Presented by:

Mohit Jalan
 Introduction

Analysis of statistics generated by market

activity such as past price and volume to come
up with reasonable outcome in future using
charts as a primary tool.

Should I take a long position? Should I take a

short position? What is going to be the price
tomorrow, next week or next year?
 Assumptions

The market discounts everything

Prices move in trends

History tends to repeat itself

 Type of Charts

Line chart
 Type of Charts

Bar Chart
 Type of Charts

Volume Bar Chart

 Type of Charts

 Candlestick Chart
 Trends
 The meaning of trend in finance isn't all that different from
the general definition of the term - a trend is really nothing
more than the general direction.

 A trend represents a consistent change in prices (i.e. a change

in investor’s expectations)

 A trendline is a simple charting technique that adds a line to a

chart to represent the trend in the market or a stock.
 Types of Trend

Uptrends
 Types of Trend

Downtrend
 Types of Trend

Sideways Trend
 Support and Resistance
 Support level is a price level where the price tends to find
support as it is going down
 Support and Resistance
 Resistance Level is a price level where the price tends to
find resistance as it is going up
 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
 Aware: Support and Resistance levels

Support and Resistance levels are highly

volatile

Traders should not buy and sell directly at

these points as there may be breakout also
 Breakout

The penetration of support and resistance level

is called breakout
 Trader’s Remorse

Returning to the level of support or resistance

after a breakout is called trader’s remorse.
Trader’s Remorse
Resistance <-> Support
 Indicators

 A mathematical tool that can be applied on security’s

price giving a result that can be used to anticipate
trends, volatility and price

 Indicators are used in two main ways: to confirm

price movement and to form buy and sell signals
 Types of Indicator

Lagging
This indicator simply tells you what prices are
doing, they don’t warn you of upcoming changes

Leading
This indicators attempt to make investment calls on
securities prior to actual price confirmation
 Moving Averages
 A simple moving average is calculated by taking
average of most recent closing prices of n time period

 Exponential Moving average applies weighting

factors which decrease exponentially
Moving Averages
 Moving Averages Convergence Divergence

 MACD is calculated by subtracting 26 days moving

average from moving average of 12 days
 Trading using MACD
 A 9 day moving average of MACD is plotted along
with MACD
 Bollinger Bands
 Bollinger bands are the envelopes plotted at standard
deviations above and below the moving average

 Bollinger Bands can be used to measure the highness

or lowness of the price relative to previous trades
Bollinger Bands
Bollinger Bands
 Elliot Wave Theory
 Elliot stated that stock market moves in
repetitive cycles
 Impulse and Corrective Patterns
 The impulse pattern consists of five waves, the
five waves can be in either direction, up or
down
 Corrective patterns can be grouped into two
different categories:
• Simple Correction( Zig-Zag )
• Complex correction (Flat, Irregular,
Triangle)
 Fractal Structure
 The structures Elliott described meet the
common definition of a fractal ( self-similar
patterns appearing at every degree of trend)

 ElliottWave patterns that show up on long

term charts are identical to, and will also show
up on short term charts
Fractal Structure
 Fibonacci Retracement Patterns
 Stocks often pull back or retrace a percentage
of the previous move before reversing

 Retracement percentages follow a Fibonacci

ratio pattern, the key Fibonacci ratios are 23.6,
38.2, 50, 61.8
Fibonacci Retracement Patterns
 Linear Regression Lines
 When prices are below the Linear Regression Line, this could
be viewed as a good time to buy, and when prices are above
the Linear Regression Line, a trader might sell
 Linear Regression Channel
 A Linear Regression trendline shows where equilibrium exists
but Linear Regression Channels show the range prices can be
expected to deviate from a trendline
 Relative Strength Index
 It compares the magnitude of recent gains to recent losses in an
attempt to determine overbought and oversold conditions of an
asset
RSI= 100- 100/ (1+RS)

RS=EMA[U]/EMA[D] EMA- exponential moving

average

U= Sig (close (today)-close (yesterday))

D= Sig(close(yesterday)-close(today))
Relative Strength Index

Relative Strength Index

 Stochastic Oscillator
 Compares where a security’s price closed
relative to its price range over a given time
period

Fast oscillator

Slow oscillator %D = SMA(%K, N)

 Stochastic Oscillator
 Buy when the Oscillator (either %K or %D) falls below a specific level
(e.g., 20) and then rises above that level. Sell when the Oscillator rises
above a specific level (e.g., 80) and then falls below that level;
 Buy when the %K line rises above the %D line and sell when the %K line
falls below the %D line
 References
 Technical Analysis A to Z by Steven B. Achelis

 How to make money in Stocks By William J O’Neil

 Investopedia (www.investopedia.com)

 Technical Analysis of Indian stock market BSE

Sensex Index (Tradersedge India)
 Thank you

If you don’t follow the stock market, you are

missing some amazing drama
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