Professional Documents
Culture Documents
Mumbai University
(M.M.S.)
Submitted by:
(Roll No.18)
Project Guide:
Mr.K.K.Surenranathan
University of Mumbai
March’ 2010
[1]
DECLARATION
Place: Karjat
Date:
Certificate
[2]
This is to certify that the dissertation entitled “TECHNICAL
ANALYSIS” is the bonafide research work carried out by Mr. Vishal
Nabde student of MMS, at IBSAR® Institute of Management Studies,
Karjat during the year 2008 -2010, in partial fulfilment of the
requirements for the award of the Degree of Master of Management
Studies and that the dissertation has not formed the basis for the award
previously of any degree, diploma, associate ship, fellowship or any other
similar title.
Dy. Director
Director,
ACKNOWLEDGEMENT
[3]
In the first place, I thank Mr. K.K. Surendranathan for having given me
his valuable guidance for the project. Without his help it would have
Place: Karjat
Date:
TABLE OF CONTENTS
S.NO. PARTICULARS PAGE NO.
Chapter 1. Introduction 06
[4]
Chapter 2. Technical analysis 10
Chapter 3. Drawbacks / limitations of 13
technical analysis
Chapter 4. Tools & Instruments in technical 16
analysis
Chapter 5. Trends In Technical Analysis 36
Chapter 6. Why Volume Is Important 46
Chapter 7. Chart Patterns 48
Chapter 8. Technical Indicators 74
Chapter 9. Technical analysis of Stock 85
“Power Grid”
Chapter 10. Bibliography 99
INTRODUCTION :-
[5]
Professional investor will make more money & less loss than, who let
their heart rule. Their head eliminate all emotions for decision making. Be
ruthless & calculating, you are out to make money. Decision should be based
The subject of Equity analysis, i.e. the attempt to determine future share price
tools: pocket calculator, pencil, ruler, chart paper & your cautious mind,
watchful attention. It should be pointed out that, this equity analysis does not
discuss how to buy & sell shares, but does discuss a method which enables
the investor to arrive at buying & selling decision. The financial analysts
[6]
its performances, liquidity, leverage, turnover, profitability & financial health
was checked & analysis with the help of ratio analysis for the purpose of long
Technical analysis mainly seeks to predict the short term price travels.
The focus of technical analysis is mainly on the internal market data, i.e.
19th century.
[7]
1. Works only in normal share-market conditions with great reliability, it also
the investment object has vital importance associated to return along with
risk.
3. Cash management gets the magnitude role, because the scenario of equity
knowledge.
5. Capital market trend is always a friend, whether it is short run or long run.
6. You are buying stock & not companies, so don t be curious or panic to do
7. History repeats: investors & speculators react the same way to the same
[8]
8. Capital market has a typical market psychology along with other issues
10. Although the equity analysis is art as well as sciences so, it also has some
exceptions.
EQUITY ANALYSIS.
FUNDAMENTAL TECHNICAL
ANALYSIS ANALYSIS
Technical analysis :-
“Technical analysis refers to the study of market generated data like
It is important criteria for selecting the company to invest. It also provides the
base for decision-making in investment. The one of the most frequently used
yardstick to check & analyze underlying price progress. For that matter a
provides important & vital information regarding the current price position of
the company.
calculating & interpreting graph & chart to assess the performances & status
of the price. It is the tool of financial analysis, which not only studies but also
financial factors.
i.e. prices & volume data. It appeals mainly to short term traders. It is the
oldest approach to equity investment dating back to the late 19th century.
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
[10]
the basis of the trend. 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. It is because of this assumption that many
thrived in the late nineteenth century when Charles Dow, then editor of the
Wall Street Journal, proposed the Dow theory. He recognized that the
instead use charts and other tools to identify patterns that can suggest future
activity. Just as there are many investment styles on the fundamental side,
there are also many different types of technical traders. Some rely on chart
patterns, others use technical indicators and oscillators, and most use some
historical price and volume data is what separates them from their
[11]
fundamental counterparts. Unlike fundamental analysts, 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
forces.
2. Supply & demand are influenced by variety of supply & demand affiliated
trends.
6. This shift s can be detected with the help of charts of manual &
1. Technical analysis does not able to explain the rezones behind the
more people use, employ it the value of such analysis trends to reduce.
trend is forming, a price is dipping or other events are developing that show
the best entry point and time for the most profitable trade. With the constant
movement of various currencies against each other in the Forex market, most
traders will focus on using technical indicators to find and place their
trades.
[13]
knowing which technical indicators to use and how to use them.
2) Computers and the Internet have made this process much easier.
3) One way to avoid getting frustrated by all the lines, colors, and
provide you with the information needed. Try not to clutter your
Technical analysis and fundamental analysis are the two main schools
looks at the price movement of a security and uses this data to predict its
[14]
The future can be found in the past
security should sell for (i.e., fundamental analysis) becomes less important
than knowing what other investors expect it to sell for. That's not to say that
knowing what a security should sell for isn't important--it is. But there is
usually a fairly strong consensus of a stock's future earnings that the average
might define this process as the fact that history repeats itself while others
Price Fields
volume. The fields which define a security's price and volume are explained
below.
[15]
Open - This is the price of the first trade for the period (e.g., the first trade of
the day). When analyzing daily data, the Open is especially important as it is
the consensus price after all interested parties were able to "sleep on it."
High - This is the highest price that the security traded during the period. It
is the point at which there were more sellers than buyers (i.e., there are
always sellers willing to sell at higher prices, but the High represents the
Low - This is the lowest price that the security traded during the period. It is
the point at which there were more buyers than sellers (i.e., there are always
buyers willing to buy at lower prices, but the Low represents the lowest price
Close - This is the last price that the security traded during the period. Due
to its availability, the Close is the most often used price for analysis. The
relationship between the Open (the first price) and the Close (the last price)
Volume - This is the number of shares (or contracts) that were traded during
the period. The relationship between prices and volume (e.g., increasing
[16]
Open Interest - This is the total number of outstanding contracts (i.e.,
those that have not been exercised, closed, or expired) of a future or option.
Bid - This is the price a market maker is willing to pay for a security (i.e., the
Ask - This is the price a market maker is willing to accept (i.e., the price you
Price Styles
1. Bar Chart.
2. Line Chart.
[17]
3. Candlestick Chart.
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). A small horizontal tick to the left
denotes the opening level while a small horizontal tick to the right represents
2) Line Chart.
The exchange rates for each time period are plotted in a diagram and the
The relatively easy handling of line charts is a great advantage. Line charts
do not show price movements within a time period. This can be a problem
because important information for exchange rate analysis can be lost. This
problem was remedied with the development of bar charts that represent a
3) Candlestick Chart.
A candlestick is black if the closing price is lower than the opening price. A
candlestick is white if the closing price is higher than the opening price.
[19]
In the 1600s, the Japanese developed a method of technical analysis to
Candlestick charts display the open, high, low, and closing prices in a format
charts are simply a new way of looking at prices, they don't involve any
[20]
high, low, and closing prices, they cannot be displayed on securities that only
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.
small range between the open and closing prices) and a long lower
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shadow (i.e., the low is significantly lower than the open, high, and
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.
(empty) line.
[22]
5) Morning star. This is a bullish pattern signifying a potential bottom.
The "star" indicates a possible reversal and the bullish (empty) line
[23]
morning star, above) before trading a doji star. The first line can be
Bearish Patterns
1) Long black (filled-in) line. This is a bearish line. It occurs when prices
open near the high and close significantly lower near the period's low.
2) Hanging Man. These lines are bearish if they occur after a significant
a Hammer. They are identified by small real bodies (i.e., a small range
[24]
between the open and closing prices) and a long lower shadow (i.e., the
low was significantly lower than the open, high, and close). The bodies
significant if the second line's body is below the center of the previous
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4) Bearish engulfing lines. This pattern is strongly bearish if it occurs
in) line.
"star" indicates a possible reversal and the bearish (filled-in) line confirms
[26]
5) Doji star. A star indicates a reversal and a doji indicates indecision.
period. You should wait for a confirmation (e.g., as in the evening star
after a rally. The star's body must appear near the low price and the line
[27]
Reversal Patterns
when the open and close are the same, and the range between the high and
2) Dragon-fly doji. This line also signifies a turning point. It occurs when
the open and close are the same, and the low is significantly lower than
[28]
3) Gravestone doji. This line also signifies a turning point. It occurs when
the open, close, and low are the same, and the high is significantly higher
4) Star. Stars indicate reversals. A star is a line with a small real body that
occurs after a line with a much larger real body, where the real bodies do
[29]
5) Doji star. A star indicates a reversal and a doji indicates indecision.
period. You should wait for a confirmation (e.g., as in the evening star
Neutral Patterns
1) Spinning tops. These are neutral lines. They occur when the
distance between the high and low, and the distance between the
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2) Doji. This line implies indecision. The security opened and closed
patterns. Double doji lines (two adjacent doji lines) imply that a
(signifying indecision).
[32]
Example
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 type of chart reflects price movements and is not as concerned
[33]
about time and volume in the formulation of the points. The point and figure
chart removes the noise, or insignificant price movements, in the stock, which
can distort traders' views of the price trends. These types of charts also try to
When first looking at a point and figure chart, you will notice a series of Xs
and Os. The Xs represent upward price trends and the Os represent downward
price trends. There are also numbers and letters in the chart; these represent
months, and give investors an idea of the date. Each box on the chart
represents the price scale, which adjusts depending on the price of the stock:
the higher the stock's price the more each box represents. On most charts
where the price is between $20 and $100, a box represents $1, or 1 point for
[34]
the stock. The other critical point of a point and figure chart is the reversal
criteria. This is usually set at three but it can also be set according to the
chartist's discretion. 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, in other
words, how much the price has to move in order for a column of Xs to
become a column of Os, or vice versa. When the price trend has moved from
trend. 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
chart below:
[35]
Isn’t it hard to see that the trend is up. However, it's not always this
[36]
There are lots of ups and downs in this chart, but there isn't a clear
defining a trend goes well beyond the obvious. In any given chart, you
will probably notice that prices do not tend to move in a straight line in
and higher lows, while a downtrend is one of lower lows and lower
highs.
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.
Types of Trend
1.Uptrend
2.Downtrend
3.Sideways/Horizontal Trends
As the names imply, when each successive peak and trough is higher,
it's referred to as an upward trend. If the peaks and troughs are getting lower,
it's a downtrend. When there is little movement up or down in the peaks and
troughs, it's a sideways or horizontal trend. If you want to get really technical,
you might even say that a sideways trend is actually not a trend on its own,
but a lack of a well-defined trend in either direction. In any case, the market
can really only trend in these three ways: up, down or nowhere.
[38]
Trend Lengths
Along with these three trend directions, there are three trend
and three months and a near-term trend is anything less than a month.
often move against the direction of the major trend. If the major trend
[39]
When analyzing trends, it is important that the chart is constructed to
used by chartists to get a better idea of the long-term trend. Daily data
charts are best used when analyzing both intermediate and short-term
trends. It is also important to remember that the longer the trend, the
Trend Lines
This line represents the support the stock has every time it moves from
This type of trend line helps traders to anticipate the point at which a
trend line is drawn at the highs of the downward trend. This line
represents the resistance level that a stock faces every time the price
[41]
Channels
lines that act as strong areas of support and resistance. The upper trend
line connects a series of highs, while the lower trend line connects a
Traders will expect a given security to trade between the two levels of
support and resistance until it breaks beyond one of the levels, in which
case traders can expect a sharp move in the direction of the break.
Along with clearly displaying the trend, channels are mainly used to
[42]
A descending channel on a stock chart; the upper trend line has been
placed on the highs and the lower trend line is on the lows. The price
has bounced off of these lines several times, and has remained range-
bound for several months. As long as the price does not fall below the
can trade with rather than against them. Two important sayings in technical
analysis are "the trend is your friend" and "don't buck the trend," illustrating
What Is Volume?
over a given period of time, usually a day. The higher the volume, the
(up or down), chartists look at the volume bars that can usually be
found at the bottom of any chart. Volume bars illustrate how many
shares have traded per period and show trends in the same way that
prices do.
[44]
Why Volume Is Important?
move than a similar move with weak volume.Say, for example, that a
volume is high during the day relative to the average daily volume, it is
a sign that the reversal is probably for real. On the other hand, if the
support a true trend reversal. Volume should move with the trend. If
[45]
prices are moving in an upward trend, volume should increase (and
trend. For example, if the stock is in an uptrend but the up trading days
are marked with lower volume, it is a sign that the trend is starting to
lose its legs and may soon end. When volume tells a different story, it
such as head and shoulders, triangles, flags and other price patterns can
detail later in this tutorial. In most chart patterns, there are several
pivotal points that are vital to what the chart is able to convey to
pattern is weakened.
[46]
Another important idea in technical analysis is that price is preceded by
uptrend, it is usually a sign that the upward run is about to end. Now that we
CHART PATTERNS :-
patterns to identify current trends and trend reversals and to trigger buy and
sell signals.
analysis, history repeats itself. The theory behind chart patters is based on this
assumption. The idea is that certain patterns are seen many times, and that
these patterns signal a certain high probability move in a stock. Based on the
look for these Patterns to identify trading opportunities. While there are
general ideas and components to every chart pattern, there is no chart pattern
[47]
that will tell you with 100% certainty where a security is headed. This creates
some leeway and debate as to what a good pattern looks like, and is a major
reason why charting is often seen as more of an art than a science. There are
two types of patterns within this area of technical analysis, reversal and
continuation. A reversal pattern signals that a prior trend will reverse upon
that a trend will continue once the pattern is complete. These patterns can be
found over charts of any timeframe. In this section, we will review some of
This is one of the most popular and reliable chart patterns in technical
analysis. Head and shoulders is a reversal chart pattern that when formed,
signals that the security is likely to move against the previous trend. As you
can see , there are two versions of the head and shoulders chart pattern. 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. Head and shoulders bottom, also known as inverse head and shoulders
(shown on the right) is the lesser known of the two, but is used to signal a
reversal in a downtrend.
[48]
Head and shoulders top is shown on the left. Head and shoulders bottom,
Both of these head and shoulders patterns are similar in that there are four
main parts: two shoulders, a head and a neckline. Also, each individual head
and shoulder is comprised of a high and a low. For example, in the head and
shoulders top image shown on the left side, the left shoulder is made up of a
highs and rising lows. The head and shoulders chart pattern, therefore,
A cup and handle chart is a bullish continuation pattern in which the upward
[49]
trend has paused but will continue in an upward direction once the pattern is
confirmed.
The price pattern forms what looks like a cup, which is preceded by an
upward trend. The handle follows the cup formation and is formed by a
price movement pushes above the resistance lines formed in the handle, the
This chart pattern is another well-known pattern that signals a trend reversal -
patterns are formed after a sustained trend and signal to chartists that the trend
[50]
is about to reverse. The pattern is created when a price movement tests
support or resistance levels twice and is unable to break through. This pattern
A double top pattern is shown on the left, while a double bottom pattern
is shown on the right.In the case of the double top pattern, the price
movement has twice tried to move above a certain price level. After two
unsuccessful attempts at pushing the price higher, the trend reverses and the
price heads lower. In the case of a double bottom (shown on the right), the
price movement has tried to go lower twice, but has found support each time.
After the second bounce off of the support, the security enters a new trend
[51]
4.Triangles
The symmetrical is a pattern in which two trend lines converge toward each
[52]
trend line is flat, while the bottom trend line is upward sloping. This is
breakout. In a descending triangle, the lower trend line is flat and the upper
These two short-term chart patterns are continuation patterns that are formed
movement in the same direction as the move that started the trend. The
There is little difference between a pennant and a flag. The main difference
between these price movements can be seen in the middle section of the chart
lines, much like what is seen in a symmetrical triangle. The middle section on
[53]
the flag pattern, on the other hand, shows a channel pattern, with no
convergence between the trend lines. In both cases, the trend is expected to
continue when the price moves above the upper trend line
6.Wedge
[54]
The fact that wedges are classified as both continuation and reversal patterns
can make reading signals confusing. However, at the most basic level, a
the price was to rise above the upper trend line, it would form a continuation
pattern, while a move below the lower trend line would signal a reversal
pattern
Triple tops and triple bottoms are another type of reversal chart pattern in
chart analysis. These are not as prevalent in charts as head and shoulders and
double tops and bottoms, but they act in a similar fashion. These two chart
patterns are formed when the price movement tests a level of support or
resistance three times and is unable to break through; this signals a reversal of
[55]
Confusion can form with triple tops and bottoms during the formation of the
pattern because they can look similar to other chart patterns. After the first
two support/resistance tests are formed in the price movement, the pattern
will look like a double top or bottom, which could lead a chartist to enter a
8.Rounding Bottom
[56]
A rounding bottom chart pattern looks similar to a cup and handle pattern but
without the handle. The long-term nature of this pattern and the lack of a
confirmation trigger, such as the handle in the cup and handle, make it a
difficult pattern.
[57]
Once you understand the concept of a trend, the next major concept is
that of support and resistance. You'll often hear technical analysts talk about
the ongoing battle between the bulls and the bears, or the struggle between
buyers (demand) and sellers (supply). This is revealed by the prices a security
Support is the price level through which a stock or market seldom falls
(illustrated by the blue arrows). Resistance, on the other hand, is the price
level that a stock or market seldom surpasses (illustrated by the Red Arrows).
market psychology and supply and demand. Support and resistance levels are
[58]
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). When these trend lines are
broken, the supply and demand and the psychology behind the stock's
across a large number of securities is round numbers. Round numbers like 10,
20, 35, 50, 100 and 1,000 tend be important in support and resistance levels
because they often represent the major psychological turning points at which
Buyers will often purchase large amounts of stock once the price starts to fall
toward a major round number such as $50, which makes it more difficult for
shares to fall below the level. On the other hand, sellers start to sell off a
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,
Role Reversal
[59]
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. If the price
rises above a resistance level, it will often become support. As the price
demand has shifted, causing the breached level to reverse its role. For a true
reversal to occur, however, it is important that the price make a strong move
For example, as you can see, the dotted line is shown as a level of
resistance that has prevented the price from heading higher on two
Many traders who begin using technical analysis find this concept hard
[60]
(WMT) chart between 2003 and 2006. Notice how the role of the $51
In almost every case, a stock will have both a level of support and a
these levels.
reversing.
Support and resistance levels both test and confirm trends and need to
the share remains between these levels of support and resistance, the trend is
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likely to continue. It is important to note, however, that a break beyond a
trending channel, the trend have accelerated, not reversed. This means that
Being aware of these important support and resistance points should affect the
way that you trade a stock. Traders should avoid placing orders at these major
points, as the area around them is usually marked by a lot of volatility. If you
important that you follow this simple rule: do not place orders directly at the
support or resistance level. This is because in many cases, the price never
actually reaches the whole number, but flirts with it instead. So if you're
place the trade at the support level. Instead, place it above the support level,
but within a few points. On the other hand, if you are placing stops or short
Summary of charts
[62]
MOVING AVERAGES :-
overall trend. One simple method traders use to combat this is to apply
removed, traders are better able to identify the true trend and increase
[63]
Types Of Moving Averages:-
the way they are calculated, but how each average is interpreted remains the
same. The calculations only differ in regards to the weighting that they place
on the price data, shifting from equal weighting of each price point to more
weight being placed on recent data. The three most common types of moving
This is the most common method used to calculate the moving average
of prices. It simply takes the sum of all of the past closing prices over the
time period and divides the result by the number of prices used in the
prices are added together and then divided by 10. As you can see in Figure 1,
number of time periods in the calculation is one of the best ways to gauge the
[64]
strength of the long-term trend and the likelihood that it will reverse.
Many individuals argue that the usefulness of this type of average is limited
because each point in the data series has the same impact on the result
[65]
regardless of where it occurs in the sequence. The critics argue that the most
recent data is more important and, therefore, it should also have a higher
weighting. This type of criticism has been one of the main factors leading to
This moving average indicator is the least common out of the three
and is used to address the problem of the equal weighting. The linear
weighted moving average is calculated by taking the sum of all the closing
prices over a certain time period and multiplying them by the position of the
data point and then dividing by the sum of the number of periods. For
multiplied by five; yesterday's by four and so on until the first day in the
period range is reached. These numbers are then added together and divided
higher weight on recent data points and is regarded as much more efficient
the calculation for you. The most important thing to remember about the
relative to the simple moving average. This responsiveness is one of the key
factors of why this is the moving average of choice among many technical
traders. A 15-period EMA raises and falls faster than a 15-period SMA. This
Moving averages are used to identify current trends and trend reversals
moving average is heading upward and the price is above it, the security is in
[67]
an uptrend. Conversely, a downward sloping moving average with the price
the trend is up. On the other hand, a long-term average above a shorter-term
Moving average trend reversals are formed in two main ways: when the
price moves through a moving average and when it moves through moving
average crossovers. The first common signal is when the price moves through
an important moving average. For example, when the price of a security that
was in an uptrend falls below a 50-period moving average, it is a sign that the
[68]
The other signal of a trend reversal is when one moving average crosses
through another. For example, if the 15-day moving average crosses above
the 50-day moving average, it is a positive sign that the price will start to
increase.
[69]
If the periods used in the calculation are relatively short, for example 15 and
35, this could signal a short-term trend reversal. On the other hand, when two
averages with relatively long time frames cross over (50 and 200, for
Another major way moving averages are used is to identify support and
resistance levels. It is not uncommon to see a stock that has been falling stop
its decline and reverse direction once it hits the support of a major moving
technical traders that the trend is reversing. For example, if the price breaks
[70]
Moving averages are a powerful tool for analyzing the trend in a security.
They provide useful support and resistance points and are very easy to use.
The most common time frames that are used when creating moving averages
are the 200-day, 100-day, 50-day, 20-day and 10-day. The 200-day average is
Moving averages help technical traders smooth out some of the noise
the price trend. So far we have been focused on price movement, through
charts and averages. In the next section, we'll look at some other techniques
ACCUMULATION/DISTRIBUTION
Overview
associates changes in price and volume. The indicator is based on the premise
that the more volume that accompanies a price move, the more significant the
price move.
Interpretation
movement. When the indicator moves down, it shows that the security is
[72]
example, if the indicator is moving up and the security's price is going down,
BOLLINGER BANDS
Overview
Bands are plotted at standard deviation levels above and below a moving
calmer periods.
Interpretation
displayed on prices.
Bands is that prices tend to stay within the upper- and lower-band. The
bands varies based on the volatility of the prices. During periods of extreme
[73]
price changes (i.e., high volatility), the bands widen to become more
forgiving. During periods of stagnant pricing (i.e., low volatility), the bands
• Sharp price changes tend to occur after the bands tighten, as volatility
lessens.
• When prices move outside the bands, a continuation of the current trend is
implied.
• Bottoms and tops made outside the bands followed by bottoms and tops
• A move that originates at one band tends to go all the way to the other band.
Overview
security's price from its statistical mean. High values show that prices are
[74]
unusually high compared to average prices whereas low values indicate that
prices are unusually low. Contrary to its name, the CCI can be used
Interpretation
There are two basic methods of interpreting the CCI: looking for
• A divergence occurs when the security's prices are making new highs while
the CCI is failing to surpass its previous highs. This classic divergence is
condition (and a pending price correction) while readings below -100 imply
Overview
[75]
An envelope is comprised of two moving averages. One moving
downward.
Interpretation
trading range. A sell signal is generated when the security reaches the upper
band whereas a buy signal is generated at the lower band. The optimum
the larger the percentage. The logic behind envelopes is that overzealous
buyers and sellers push the price to the extremes (i.e., the upper and lower
bands), at which point the prices often stabilize by moving to more realistic
MACD
Overview
average, called the "signal" (or "trigger") line is plotted on top of the MACD
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to show buy/sell opportunities. (Appel specifies exponential moving averages
Interpretation
Crossovers
The basic MACD trading rule is to sell when the MACD falls below its signal
line. Similarly, a buy signal occurs when the MACD rises above its signal
line. It is also popular to buy/sell when the MACD goes above/below zero.
Overbought/Oversold Conditions
shorter moving average pulls away dramatically from the longer moving
average (i.e., the MACD rises), it is likely that the security price is
Divergences
A indication that an end to the current trend may be near occurs when the
MACD diverges from the security. A bearish divergence occurs when the
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MACD is making new lows while prices fail to reach new lows. A bullish
divergence occurs when the MACD is making new highs while prices fail to
reach new highs. Both of these divergences are most significant when they
MOMENTUM
Overview
The Momentum indicator measures the amount that a security's price has
Interpretation
ratio.
ON BALANCE VOLUME
Overview
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On Balance Volume ("OBV") is a momentum indicator that relates volume to
Interpretation
flowing into or out of a security. When the security closes higher than the
previous close, all of the day's volume is considered up-volume. When the
security closes lower than the previous close, all of the day's volume is
considered down-volume.
PRICE OSCILLATOR
Overview
The Price Oscillator displays the difference between two moving averages of
identical to the MACD, except that the Price Oscillator can use any two user-
specified moving averages. (The MACD always uses 12- and 26-day moving
Interpretation
moving average (or the securitys price) rises above a longer-term moving
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average. Conversely, sell signals are generated when a shorter-term moving
average (or the security’s price) falls below a longer-term moving average.
The Price Oscillator illustrates the cyclical and often profitable signals
VOLUME
Overview
specified time frame (e.g., hour, day, week, month, etc). The analysis of
Interpretation
that typically occur during consolidation periods (i.e., periods where prices
move sideways in a trading range). Low volume also often occurs during the
prices will move higher. High volume levels are also very common at the
beginning of new trends (i.e., when prices break out of a trading range). Just
selling.
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Volume can help determine the health of an existing trend. A healthy up-trend
should have higher volume on the upward legs of the trend, and lower volume
volume on the downward legs of the trend and lower volume on the upward
(corrective) legs.
VOLUME OSCILLATOR
Overview
The Volume Oscillator displays the difference between two moving averages
Interpretation
Volume Oscillator rises above zero, it signifies that the shorter-term volume
moving average has risen above the longerterm volume moving average, and
thus, that the short-term volume trend is higher (i.e., more volume) than the
There are many ways to interpret changes in volume trends. One common
belief is that rising prices coupled with increased volume, and falling prices
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POWERGRID, a Navratna Public Sector Enterprise, is one of the
Kms of Transmission network and 120 nos. of EHVAC & HVDC sub-
has also diversified into Telecom business and established a telecom network
engaged in power transmission business with the mandate for planning, co-
system. POWERGRID, as on July 2009, owns and operates about 71,600 ckt
kms of transmission lines at 800/765 kV, 400 kV, 220 kV & 132 kV EHVAC
& +500 kV HVDC levels and 122 sub-stations with transformation capacity
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length and breadth of the country, is consistently maintained at an availability
[85]
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
But for now looking at this indicator is showing downward trend in the
prices. 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
Bollinger Bands
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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. During the Oct – Nov 2008 and May – June 2009 the Script
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
santiments and situation which would be prevailing in the market at that point
of time.
But for now one shold sell the particular script to gain a profit of about 5 –
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Commodity Channel Index:
The chart shows that the CCI is moving in line with the prices and the as
By the chart, if we are looking for the current trend its moving downward for
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Envelope:
Currently stock is showing that prices will go down but as it will touch its
MACD:-
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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
Momentum:-
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Earlier chart has shown some indication about sell and buy and they come
true as it can be seen from the chart itself. Now the chart is showing selling
indication for intraday basis and for short term its good when indicator goes
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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
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near future. Sometime it shows indication of sale and buy at given point of
time
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 futher going down. 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.
On Balance Volume:-
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Currently the indicator is making low high than the previous high and its
indicates the downturn in intraday basis. But as it breaks the cuurent trend
Price Oscillator:-
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Currently the share prices according to the indicator is trading high and it
gave a signal of selling share prices fro short term and go long for medium
term
Volume:-
[95]
Current trend of volume shows that price tend to move upward but the rally
will not exceed 2-3 days. After that we need to see the chart again because the
Volume Oscillator:-
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The chart shows that price will tend to move downside in short term but on
BIBLIOGRAPHY
www.moneycontrol.com
www.googlefinance.com
www.yahoofinance.com
www.technicalanalysis.com
www.nseindia.com
www.bseindia.com
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