1450

1550
1750
1850
1950
2050
2150

1650
1450
1550
1650
1850
1950
2050
2150
2250
2350

1750
13-03-2020 15-05-2019
16-03-2020 24-05-2019
17-03-2020
candlesticks.

04-06-2019
18-03-2020 14-06-2019
19-03-2020

MS
25-06-2019
20-03-2020
04-07-2019
23-03-2020
24-03-2020 15-07-2019
25-03-2020 24-07-2019

D1
26-03-2020 02-08-2019
27-03-2020 14-08-2019
30-03-2020 26-08-2019
31-03-2020

IH1
05-09-2019
01-04-2020
17-09-2019
03-04-2020
26-09-2019
07-04-2020

ES1
08-04-2020 09-10-2019
09-04-2020 18-10-2019

D2
13-04-2020 30-10-2019

D4
15-04-2020 08-11-2019

Legends
16-04-2020

D3
20-11-2019
17-04-2020 29-11-2019
20-04-2020
10-12-2019
21-04-2020

ES2
19-12-2019
22-04-2020
31-12-2019
NSE:TCS Candle-stick (1 year)

23-04-2020
09-01-2020
NSE:TCS Candle-stick (2 months)
24-04-2020

BLE
27-04-2020 20-01-2020
28-04-2020 29-01-2020
29-04-2020

IH2
07-02-2020
30-04-2020 18-02-2020
04-05-2020
Assignment 1: Collect the last one year closing price plot candlestick, identify few

28-02-2020
05-05-2020
11-03-2020
06-05-2020
07-05-2020 20-03-2020
08-05-2020 31-03-2020
11-05-2020 15-04-2020
12-05-2020 24-04-2020
13-05-2020 06-05-2020

MS: Morning Star, D1 to D4: Doji, IH1 to IH2: Inverted Hammer, ES1 to ES2: Evening Star, BLE: Bullish Engulfing,
14-05-2020 15-05-2020
15-05-2020
1. Single Candlestick pattern
a. Doji: Doji candlestick pattern has their opening and closing price are very close
to each other. The candle thus looks like a plus sign with a chance that the highs
and lows wicks of the candle being of different lengths. Dojis often indicate
indecision in the market.

Doji is shown by D1 to D4 in the above figure. D1 indicated indecision in the

market before going to down trend. The reverse is true for D3. Whereas D2
indicates indecision in the market before the next big move.

b. Inverted Hammer: Inverted hammer is one candle pattern with a shadow at least
two times greater than the body. This pattern is identified by the small body.
They are found at the bottom of the decline which is evidence that bulls are
stepping in but still selling is going on. The color of the small body is not
important but the green body has more bullish indications than a red body. A
positive day is required the following day to confirm this signal.

Shown by IH1 and IH2, the security has a positive day in the next day.

2. Two-candlestick pattern
a. Bullish Engulfing: The bullish engulfing pattern is a two candlestick pattern
which appears at the bottom of the down trend. As the name suggests, this is a
bullish pattern which prompts the trader to go long. The prerequisites for the
pattern are as follows:
i. The prior trend should be a downtrend
ii. The first day of the pattern (P1) should be a red candle reconfirming the
bearishness in the market
iii. The candle on the 2nd day of pattern (P2) should be a green candle, long
enough to engulf the red candle

It is shown by BLE in the above figure. The bullishness is expected to continue

over the next few successive trading sessions, driving the prices higher and hence
the trader should look for buying opportunities. Thus, trade should be started on
P2 after confirming the pattern with stop loss set to lowest low between P1 and
P2, i.e., Rs. 1,719.15.

3. Three-candlestick Pattern
a. Morning Star: The morning star is a bullish candlestick pattern which evolves
over a three-day period. It is a downtrend reversal pattern. The pattern is formed
by combining 3 consecutive candlesticks. The morning star appears at the
bottom end of a down trend.
 i. The first candle in the morning star formation is a big bearish candle
which clearly defines the down move.
ii. The second candle is a small candle, which is ideally a Doji candle.
iii. The third candle is a large bullish candle which closes near the top of the
day.

It is shown by MS in the above figure. As it denotes bottom reversal a trader may

buy shares on day 3 with stop loss set to lowest low of those 3 days, i.e., Rs.
1,546.75.

b. Evening Star: The evening star is a bearish equivalent of the morning star. The
evening star appears at the top end of an uptrend. Like the morning star, the
evening star is a three candle formation and evolves over three trading sessions.
i. The first candle is a long bullish candle.
ii. It is followed by a small candle which ideally should be a Doji candle.
iii. The third candle is a long bearish candle which signals the end of the bull
move.

It is shown by ES1 and ES2 in the above figure. The expectation is that the
bearishness will continue over the next few trading sessions. Therefore, one
should look at shorting opportunities.
Assignment 2: Calculate 20 and 50-day simple moving and exponential moving average
and plot along with price chart and interpret the signal.

NSE:TCS Closing Price and Simple Moving Average

2350.00
20-Day Simple Moving Average 50-Day Simple Moving Average Closing Share Price
2250.00
B
2150.00 D
A
2050.00 F
E
C
1950.00

1850.00

1750.00 G
1650.00

1550.00
31-07-2019

18-09-2019

06-11-2019

01-01-2020

19-02-2020

08-04-2020
24-07-2019

07-08-2019
14-08-2019
21-08-2019
28-08-2019
04-09-2019
11-09-2019

25-09-2019
02-10-2019
09-10-2019
16-10-2019
23-10-2019
30-10-2019

13-11-2019
20-11-2019
27-11-2019
04-12-2019
11-12-2019
18-12-2019
25-12-2019

08-01-2020
15-01-2020
22-01-2020
29-01-2020
05-02-2020
12-02-2020

26-02-2020
04-03-2020
11-03-2020
18-03-2020
25-03-2020
01-04-2020

15-04-2020
22-04-2020
29-04-2020
06-05-2020
13-05-2020
Moving average gives trend of market price – if the market price is going up or down. We can
also determine if a share to buy or sell based short-term and long-term moving averages. If –

 Long-term moving average crosses the short-term moving average from downside, a
trader should buy shares
 Short-term moving average crosses the long-term moving average from downside, a
trader should sell her shares

From the figure above, we can see on 21st August, 2019 (A) short-term moving average crosses
the long-term moving average from downside, so a trader should sell her shares. Same
inference can be drawn for 11th November, 2019 (C), 30th December, 2019 (E) and 12th May, 2020
(G).

We can also observe that on 26th September, 2019 (B) long-term moving average crosses the
short-term moving average from downside, so a trader should buy shares. Same inference can
be drawn for 4th December, 2019 (D) and 11th February, 2020 (F).
 NSE: TCS Closing Price and Exponential Moving Average
2350.00
2250.00 B F G
2150.00 D
2050.00 A
1950.00 C E
1850.00
1750.00
1650.00
1550.00
24-07-2019

28-08-2019

30-10-2019

04-12-2019

05-02-2020

11-03-2020

13-05-2020
31-07-2019
07-08-2019
14-08-2019
21-08-2019

04-09-2019
11-09-2019
18-09-2019
25-09-2019
02-10-2019
09-10-2019
16-10-2019
23-10-2019

06-11-2019
13-11-2019
20-11-2019
27-11-2019

11-12-2019
18-12-2019
25-12-2019
01-01-2020
08-01-2020
15-01-2020
22-01-2020
29-01-2020

12-02-2020
19-02-2020
26-02-2020
04-03-2020

18-03-2020
25-03-2020
01-04-2020
08-04-2020
15-04-2020
22-04-2020
29-04-2020
06-05-2020
20-Day Exponential Moving Average 50-Day Exponential Moving Avergae Closing Market Price

Exponential moving average gives more emphasis on recent closing prices, however, buy/sell
decision can be made same way as simple moving average, that is, if –

• Long-term moving average crosses the short-term moving average from downside, a
trader should buy shares
• Short-term moving average crosses the long-term moving average from downside, a
trader should sell her shares

From the figure above, on 8th August, 2019 (A), short-term moving average crosses the long-
term moving average from downside, so a trader should sell her shares. Same conclusion can be
drawn for 1st November, 2019 (C), 18th December, 2019 (E) and 11th February, 2020 (G).

We can also observe that on 16th September, 2019 (B) long-term moving average crosses the
short-term moving average from downside, so a trader should buy shares. Same conclusion can
be drawn for 26th November, 2019 (D) and 25th February, 2020 (F).
Assignment 3: Calculate relative strength index, money flow index, stochastic and
interpret.

Relative Strength Index (RSI)

NSE:TCS Relative Strength Index

80.00

70.00

60.00

50.00

40.00

30.00

20.00

10.00

0.00
04-07-2019

26-09-2019

19-12-2019

11-03-2020

06-05-2020
04-06-2019
14-06-2019
25-06-2019

15-07-2019
24-07-2019
02-08-2019
14-08-2019
26-08-2019
05-09-2019
17-09-2019

09-10-2019
18-10-2019
30-10-2019
08-11-2019
20-11-2019
29-11-2019
10-12-2019

31-12-2019
09-01-2020
20-01-2020
29-01-2020
07-02-2020
18-02-2020
28-02-2020

20-03-2020
31-03-2020
15-04-2020
24-04-2020

15-05-2020
RSI is an oscillating index which tells a trader if market is overbought or oversold. If –

 RSI > 80 (or 70), market is overbought and a trader should sell her shares
 RSI < 20 (or 30), market is oversold and a trader should buy shares

In the following discussion, we have taken 70 and 30 as upper and lower bounds respectively.

 On 23rd September, 2019, RSI < 30 so a trader should buy shares

 On 30th & 31st October, 2019, RSI > 70, so a trader should sell her shares
 In the week of 13th – 20th March, 2020, RSI < 30 and a trader may buy shares in this
period.
Money Flow Index (MFI)

NSE:TCS Money Flow Index

90.00
80.00
70.00
60.00
50.00
40.00
30.00
20.00
10.00
0.00
13-06-2019

01-08-2019

09-12-2019

28-01-2020
03-06-2019

24-06-2019
03-07-2019
12-07-2019
23-07-2019

13-08-2019
23-08-2019
04-09-2019
16-09-2019
25-09-2019
07-10-2019
17-10-2019
29-10-2019
07-11-2019
19-11-2019
28-11-2019

18-12-2019
30-12-2019
08-01-2020
17-01-2020

06-02-2020
17-02-2020
27-02-2020
09-03-2020
19-03-2020
30-03-2020
13-04-2020
23-04-2020
05-05-2020
14-05-2020
Money flow index takes into account volume action and on the basis of volume action; it
attempts to measure the strength of money flowing in and out the security which now a day is
also known as smart money flow indicator.

From Money Flow Index (MFI), we can determine if market for a company is oversold or
overbought. If –

 MFI > 80: Market is overbought and a trader should sell her shares and avoid buying
new shares
 MFI < 20: Market is oversold and a trader should buy shares and avoid selling shares

From the figure, we can say that, around 23rd September 2019, MFI < 20 and a trader should buy
shares of TCS. This also supports our decision from RSI.
Stochastic

NSE:TCS Stochastics
100.00
90.00
80.00
70.00
60.00
50.00
40.00
30.00
20.00
10.00
0.00
26-06-2019

06-09-2019

21-11-2019

27-04-2020
06-06-2019
17-06-2019

05-07-2019
16-07-2019
25-07-2019
05-08-2019
16-08-2019
27-08-2019

18-09-2019
27-09-2019
10-10-2019
22-10-2019
31-10-2019
11-11-2019

02-12-2019
11-12-2019
20-12-2019
01-01-2020
10-01-2020
21-01-2020
30-01-2020
10-02-2020
19-02-2020
02-03-2020
12-03-2020
23-03-2020
01-04-2020
16-04-2020

07-05-2020
-10.00
-20.00
-30.00

%K Line %D Line

Usually stochastic oscillator reading above 80 is considered overbought and stochastic oscillator
reading below 20 is considered oversold. It suggests that:

 One should book profit in buy side positions and should avoid new buy side positions in
an overbought zone.
 One should book profit in sell side positions and should avoid new sell side positions in
an oversold zone

From %K and %D line we can determine when to buy and sell using –

 %K line crosses %D line upside in oversold zone – Buy

 %D line crosses %K line upside in overbought zone – Sell

Thus, from the figure above one should look for buying opportunities on the following dates:
22nd July 2019, 23rd September 2019 (supports our decision from MFI & RSI), 11th October 2019,
3rd December 2019, 11th December 2019, 31st January 2020 and look for selling opportunities on
the following dates: 29st October 2019, 24th December 2019 and 4th May 2020.