Hitesh Chainani
Introduction

A trend is really nothing more than the general direction


in which a security or market is headed.
Trend

In technical analysis, it is the movement of the highs


and lows that constitutes a trend.
Example

Point 2 in the is the first high, which is determined


after the price falls from this point. Point 3 is the low
that is established as the price falls from the high.
Types of Trend

1. Uptrend

2. Downtrends

3. Sideways/Horizontal Trends
Trend Lengths

1. Long-term trend:
Longer than a year

2. Medium trend:
One and three
months

3. Short-term trend:
Less than a month
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.
• An upward trendline is drawn at the lows of an upward
trend. This line represents the support the stock has
every time it moves from a high to a low.
Trend lines

• This type of trendline helps traders to anticipate the


point at which a stock's price will begin moving
upwards again.

• Similarly, a downward trendline is drawn at the highs


of the downward trend.
• This line represents the resistance level that a stock
faces every time the price moves from a low to a high.
Channels

• A channel, or channel lines, is the addition of two parallel


trendlines that act as strong areas of support and
resistance.
• The upper trendline connects a series of highs, while the
lower trendline connects a series of lows.
The Importance of Trend

• “The trend is your friend"


• “Don't buck the trend"
Why Does it Happen?

• These support and resistance levels are seen as


important in terms of market psychology and supply
and demand.

• These are 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).

• When these trendlines are broken, the supply and


demand and the psychology behind the stock's
movements is thought to have shifted
Round Numbers

• One type of universal support and resistance that


tends to be seen across a large number of securities
is round numbers.
• Round numbers like 10, 20, 35, 50, 100 and 1,000
tend be important because they often represent the
major psychological turning points at which many
traders will make buy or sell decisions.
• This is due to increased buying and selling
pressure at these levels
Role Reversal

• Once a resistance or support level is broken, its role is


reversed.
• If the price falls below a support level, that level will
become resistance and vice versa.
• As the price moves past a level of support or
resistance, it is thought that supply and demand has
shifted, causing the breached level to reverse its role.
Role Reversal - Example

• As you can see in Figure, this phenomenon is evident


on the Wal-Mart Stores Inc chart between 2003 and
2006.
• Notice how the role of the $51 level changes from a
strong level of support to a level of resistance
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.

• Traders should avoid placing orders at these major


points, as the area around them is usually marked by
a lot of volatility.

• This is because in many cases, the price never actually


reaches the whole number, but flirts with it instead.
Importance of Support and Resistance

• It is important to follow this simple rule: do not place


orders directly at the support or resistance level.

• So if you're bullish on a stock that is moving toward


an important support level, do not place the trade at
the support level.

• Instead, place it above the support level, but within a


few points.
Volume
What is Volume?

• Volume is simply the number of shares or contracts


that trade over a given period of time, usually a day.
• The higher the volume, the more active the security.
• Volume bars illustrate how many shares have traded
per period and show trends in the same way that
prices do.
Why is volume important?

• Say, for example, that a stock jumps 5% in one


trading day after being in a long downtrend.

• Is this a sign of a trend reversal? This is where


volume helps traders.

• If volume is high during the day relative to the


average daily volume, it is a sign that the reversal is
probably for real.
Why is volume important?

• On the other hand, if the volume is below average,


there may not be enough conviction to support a true
trend reversal.

• When volume tells a different story, it is a case of


divergence, which refers to a contradiction between
two different indicators.

• The simplest example of divergence is a clear upward


trend on declining volume.
Moving Averages

-Suraj Purohit
Types of Moving Averages

1. Simple Moving Average

2. Linear Moving Average

3. Exponential Moving Average


Simple Moving Average
Linear Moving Average

• Formulae
Exponential Moving Average
Major Uses of Moving Averages

1. Identify Current Trends

2. Trend Reversals

3. Support & Resistance levels


Current Trends
Trend Reversals
Crossover
Support & Resistance Levels
Technical Indicators and
Oscillators

-Hiten Jain
What is an Indicator?

• A technical indicator is a series of data points that


are derived by applying a formula to the price
data of a security.

• Price data includes any combination of the open,


high, low or close over a period of time.
What is an Oscillators?
Types:

• Accumulation/Distribution Line
• Average Directional Index
• Arron
• Aroon Indicator
• Moving Average Convergence Divergence
• Relative Strength Index
• On-Balance Volume
• Stochastic Oscillator
• Bollinger Band
• Fibonacci Retracement
• Fibonacci Fan
• Fibonacci Arc
• Rate of change (ROC)
• Regression
• Eliot Wave
Relative Strength Index
Bollinger Band

• A band plotted two standard deviations away from a simple


moving average, developed by famous technical trader John
Bollinger.
Moving Average Convergence Divergence

• This indicator is comprised of two exponential


moving averages, which help to measure
momentum in the security.

• The MACD is simply the difference between these


two moving averages plotted against a centerline.

• The centerline is the point at which the two


moving averages are equal.