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Technical Analysis Stock Market

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26 views4 pages

Technical Analysis Stock Market

Yes

Uploaded by

nickbadshah4
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Technical Analysis

Learning Objectives
Introdution
Meaning
Principle of Technical Analysis
Chart Types/ Charting as Technical
Tool
Chart Pattern
The DOW JONES Theory
ELLIOTT WE Theory
Trend Reversal
Mathematical Indicator
Oscillators & Relative Strength Index
(RSI)
Market Indicator
Distinguish Between Fundamental
Analysis & Technical Analysis

Introduction
In finance, technical analysis is a security analysis discipline for
forecasting the direction of prices through the study of past market
data, primarily price and volume.

Meaning
• What is Technical analysis?
• In what Technical analysts believe?
• Technical analysts believe past trading activity and price changes
of a
security are better indicators of a security's likely future price
movements than the intrinsic value of the security.
• This analysis was formed out of basic concepts gleaned from Dow
Theory, a Theory about trading market movements that came from
the early writings of Charles Dow.

Charles Dow
Market Cycles:
Dow
Theory
Charles Dow (1851-1902)
founded Dow Jones & The Wall
Street Journal
Dow noticed that prices on
markets follow both long-term
and short-term trends
Short-term trends are
reactionary and won't
necessarily derail long-term
trend

Based on certain Assumption.


1) Prices follows a particular movement over the period.
2) Price movement is influenced by demand & supply.
3) Demand and Supply are affected by certain rational(logical) and
irrational (psychological) factors.
4) Every kind of price sensitive information is discounted into prices,
which
is the base of predicating near future price movement.
5) Prices follow a particular path continuously, which gets repeated
again
and again; this repetition provides a chance to take
investment/disinvestments decision.
Price movement is supported by trade volume.

Principles of Technical Analysis


• Analysis is based on 3 principles :-
1) The market discounts everything.
2) Price moves in trends.
3) History tends to repeat itself.

Chart Types/ Charting as a Technical Tool


1) Line Chart.
2)Bar Chart.
3) Point and figure chart.
4) Japanese candle stick chart.

Bar Chart
OPENING
LOWEST
PRICE
DATE
• To plot a bar chart, one should have a four daily data of a security
i.e.
opening price, high price, low price and closing price.
• Opening price of the security will be plotted on the left-hand side
and
Closing price in the right-hand side.
• It is formed by joining the higher price and lowest price of a
particular
day by a vertical line.
Point and figure chart
price
Point & figure Chart
XXXXX
00000000
XXXXXXXXXXXX
0000000
XXXXXXX
00000
Days
It is one of the oldest method of predicting price movements.
It does not consider the passage of time.
Upward price is shown by "X" and downward movement is shown by
"O"
As it does not consider time and volumes, most of the analysts do
not
depend on this charting method.

Japanese candle stick chart


daY
Japanese candle stick also shows the four important point of a stock
i.e. opening price, closing price, highest price and lowest price.
In a candle stick chart, a thick bar called candle, is drawn in the
chart.
The upper edge of the candle indicates high price and lower edge
candle indicates low price of the day.

Chart Pattern[Introduction]
D
Under technical analysis, it is believed that prices show a particular
pattern again and again & due to this, tendency chart pattern get
generated.
These chart pattern can be used to predict about the near future
price
movement, but these are not as strong as Oscillators and moving
average

Chart Pattern helps us to understand


• Support level
It is the lower level at which demand for shares gains momentum.
As a result, declining prices take an upward turn at this level.
It is expected that price will not fall below this level and the hope of
gaining
something from the rising prices creates a demand.
• Resistance level
It is the upper price level at which supply for the shares gains
momentum; as a
result, rising prices take a downward turn at this level.
It is expected that prices will not rise above this level and the fear of
likely loss
to decline in the share prices generates the supply.

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