The other unhealthy Transactions are

• BUCKET SHOPS: An illegal transaction made outside the Stock Exchange.

• MATCHED ORDER: A Speculator simultaneously appoints one broker for buying
and another broker for selling the securities at prefixed price. The ultimate aim of this
transaction is also to create artificial scarcity for certain securities.

FUNDAMENTAL ANALYSIS
SECURITY ANALYSIS
It provides the bases for selecting individual issues to bur or sell from among
available choices.
Approaches to security analysis
There are various approaches to security analysis which are as follows:
1. Fundamental analysis
a. Economic analysis
b. Company analysis
2. Technical analysis

MEANING OF FUNDAMENTAL ANALYSIS

In order to make a rational and scientific investment decision, an investor has to
evaluate a lot of inform as to the part as well as the expected future performance of
companies, industries and the economy as a whole in advance such evaluation or analysis is
known as fundamental analysis

FUNDAMENTAL ANALYSIS
• Fundamental Analysis really a logical and systematic approach for estimating the
future dividends and share price. It assumes that their price is determined by a number
of fundamental factors regarding economy industry and company Hence the
fundamentals as to EIC have to be considered while analyzing a security for the
purpose of investment
• Fundamental Analysis is in other words a detailed analysis of the fundamental
factor affecting the performance of companies
• Fundamental Analysis forms the basis for the selection of securities for invests
from among those available in market.

Fundamental Analysis thus involves 3 steps

• Economic analysis
• Company analysis
• Industry analysis

Economic Analysis

• The performance of a company depends much on the performance of the

economy if the economy is BOOM, the industries and companies in general said to be
prosperous. On the other hand, if the economy is in RECESSION, the performance of
companies will be generally poor.
• Investors are interested in studying those economic varieties, which affect the
performance of the company in which they proposed to invest. An analyzed of those
economic variable would give an idea about future corporate earnings and the
payment of dividends and interest to investors.
 • We shall now discuss some of the key economic variables that can investor
must monitor as part of this fundamental analysis:
• (1) GNP
• (2) SAVINGS AND INVESTMENT
• (3) INFLATION
• (4) AGRICULTURE
• (5) RATES OF INTEREST
• (6) GOVT. REVENUE, EXPENDITURE & DEFICITS
• (7) INFRASTRUCTURE
• (8) MONSOON
• (9) POLITICAL STABILITY

(1) GNP GNP represents the aggregate value of goods and services produced in the
economy. It reflects the over all performance of the economy the growth rate of GNP
indicates the growth rate of the economy the higher the rate of growth of GNP, the more
favorable is it for the stock market and vice versa
(2) SAVINGS AND INVESTMENT Savings and investment denote that
position of GNP, which is saved and invested savings increases in India since eighties now
the rate of savings is 25% from 21% in 80’s, which indicates the growth of capital market.
The higher the level of savings interest, the more favorable is it for the stock marketed vice
versa
(3) INFLATION Inflation has considerate impact on the performance of
companies. Higher rates of inflation upset business plans and erode purchasing power in the
hands of consumers. This will result in lower demand for products. Thus high rates of
inflation in an economy are likely to affect the performance of companies adversely.
However industries and companies prosper during periods of low inflation. Hence an
investor has to evaluate the inflation rates prevailing in the economy currently as well as the
trend of inflation likely to prevail in the future.
(4) AGRICULTURE Agriculture forms a major part of the Indian economy.
Some companies are using agricultural raw material as inputs and some others are supplying
inputs to agriculture. Such companies are directly affected by changes in agricultural
production. Hence, the increase/decrease in agricultural production has a significant bearing
on the industrial production and corporate performance.
(5) RATES OF INTEREST The cost and availability of credit for companies
are determined by the rates of interest prevalent in an economy. A low interest rate stimulates
investment by making credit available easily and cheaply. As a result cost of finance for
companies decreases which assures higher profitability. On the other hand, higher interest
rates result in higher cost of production, which may lead to lower profitability and lower
demand. Hence an investor has to consider the interest rates prevailing in the economy and
evaluate their impact on the performance and profitability of the companies.

(6) GOVT. REVENUE, EXPENDITURE & DEFICITS Government is the

largest investor and spender of money. So the trends in government revenue expenditure
deficits have a significant impact on the performance of industries and companies. So the
investor has to evaluate these carefully to assess their impact on his investments.
(7) INFRASTRUCTURE The development of an economy very much on the
availability of infrastructure. It includes electricity, roads and railways, communication
channels etc. The availability of infrastructural facilities affects the performance of
companies. Bas infrastructure leads to inefficiencies, lower productivity, wastage and delays
and vice versa. Thus an investor should assess the status of infrastructural facilities available
in the economy before finalizing his investment avenues.
(8) MONSOON The Indian economy is essentially an agrarian economy and
agriculture forms a very important sector of the Indian economy. But the performance of
agriculture to a very great extent depends upon the monsoon. The adequacy of the monsoon
ensures the success of the agricultural activities in India and vice versa. Hence the progress
and adequacy of the monsoon becomes a matter of great concern for an investor in India.
(9) POLITICAL STABILITY A stable political environment is necessary for
steady and balanced growth. No industry or company can grow and prosper in the midst of
political turmoil. Such long term economic policies are needed for industrial growth. Such
stable policies can be framed only by stable political systems.

INDUSTRY ANALYSIS
Industry analysis indicates to an investor whether the industry is a growth
industry or not. It gives an investor a choice of the industry in which the investments should
be made.
Industry analysis refers to an evaluation of the relative strength and weakness
of particular industries which can be divided in to three parts, viz.,
1. Life cycle of an industry
2. Characteristics of an industry
3. Profit potential of an industry

1. Life cycle of an industry

Marketing experts believe that each product has a life cycle. In the same way industry
is also said to have a life cycle. They are

(a) Pioneering Stage: Technology and product are newly introduced.

(b) Expansion stage: Those companies which reached first stage grow
further and becomes stronger.

(c) Stagnation Stage: In this stage the growth of the industries

Stabilizes. Sales increases at slower rate.

(d) Decay stage: The industry becomes obsolete and gradually

ceases to exist.

2. Characteristics of an industry
In an Industry Analysis the analyst should consider a number of key characteristics

(a) Relationship between Demand & supply: Excess supply reduces the profitability of the
industry and insufficient supply tends to improve the profitability. Thus an investor should
estimate the demand and supply gap in an industry.

(b) Period of life: Life of the industry depends on the products and the technology used by
the industry. Technological changes leads to product obsolete. No investment should be made
in such industries.

(c) State of labour: When there is labour revolution, industries cannot become bright.
(d) Governments attitude: The Government may encourage the growth and development of
certain industries by giving much assistance to such industries.

(e) Availability of Raw Material: An industry may depend on internal / external country for
raw material. Sometimes they depend on import of raw material.

(f) Cost structure: It refers to the proportion of fixed costs to variable costs. (Discuss about
Marginal Cost)

3. Profit potential of an industry

It depends on the following:
(i) Threat new entrants: New entrants inflate cost, push down the prices and reduce
profitability. An industry which is well protected from the entry of new firms would be ideal
for investment.

(ii) Competitions among existing firms: The firm competes with each other on the basis of
price, quality, promotion, service, warranties and so on. If the rivalry between the firms in an
industry is strong average profitability of the industry may be discouraged. The rivalry in an
industry is high when the following conditions prevail in the market:
(a) There is a sustained competitive battle
(b) The industry growth is dull
(c) The level of fixed cost is high
(d) There is over capacity in the industry continuing for a long time.
(e) The industry product is considered as a commodity, which
stimulates strong competition.
(f) The industry struggles much to withstand.
(iii) Pressure from substitute products: Each firm in an industry face competition from
other firms in the same industry producing substitute products. Substitute products may affect
the profit potential of the industry badly. The pressure from the substitute products is found to
be high under the following circumstances:
(a) When the price of the products is attractive
(b) When the cost for the prospective buyers to switch over to a substitute product is
minimum.
(c) When the substitute products are earning greater profits.
(iv) Bargaining power of buyers: Buyers can bargain for price reduction asks for better
quality and better service. The bargaining power of a buyer group is said to be high under the
following conditions:
(a) If its capacity to buy is more than the capacity of the seller to sell.
(b) If the cost of the switch over to a substitute product is low.
(c) If it poses a threat of backward integration strongly.
(v) Bargaining power of sellers: Sellers also can exert a competitive force in an industry and
bargain for rise in prices, lower quality, curtail some of the free services they offer etc.
Powerful suppliers can affect the profitability of the buyer industry badly. Suppliers are said
to be powerful under the following circumstances.
(a) Few suppliers dominate the entire market.
(b) There is no viable substitute for the products supplied.
(c) The switching poses a strong threat of forward integration.
(d) Suppliers also pose a strong threat of forward integration.
Company Analysis
It involves a close investigative scrutiny of the companies financial and non financial
aspects with a view to identifying its strength, weaknesses and future business prospects.
The financial and non financial aspects are as follows:
 Marketing success
 Accounting Policies
 Profitability

Marketing success
The success of the market of the firm depends on (a) The share of the company in the
industry (b) Growth of its sales and stability of sales (c) Sales.

Accounting Policies
A. Inventory Pricing
• Cost/market value method
• FIFO
• LIFO
B. Depreciation methods
• Straight line method
• Sum of the years digit method
C. Non operating income
• Dividend
• Interest
D. Tax Carry over
• Provision for taxation

Profitability
A.(a) Gross profit Margin
(b) Net profit Margin
(c) Earning power
(d) Return on equity
(e) Earning per share
(f) Cash EPS
B. Financial Statement Analysis
 Trading, P& L A/C Analysis
 Balance Sheet Analysis
C. Ratio Analysis
– Liquidity Ratios
– Leverage Ratios
– Profitability Ratios
– Activity / Efficiency Ratio
TECHNICAL ANALYSIS

Meaning of Technical Analysis

It deals with the study of the market data in terms of factors affecting supply and
demand schedules viz., prices, volume of trading, etc.,
The technical analysts believe that the price of stock depends on supply and demand
in the market place and has little relationship to value.

ASSUMPTIONS OF TECHNICAL ANALYSIS

1. Market prices are determined by the interaction of supply and demand forces.
2. Supply and demand forces are influenced by a variety of factors.
3. Stock prices tend to move in fairly persistent trends.
4. Changes in demand and supply bring out changes in trends.
5. Shifts in demand and supply can be detected with the help of charts as to market action.
6. Analysis of past market data can be used to predict future price behaviour. This is because
trends and patterns are persistent.

TECHNICAL ANALYSIS Vs FUNDAMENTAL ANALYSIS

S No TECHNICAL ANALYSIS FUNDAMENTAL ANALYSIS
ICAL ANALYSIS ENTAL ANALYSIS
1 It mainly seeks to predict It tries to determine long term values
short term price movements
2 The focus of technical The focus of fundamental analysis is
analysis is mainly on on fundamental factors relating to the
internal market data EIC
3 It consider the factors like It considers economic factors,
price of securities, its demand population and natural resources etc.
and supply and Return On
Investment.
4 It provides an ample scope to There is no scope for it.
narrow about the past trend
of the share and also
fluctuation in the price trend
etc
5 It has many assumptions There are no assumptions in
Fundamental Analysis
6 In Technical Analysis only In Fundamental Analysis production
the amount of profit is given method raw material supply and
primary importance demand for the product etc. are
considered as basic factors.

THEORIES OF TECHNICAL ANALYSIS

Technical analysis gives the following three theories to value the security:
 – Dow Theory
– Random Walk Theory
– Efficient Market Theory.

DOW THEORY
• Proposed by Charles H Dow
• One of the oldest technical methods of security valuation
• However it is still widely followed
• It consists of 3 types of market movements viz.,
 Primary Market Trend - Movements lasting for one year or more
 Secondary Intermediate Trend - Movements lasting for one several to months
 Minor Movements - Movements lasting for hours to few days

The Dow Theory asserts that stock prices demonstrate patterns over 4-5 years and these
patterns are mirrored by indices of stock prices. The Dow Theory employs 2 of the Dow
Jones Averages. They are 1. The Industrial Average and 2. The Transportation Average.
If the Dow Jones Industrial Averages rises, the transportation average should also rise. Such
simultaneous price movements suggest a strong bull market. On the other hand, a decline in
both the industrial and transportation averages suggests that the market is uncertain regarding
the direction of future stock prices.

The Dow Theory asserts that stock prices demonstrate patterns over 4-5 years and these
patterns are mirrored by indices of stock prices. The Dow Theory employs 2 of the Dow
Jones Averages. They are
1. The Industrial Average and
2. The Transportation Average.
If the Dow Jones Industrial Averages rises, the transportation average should also rise. Such
simultaneous price movements suggest a strong bull market. On the other hand, a decline in
both the industrial and transportation averages suggests that the market is uncertain regarding
the direction of future stock prices.

If one of the averages starts to decline after a period of rising stock prices, then the 2 are at
odds. This suggests that the other average may not continue to rise but may soon start to fall.
Hence, the investor will use this signal to sell securities and convert them to cash.
On the other hand, when after a period of falling security prices one of the averages start to
rise while other continues to fall the converse occurs. According to the Dow Theory this
divergence suggests that this phase is over and that security prices in general will soon start to
rise. Investor will then purchase securities in anticipation of the price increase.

If investors believe this theory, they will try to liquidate when a sell becomes apparent, which
in turn will drive down prices. Buy signals have the opposite effect, Investors will try to
purchase securities which will drive up their prices. If investors believe the signals and act
accordingly, the signals will become self-fulfilling properties.
According to Dow Theory, the price movements in the market can be identified with the help
of a line chart.
 Prices (Closing values of the market)
index) Primary Trend

Secondary Reactions

Secondary Reactions

Days (Price Movements in the market)

Figure: Price Movements in the Market

The above figure shows a line chart of the closing values of the market index. The primary
trend of the market is upward but there are secondary reactions in the opposite direction.

Bullish Trend

Bull Market has three phases

PHASE I : The prices would advance with the revival of confidence in the future of
business. This will encourage investors to buy shares of companies.
PHASE II: The prices would advance due to the improvements in corporate earnings.
PHASE III: The prices advances due to inflation and speculation.

Thus in case of bull market, the line chart would exhibit 3 peaks, in the following figures.
 T3

Phase III
T2

Phase II
T1
Phase I
Prices

Speculation
Confidence Increase in Corporate & Inflation
Revival Earnings

Days

BEARISH TREND

Bear market also has three phases:

PHASE I: Prices begin to fall due to abandonment of hopes. Investors begin to sell their
shares.
PHASE II: Companies to start reporting lower profits and lower dividends.
PHASE III: Prices fall still further due to distress selling.

Bearish trend would be indicated by the following figure

Bear market also has three phases:

PHASE I: Prices begin to fall due to abandonment of hopes. Investors begin to sell their
shares.
PHASE II: Companies to start reporting lower profits and lower dividends.
PHASE III: Prices fall still further due to distress selling.

Bearish trend would be indicated by the following figure

 Distress
selling
Lower profits
Fall in & Dividends
prices

Phase III
Phase I
Prices

Phase II
B3

B1
B2

Days

CHARTS
. Charting represents a key activity in Technical analysis and so graphical representations
forms the very basis of Technical analysis. Here the security prices are charted. Generally,
shares are traded in the market at different prices on the same day. Of them, 4 prices are
important ., Viz.,
 The highest price of the day
 The lowest price of the day
 The opening price of the day
 The closing price of the day ( the most important price of the day, because it is used
in most of the analysis of share prices)

The various price charts used by the analysts are

 Line chart
 Bar Chart
 Japanese Candle Stick Chart

LINE CHART
Line chart is the simplest price chart. Generally the fundamentalist use
line chart. In this chart, the closing prices of a share are plotted on the XY graph on a day to
day basis. Line Chart is drawn to forecast the price of a share in advance.
BAR CHART
It is the most popular method of chart used by Technical Analysis, In this chart, the highest
price, the lowest price and the closing price of each day are plotted on a day to day basis.

The top of the bar indicates - Highest Prices of the day

The bottom of the bar indicates – Lowest prices of the day
A small horizontal hash marked on the right side of the bar indicates - Closing price of the
day
Some times a hash on the left of the bar indicates – Opening price of the day.

JAPANESE CANDLE STICK CHARTS

It shows all the four important prices viz., the highest price, the lowest price, the opening
price and the closing price of shares on a day to day basis. A vertical bar joins the highest
price and the lowest price of a day. The opening price and the closing price of the day would
be shown by a rectangle so that the chart looks like a candle stick.

Different types of candle stick charts are used to represent different situations. They are
• White candle stick chart
• Black candle stick chart
• Doji candle stick chart
• When the closing price of the day is higher than the opening price White candle stick
chart is used,
• where Black candle stick chart is used when the closing price of the day is lower than
the opening price.
• Doji candle stick chart is adopted where the opening price and the closing price of the
day are the same. Japanese candle stick chart is as follows:

CHART PATTERNS

The various chart patterns that are commonly adapted are

 Support and resistance patterns
  Reversal patterns – Head shoulder formation
 Continuation patterns

Support and resistance patterns

Support and resistance are price levels at which the down trend or uptrend
in price movements is reversed. Support level occurs when price moves downward. The price
may bounce back every time it reaches a particular level. A Horizontal line to the support
lime connects all these low points.

Resistance level occurs when the share price moves upwards. However, price may reverse
every time it reaches a particular level. A horizontal line is used to join these tops which
forms the resistance level.
If the scrip moved downwards by breaking the support level, it means it has bearish
implications. It means that the prices may fall further. On the other hand, if the scrip
penetrated the resistance level, it would denote a bullish trend.

HEAD AND SHOULDERS FORMATION

The most popular reversal pattern is the Head and Shoulder formation. Head and Shoulder
formation occurs at the end of a long up trend. It shows a top followed by a still higher top
and then another lower top. Such formation resembles the HEAD and TWO SHOULDERS of
a man. So it is called as Head and Shoulder formation.
The first hump i.e., the left shoulder is formed when the prices reach the top due to a strong
buying impulse. Then there is a short trend downward swing due to the less volume of trade.
The second top known as head is formed when the volume of trade increases still further.
This is followed by less volume, which takes the price down to a bottom near to the earlier
downward swing. A third top i.e., right shoulder occurs taking the price to a height less than
the head but equal to the left shoulder.
A horizontal line joining the bottoms of this formation is called neck line. Price penetrates
this neck line. So the formation of the Head and Shoulders pattern is completed.
After breaking the neck line, the price is expected to decline sharply.

CONTINUATION PATTERNS
Continuation patterns are those patterns that provide a space for breathing to the earlier
movement, which may be a rise or fall. After these patterns, get over, the price moves along
the original trend. As these patterns denote a continuation of the trend in the market before its
formation, they are called so. The popular forms of continuation patterns are:

 Triangle Formation
 Flag Formation
 Pennant Formation.

An example of Triangle formation is as follows:

RANDOM WALK THEORY

According to this theory a change in the price of a stock occurs only due to certain changes in
the EIC.
Information regarding changes in any of these factors change the stock prices immediately
and the stock moves to a new level, which may be either upwards or downwards. Thereafter,
change in the price of the stock will occur only if any other new piece information is made
known, which was not available, is made known, which was not available before.
Thus according to this theory, changes in stock prices show independent behaviour and are
dependent on the new pieces of information that are received. Each price change is
independent of other price changes because each change is caused by a new piece of
information.
The basic in random walk theory is that the information regarding changes in the EIC
Performance is immediately and fully spread. As and when the information regarding
changes received there will be an instant. Adjustment in stock prices either upwards or
downwards. Thus the current stock price fully reflects all available information on the stock.
Therefore, the price of each day is independent. It may be unchanged, either higher or lower
from the previous price, which depends upon the new pieces of information being received
each day.
The random walk theory pre supposes that the stock markets are efficient and competitive. So
there is immediate price adjustment. Hence this theory later came to be known as the
EFFICIENT MARKET HYPOTHESIS (EMH).

EFFICIENT MARKET THEORY

Efficient Market Theory states that the capital market is efficient. In an efficient market, a
stock price fully reflects all available information. New information is evaluated as and when
it arrives and prices a re instantaneously adjusted to a new level. Hence, in an efficient capital
market, security prices always equal their intrinsic values.

Assumptions of Efficient Market Theory

The following are the assumptions of Efficient Market Theory

• Information is freely available and also flowing quickly.
• All investors have the same access to investment information.
• Transaction costs are not there.
• Taxes are not affecting the investor in any manner.
• Investors are rational
• Every investor has access to lending and borrowing at the same rate.
• Market prices are not stable and absorb the market information quickly and respond
efficiently and quickly.

Levels of Market Efficiency

There are 3 levels of Market Efficiency viz.,
• Weak form
• Semi – Strong form
• Strong form

Each such form deals with a different type of information. They have been
tested through several empirical studies.

WEAK FORM EFFICIENCY

• The weak form efficiency deals with the information regarding the past sequence of
security price movements. The weak form hypothesis is says that the current prices of
stocks already fully reflected all the information contained with historical prices.

SEMI – STRONG FORM EFFICIENCY

• It deals with the publicly available information. The Semi – Strong form of the
Efficient Market Hypothesis says that current prices of stocks not only reflect all
informational content of historical prices but also reflect all publicly available
information about the company being studied. It maintains that stock prices
instantaneously adjust to the information that is received. Examples of such
information are Corporate annual report, announcement of forth coming dividends,
right issue, etc.

STRONG FORM EFFICIENCY

The strong form efficiency deals with all information both public and
private i.e. inside. The strong form of the Efficient Market Hypothesis maintains that the
current security prices reflect all information both publicly available information as well as
private or inside information. It implies that no information can be used to earn superior
returns consistently
MOVING AVERAGE CONVERGENCE AND DIVERGENCE [MACD]
 It is an indicator used for disinvestment and investment process.lt measures the
convergence and divergence between two exponential or simple moving averages .
 There are two series of closing price data : short-term moving average 12 days long
term moving average for 26days .
 MACD should reflect the absolute differences between these two moving averages .

 If the market is in the overbought zone one can sell but not in the cover sold zone .

 A daily chart prices will first give preliminary indications, which are to be confirmed
by the oscillators or the MACD lines.

RELATIVE STRENGTH INDEX (RSI)

 It was developed by Wells Wilder. It is an oscillator used to identify the inherent

technical strength and weakness of a particular scrip or market. RSI can be calculated
for a scrip by the formula:

100-(100)
RSI = ------------
[ 1+Rs]

Average gain per day

Rs = ---------------------------
Average loss per day
 The RSI can be calculated for any number of days depending on the wish of technical
analyst and the time frame of trading adopted in particular stock market.

 RSI is calculated for 5,7,9,14 days period as wrong signals is reduced.

 Reactionary or sustained rise or fall in the price of the scrip is foretold by RSI.

 If the share price is falling and RSI is rising, a divergence is said to have occurred.
Divergence indicates the turning point of the market.

 lf the RSI is rising overbought zone, it would indicate the downfall of the price. If it
falls in the overbought zone, it gives clear signal of 'sell'

 When RSI is in the oversold region, it generates buy signal.

RATE OF CHANGE MOMENTUM (ROC)

ROC measures the rate of change between the current price and the price 'n'
number of days in past. It helps to find out the overbought and oversold positions in a scrip.lt
is also used in identifying trend reversal. Closing prices are used to calculate the ROC.

Procedure
 Calculated using 2 methods :
• Current closing price is expressed as a percentage of the 12days or weeks in past.
• The percentage variation between the current price and the price 12days in the past is
calculated.

ROC GRAPH
It can be plotted in a graph, x-axis representing days or months and y-axis
the values of ROC.

When 1st method adopted, ROC oscillates across the hundred line. In the
2nd method, ROC oscillates around zero line.

STOCHASTICS

• Stochastic are an indicator used in technical analysis. Stochastic compare closing

prices in a market to the high and low prices for that market over a certain period of
time.

• Stochastic are calculated by taking the lowest low price and the highest high price for
a number of previous trading periods, usually fourteen. The difference between the
current closing price and the lowest low is divided by the difference between the
highest high and lowest low, and the result is multiplied by 100. The product,
expressed as a percentage, is considered to be the stochastic oscillator. Three varieties
of this oscillator exist--fast, slow, and full--each applying a different transformation to
the value of the basic stochastic oscillator.

• Stochastics can be used to determine when a market is overbought or oversold.

According to technical analysis, when the stochastic oscillator rises above 80%, the
market is overbought, and when the oscillator drops below 20%, the market is
oversold. Thus stochastics can be thought of as strong selling or buying signals,
respectively,
• When using stochastics, foreign exchange traders need to take into account the fact
that the forex market, being a twenty-four hour market, has no closing prices. Forex
traders typically use the price at the time of the New York Stock Exchange's close as ,
the forex market's closing price, since the volume of trading drops off shortly after the
close of the NYSE.
Stochastics can be used to determine when a market is overbought or
oversold. According to technical analysis, when the stochastic oscillator rises above 80%, the
market is overbought, and when the oscillator drops below 20%, the market is oversold. Thus
stochastics can be thought of as strong sell The stochastic oscillator is a momentum indicator
used in technical analysis, introduced by George Lane in the 1950s, to compare the closing
price of a commodity to its price range over a given time span.

This indicator is usually calculated as:

100 Closing Price - Price Low

STS = -----------------------------------
Price High- Price Low
and can be manipulated by changing the period considered for highs and lows

Stochastics Fast & Slow

• The idea behind this indicator is that prices tend to close near their past highs in bull
markets, and near their lows in bear markets. Transaction signals can be spotted when
the stochastic oscillator crosses its moving average.

• Two stochastic oscillator indicators are typically calculated to assess future variations
in prices, a fast (%K) and slow (%0). Comparisons of these statistics are a good
indicator of speed at which prices are changing or the Impulse of Price. %K is the
same as Williams %R, though on a scale 0 to 100 instead of -100 to 0, but the
terminology for the two are kept separate ill .

The fast stochastic oscillator or Stock %K calculates the ratio of two closing
price statistics: the difference between the latest closing price and the lowest price in the last
N days over the difference between the highest and lowest prices in the last N days:

CP to days - LOW lowest N days

%K = ------------------------------------------------------ X 100
H IGH highest N days.- LOW lowest N Days

Where:
• CP is closing price
• LOW is low price
• HIGH is high price
The usual "N" is 14 days but this can be varied. When the current closing
price is the low for the last N-days, the %K value is 0, when the current closing price is a
high for the last N-days, %K=100.

The slow stochastic oscillator or Stock %0 calculates the simple moving

average of the Stock %K statistic across s periods. Usually s=3:

%Dn = SM A3 of %K
 The %K and %D oscillators range from 0 to 100 and are often visualized
using a line plot. Levels near the extremes 100 and 0, for either %K or %D, indicate strength
or weakness (respectively) because prices have made or are near new N-day highs or lows.

There are two well known methods for using the %K and %D indicators to
make decisions about when to buy or sell stocks. The first involves crossing of %K and %D
signals, the second involves basing buy and sell decisions on the assumption that %K and
%D oscillate.

In the first case, %D acts as a trigger or signal line for %K. A buy signal is
given when %K crosses up through %D, or a sell signal when it crosses down through %D.
Such crossovers can occur too often, and to avoid repeated whipsaws one can wait for
crossovers occurring together with an overbought/oversold pullback, or only after a peak or
trough in the %D line. If price volatility is high, a simple moving average of the Stock %0
indicators may be taken. This statistic smooth’s out rapid fluctuations in price.

• In the second case, some analysts argue that %K or %D levels above 80 and below 20
can be interpreted as overbought or oversold. On the theory that the prices oscillate,
many analysts including George Lane, recommend that buying and selling timed to
the return from these thresholds. In other words, one should buy or sell after a bit of a
reversal. Practically, this means that once the price exceeds one of these thresholds,
the investor should wait for prices to return through those thresholds (e.g. if the
oscillator were to go above 80, the investor waits until it falls low 80 to sell).
• George Lane, a financial analyst from the 1950s is one of the first to publish on the
use of stochastic oscillators to forecast prices ill. According to Lane you use the
stochastic indicator with a good knowledge of "Elliot Wave Theory". A Center piece
of his teaching is the divergence and convergence of trend lines drawn on stochastic
as diverging/ converging to trend lines drawn on price cycles. Stochastic has the
power to predict tops and bottoms.

It should be noted that the existence of price oscillations is hypothetical and

statistical at best--stock price movements are a consequence of the actions of human
decision-makers and past behavior of market variables does not necessarily predict future
behavior

PORTFOLIO MANAGEMENT

Many times the investors go on acquiring these assets in and adhoc and unplanned manner
and the result is high risk, low return profile, which they may face. All such assets would
constitute his portfolio and the wise investor not only plans his portfolio as per his risk return
profile or preferences but manages his portfolio efficiently so as to secure the highest return
for the lowest risk possible at that level of investment. This in short is the PORTFOLIO
MANAGEMENT

MODERN PORTFOLIO THEORY

Modern Portfolio Theory postulates that savers are generally risk averse and
try to reduce risk by all possible methods. The markets are perfect and absorb all information
perfectly and returns are the same whenever you enter the market. The principal of
dominance is applied to select a portfolio as the frontier line.

Modern Portfolio Theory depends on the concepts of diversification and use

for beta for reducing the risk and the concept of dominance for selection of a portfolio with
least risk, with returns being given.

BASIS OF MODERN PORTFOLIO THEORY

• Diversification – Investment in more than one security, asset, industry etc., with a
view to reduce risks:
Diversification has to give an advantage, the coefficient of correlation
is to be considered. If the average risk of portfolio has to be less than 13.6%, the coefficient
of correlation of these returns of X and Y has to be less than 1, if the coefficient is +1, the
return moves along the straight line AB. Suppose it is -1, then risk of the one can be perfectly
offset by that on the other. If it is 0.5 then the diversification can reduce the risk on the
portfolio and the return will move along the curve.

• CAPM theory and concept of dominance:

Risk and return have a relationship. If you want to increase the return
you should also be prepared to accept higher risk. You are entitled to various combinations of
assets in your portfolio. These combinations are called opportunity set-a set of all possible
portfolios given the constraint of money available for investment. The upper boundary of the
opportunity set is called the efficient frontier because by so moving, you are improving the
return for the same level of risk.

• Dominance Concept:
The portfolio manager has the opportunity to include risk – free assets
in his portfolio like a government bond or bank deposit. If he includes a such risk free asset,
he lowers the risk of the total portfolio.

• Role of beta :
According to CAPM, the market related risk and not total risk is
relevant. Every asset will have a total return comprising two components.
Risk free return - a return for mere waiting or loss of liquidity for the period of investment.
Risk premium, which is return for risk taking and varies from asset to asset.

Modern Portfolio Theory postulates the following:

 Diversification reduces the total risk but applicable only to company specific
unsystematic risk.
 CAPM states that where shares are correctly priced every security is expected to earn
returns commensurate wi8th risk it carries.
 The riskiness of a security is to be seen in the context of portfolio or market related
risk, but not in isolation.
 The important of beta is for managing non-diversifiable part of risk.

PORTFOLIO INVESTMENT STRATEGY

Different assets have different risk characteristics: some of them are also
risk free assets like cash and bank deposits. Among the capital market instruments, equities
are most risky, followed by debentures which are less risky and then public sectors bonds or
government securities which are least risky. There are also money market instruments like
commercial bills, treasury bills etc., which are of short duration and less risky. Thus, the risk
characteristics vary from asset class to asset class.

ASSET ALLOCATION
Investors’ data base is the starting point for designating an investment
strategy, Does he want to a regular income? How regular, monthly or yearly? Does he want
regular cash inflows to meet the liabilities as they fall due for repayment? What is his asset –
liabilities mix or inflow – outflow pattern? Does he want only capital appreciation or a
mixture of both income and capital appreciation.

RISK MANAGEMENT STRATEGY

Diversification and management of duration of the portfolio. This will take
care of the diversifiable risk and interest rate risk.
Use of beta management of systematic risk.

TARGET RETURN
An investor who wants only risk free return can have all his funds invested
in government bonds and bank deposits, which will yield only risk free return of around 12%-
14% and sometimes more. However, is the investor wants to have a higher return and takes
risk accordingly, and then risk premium will be available to him? Assuming the risk less
return as 12% if he wants a return of 25%, then risk premium should be 13%. The portfolio
manager has to invest the majority of his funds in equities with a beta, of more than 1. If the
market return is 20% then with a beta of 1.3, he will get 26%, which is the target return.

PORTFOLIO CONSTRUCTION
Portfolio is a combination of securities such as stocks, bonds and money
market instruments. The process of blending the broad asset classes to obtain optimum return
with minimum risk is called Portfolio Construction.

Diversification of investments helps to spread risk over many assets. A diversification of

securities gives the assurance of obtaining the anticipated return on the portfolio. In a
diversified portfolio, some securities may not perform as expected, but others may exceed the
expectation and making the actual return of the portfolio reasonably close to the anticipated
one. Keeping a portfolio of single security may lead to a greater likelihood of the actual
return somewhat different from that of the expected return. hence it is a common practice
securities in the portfolio.

Approaches in portfolio construction

Commonly, there are two approaches in the construction of the portfolio securities viz.
traditional approach and Markowitz efficient frontier approach. In the traditional approach.
Investor's needs in terms of income and capital appreciation a re calculated and appropriate
securities are selected to meet the needs of the investor.

The common practice in the traditional approach is to evaluate the entire

financial plan of the individual. In the modern approach, portfolios are constructed to
maximize the expected return for a given level of risk. It views portfolio construction in terms
of the expected return and the risk associated with obtaining the expected return.

Traditional approach
 Two major decisions
• determining the objectives the portfolio
• selection of securities to be included in the portfolio
This is carried out in four to six steps. Before formulating the objectives, the
constraints of the investor should be analyzed. Within the given frame work of constraints,
objectives are formulated.

Then based on the objectives, securities are selected. After that, the risk and return of the
securities a should be studied. The investor has to assess the major risk categories that he or
she is trying to minimize. Compromise on risk and non-risk factors has to be carried out.
Finally, relative portfolio weights arc assigned to securities like bonds, stocks and debentures
and then diversification is carried out.

ANALYSIS OF CONSTRAINTS

The constraints normally discussed are

• Income Needs
• Liquidity
• Time Horizon
• Safety
• Tax considerations and the temperament.

Income Needs

The income needs depend on the need for income in constant rupees and current rupees. The
need for income in current rupees arises form the investor's need to meet all or part of the
living expenses. At the same time inflation may erode the purchasing power, the investor may
like to offset the effect of the inflation and so, needs income in constant rupees.

Need For Current Income

The investor should establish the income, which the portfolio should
generate. The current income need depends upon the entire current financial plan of the
investor. The Expenditure required maintaining a certain level of standard of living and all
the other income-generating sources should be determined. Once this information is arrived
at, it is possible to decide how much income must be provided for the portfolio of securities.

Need for constant income

Inflation reduces the purchasing power of the money. Hence, the investor
estimates the impact of inflation on his estimated stream of income and tries to build a
portfolio which could offset the effect of inflation. Funds should be invested in such
securities where income form them might increase at a rate that would offset the effect of
inflation. The inflation of purchasing power risk must be must be recognized but this docs not
pose a serious constraint on portfolio if growth stocks are selected.

Liquidity
 Liquidity need of the investment is highly individualistic of the investor. if
the investor prefers to have high liquidity, then funds should be invested in high quality short
term
debt maturity issues such as money market funds, commercial papers and shares that are
widely traded. keeping the funds in shares that are poorly traded or stocks in closely held
business and real estate lack liquidity. The investor should plan his cash drain and the need
for net cash inflows during the investment period.

Safety of the principal

Another serious constraint to be considered by the investor is the safety of the principal value
at the time of liquidation. Investing in bonds and debentures is safer than investing in the
stocks. Even among the stocks, the money should be invested in regularly traded companies
of long standing. Investing money in the unregistered finance companies may not provide
adequate safety.

Time horizon
Time horizon is the investment-planning period of the individuals. This varies from
individual to individual. Individual's risk and return preferences are often described in terms
of his" life cycle". The stages of the life cycle determine the nature of investment.
The first stage is the early career situation. At the career starting point assets are lesser than
their liabilities, more goods are purchased on credit.

The other stage of the time horizon is the mid career individual. At this stage, his assets are
larger than his liabilities. Potential pension benefits are available to him. by this time he
establishes his investment program.
The final stage is late career or the retirement stage. Here, the time horizon of the investment
is very much limited. He needs stable income and once he retires, the size of the income he
needs from investment increases.

Tax consideration
Investors in the income tax paying group consider the tax concessions they could get from
their investments. For all practical purpose, they would like to reduce the taxes. For income
tax purpose interests and dividends are taxed under the head" income form other sources".
The capital appreciation is taxed under the head" capital gains" only when the investor sells
the securities and realizes the gain.

The tax is then at a concessional rate depending on the period for which the asset has been
held before being sold. Form the tax point of view, the form in which the income is received.
Investing in government bonds and NSC can avoid taxation.

Temperament
The temperament of the investor himself poses a constraint on framing his
investment objectives. Some investors are risk lovers or takers who would like to take up
higher risk even for low return. While some investors are risk averse, who may not be willing
to undertake higher level of risk even for higher level of return?
DETERMINATION OF OBJECTIVES
Portfolio's have the common objective of financing present and future
expenditures from a large pool of assets. The return that the investor requires and th degree of
risk he is willing to take depend upon the constraints. The common objectives are
• current income
• Growth in income
• Preservation of capital
The investor in general would like to achieve all the four objectives.

SELECTION OF PORTFOLIO
The selection of portfolio under different objectives are dealt subsequently

OBJECTIVES AND ASSET MIX

If the main objectives is adequate amount of current income, sixty per cent
of the investment is made on debts and 40 per cent on equities. The proportions of
investments on debt and equity differ according to the individuals preferences. Money is in
vested in term debt and fixed and income securities. Here the growth of income becomes the
secondary objective and stability of principal amount may become the third.

Even within the debt portfolio, the funds invested in short-term bonds
depends on the need for stability of principal amount in comparison with the stability of
income. If the appreciation of capital is given third priority .instead of short term debt the
investor opts for long term debt. The maturity period may not be a constraint.

Growth of income and asset mix

Here the investor requires a certain percentage of growth in the income
received form his investment. The investor's portfolio may consist of60 to 100 percent
equities and 0 to 40 percent debt instrument. The debt portion of the portfolio may consist of
concession regarding tax exemption. Appreciation of principal amount is given third priority.

For eg
• computer software, hardware and non- conventional energy producing company
shares provide good possibility of growth in dividend.

Capital appreciation and asset mix

Capital appreciation means that the value of the original investment increases over the years.
Investment in real estates like land and house may provide a faster rate of capital appreciation
but they lack liquidity. In the capital market, the values of the shares are much higher than
their original issue prices.

Safety of principal and asset mix

Usually, the risk averse investors are very particular about the stability of principal.
According to the life cycle theory, people in the third stage of life also give more importance
to the safety of the principal. All the investors have this objective in their mind. No one like
to lose his money invested indifferent assets. But, the degree may differ. The investor's
portfolio may consist more of debt instruments and within the debt portfolio, more would be
on short-term debts.
Risk and return analysis

The traditional approach to portfolio building has some basic assumptions.

First, the individual prefers larger to smaller returns from securities. To achieve this goal. The
investor has to take more risk. The ability to achieve higher returns is dependent upon his
ability too judge risk and his ability to take specific risks. The risks are namely interest rate
risk. Purchasing power risk. Financial risk and market risk.

The investor analyses the varying degrees of risk and constructs his
portfolio. At first, he establishes the minimum income that he must have to avoid hardships
under most adverse economic condition and then he decides risk of loss of income that can be
tolerated. The investor makes a series of compromises on risk and non risk factors like
taxation and marketability after he has assessed the major risk categories, which he is trying
to minimize.

Diversification
Once the asset mix is determined and the risk and the risk and return are
analyzed. The final step is the diversification of portfolio. Financial risk can be minimized by
commitments to top quality bonds, but these securities offer poor resistance to inflation.
Stocks provide better inflation protection than bonds bit are more vulnerable to financial
risks. Good quality convertibles may balance the financial risk and purchasing power risk.

According to the investor's need for income and risk tolerance level
portfolio is diversified. In the bond portfolio. The investor has to strike a balance between the
short term and long-term bonds.
The investor has to select the industries appropriate to his investments
objectives. Each industry corresponds to specific goals of the investor. The sales of some
industries like two-wheeler and steel tend to move in tandem with the business cycle, the
housing industry sales move counter cyclically.

Selecting the best company is widely followed by all the investors but this
depends upon the investors' knowledge and perceptions regarding the company. The final
step in this process is to determine the number of shares of each stock to be purchased.
Depending upon the size of the portfolio, equal amount is allocated to each stock. The
investor has to purchase round lots to avoid and transaction

MODERN APPROACH
Markowitz gives more attention to the process of selecting the portfolio .
This planning can be applied more in the selection of common stocks portfolio than the bond
portfolio. The stocks are not selected on the bases of need for income or appreciation. but the
selection is based on the risk and return analysis. T=return includes the market return and
dividend. The investor needs return and it may be either in the form of market return and
dividend. They are assumed to be indifferent towards the form of return.

TECHNICAL TOOLS
Technical tools are,
  DOW THEORY,
 VOLUME OF TRADING,
 SHORT SELLING,
 ODD LOT TRADING,
 BARS AND LINE CHARTS,
 MOVING AVERAGES AND
 OSCILLATORS.

Dow Theory
• Hypothesis
1. No single individual or buyer can influence the major trend of the market. However, an
individual investor can affect the daily price movement by buying or selling huge quantum of
particular scrip. The intermediate price movement also can be affected to a lesser degree by
an investor.

2. The market discounts everything. Even natural calamities such as earthquake, plague and
fire also are quickly discounted in the market.
3. The theory is not infallible. It is not a tool to beat the market but provides a way to
understand it better.

THE THEORY
According to Dow Theory, the trend is divided into primary, intermediate
and short-term trend. The primary trend may be the broad upward or downward movement
that may last for a year or two. The intermediate trend is corrective movements, which may
last for three weeks to three months. The primary trend may be interrupted by the
intermediate trend. The short-term trend refers the day-to-day price movement. It is also
known as oscillators and fluctuations. These three types of trends are compared to tide waves
and ripples of the sea.

Trend
Trend is the direction of movement. The share prices can either increase or
fall or remain . flat. The three directions of the share price movements are called as rising,
falling and flat trends. The point to be remembered is that share prices do not rise or fall in a
straight line. Every rise or fall in price experience a counter move. If a share price is
increasing, the counter move will be a fall in price and vice versa. The share prices move in
zig zag manner.

The trend lines are straight lines drawn connecting either the tops or bottoms of the share
price movement. To draw a trend line, the technical analyst should have at least two tops and
bottoms. The following figure shows the trend analysis

Trend reversals
The rise or fall in share price cannot go on forever. The share price movement may reverse its
direction. Before the change of direction, certain pattern in price movement emerges. The
change in the direction of the trend is shown by violation of the trend line. Violation of the
trend line means the penetration of the trend line. If scrip cuts the rising trend line from
above, it is a violation of trend line and signals the possibility of fall in Price. Like wise if the
scrip pierces the trend line from below, this signal the rise in price.
Primary trend
The security price trend may be either increasing or decreasing. When the market exhibits the
increasing trend, it is called bull market. The bull market shows three clear cut peaks.
Each peak is higher than the previous peak. The bottoms are also higher than the previous
bottoms. The phases leading to the three peaks are revival, improvement in corporate profit
and speculation. The revival period encourages more and more investors to buy scrip's, their
expectations about the future being high.

In the second phase, increased profits of corporate would result in further price rise. In the
third phase, prices advance due to inflation and speculation.
• The reverse is true with the bear market. Here, the FIRST PHASE of fall starts with
the abandonment of hopes. The chances of prices moving back to the previous high
level seemed to be low. This would result in the sale of shares. In the SECOND
PHASE, companies are reporting lower profits and dividends.
This would lead to selling pressure.
• THE FINAL PHASE is characterized by the distress sale of shares.

THE SECONDARY TREND

The secondary trend or the intermediate trend moves against the main trend
and leads to correction. in the bull market the secondary trend would result in the fall of about
33-66% of the earlier rise. In the bear market, the secondary trend carries the price upward
and corrects the main trend. The correction would be 33% to 66% of the earlier fall.
Intermediate trend corrects the overbought and oversold condition. It provides the breathing
space to the market. Compared to the time taken for the primary trend, secondary trend is
swift and quicker.

MINOR TRENDS
Minor trends or tertiary moves are called random wriggles. They are simply
the daily price fluctuations. Minor trend tires to correct the secondary trend movement. It is
better for the investors to concentrate on the primary or secondary trends than on the minor
trends. The chartist plots the scrip's price or the market index each day to trace the primary
and secondary trend.

SUPPORT AND RESISTANCE LEVEL

Anybody interested in the technical analysis should know the support and
resistance leve1. A support level exists at a price where considerable demand for that stock is
expected to prevent further fall in the price level. The fall in the price may be halted for the
time being or it may result even in price reversal. In the support level, demand for the
particular scrip is expected.

• In the resistance level, the supply of scrip would be greater than the demand and
further rise in price is prevented. The selling pressure is greater and the increase in
price is halted for the time being.
• Support and resistance usually occur whenever the turnover of a large number of
shares tends to be concentrated at several price levels
 • When the stock touches a certain level and then drops, this is called resistance and if
the stock reaches down to certain level and then rises there exists a support. The levels
constantly switch form one to another from support to resistance or form resistance to
support.

For example,
If a scrip price hovers around Rs 150 for some weeks, then it may rise and
reach Rs.210. At this point the price halts and ten falls back. The scrip keeps on falling back
to around its original price Rs 150 and halts. Then it moves upward. In this case, Rs 150
becomes the support level. At this point, the scrip is cheap, investors buy it, and demand
makes the price move upward.
Whereas Rs. 210 becomes the resistance level, the price is high and there
would be selling pressure resulting in the decline e of the price. If the scrip price reverses the
support level and moves downward, it means that the selling pressure has overcome the
potential buying pressure, signaling the possibility of a further fall in the value of the scrip. It
indicates the violation of the support level and bearish market.

If the scrip penetrates the previous top and moves above, it is the violation
of resistance level. at this point, buying pressure would be more than the selling pressure. If
the scrip was to move above the double top or triple top formation, it indicates bullish market.
The support and the resistance level need not the formed only on tops or
bottoms. They can be on the trend lines or gaps of the chart. Gaps are defined as those points
or price levels where the scrip has not changed hands. In the rising or falling price level gaps
are formed.

If the prices are in the upward move and the high of any day is lower than
the next day is low, the gap is said to have occurred.

MOVING AVERAGE
The market indices do not rise or fall in straight line. The upward and
downward movements are interrupted by counter moves. The underlying trend can be studied
by smoothening to the data. To smooth the data moving average technique is used.
• The word moving means that the body of data moves ahead to include the recent
observation. If it is five day moving average, on the sixth day of the body of data,
moves to include the sixth day observation eliminating the first day's observation
• Like it wise it continues. In the moving average calculation, closing price of
the stock is used. The moving averages are used to study the movement of the market
as well as the individual scrip price. The moving average indicates the underlying
trend in the scrip. The period of average determines the period of the trend that is
being identified. For identifying short-term trend. 10 day to 30 day moving averages
are use. In the case of medium term trend 50 day to 125 day are adopted. 200 day
moving average is used to identify long term trend .

Index and stock price moving average

• Individual stock price is compared with the stock market indices. The moving average
of the stock and the index are plotted in the same sheet and trend are compared. If
NSE or BSE index is above stock's moving average line, the particular stock has
bullish trend. The price may increase above the market average.
 If the Sensex of Nifty is below the Stock's moving average, the bearish
market can be expected for the particular stock. if the moving average of the stock penetrates
the stock market index from above, it generates sell signal. Unfavorable market condition
prevails for the particular scrip. If the stock line pushes up though the market average, it is
buy signal.

Stock Price And Stock Price's Moving Average

• Buy and sell signals are provided by the moving averages. Moving averages are used
along with the price of the scrip. The stock price may intersect the moving average at
a particular point. Downward penetration of the rising average indicates the
possibility of a further fall. Upward penetration of a falling average would indicate the
possibility of the further rise and gives the buy signal. As the average indicates the
underlying trend, its violation may signal trend reversal.

Comparison of the two moving averages

When long term and short term moving averages are drawn, the intersection
of two moving averages generates buy or sell signal. When the scrip price is falling and if the
short-term average intersects the long-term moving average from above and falls below it, the
sell signal is generated. If the scrip is rising, the short term average would be above the long
term average.

The short-term average intersects the long term average form below
indicating a further rise in price, gives a buy signal. But, if the short term average moves
above the long term average and long term average is falling, investor should treat
intersection with suspicion. The short-term movement may not hold long. Hence, the investor
should wait for the long-term average to turn up before buying the scrip.

Similarly, if the short-term average moves below the long-term average

before the long-term average has flattened out or before it reverses its direction, the investor
should wait for the fall in the long term average for reversal of direction before moving out to
the scrip.

Oscillators
Oscillators indicate the market momentum or scrip momentum. Oscillator
shows the share price movement across a reference point from on extreme to another. The
momentum indicates:
• Overbought and oversold conditions of the scrip or the market
• Signaling the possible trend reversal
• Rise or decline in the momentum
• Generally, oscillators are analyzed along with the price chart; oscillators
indicate trend reversals that have to be confirmed with the price movement of the
scrip. Changes in the price should be correlated to changes in the momentum, and
then only buy and sell signals can be generated. Actions have to be taken only when
the price and momentum agree with each other. With the daily. Weekly or monthly
closing prices oscillators are It. For short term trading, daily price oscillators are
useful.