Introduction to Technical Analysis
What to Expect? <ul><li>Not even T of Technical Analysis   </li></ul><ul><li>(3 Hours is too less a time to expect anythi...
<ul><li>What Is Technical Analysis </li></ul><ul><li>in two words? </li></ul>
<ul><li>Price & volume </li></ul>
What wiki says? <ul><li>Technical analysis  is a security analysis discipline for forecasting the future direction of pric...
Different Kind of Charts used: <ul><li>Line charts </li></ul><ul><li>Bar charts </li></ul><ul><li>Candlestics </li></ul>
Line Charts
Bar Charts
Candlesticks
An Example…
How to use Candle Sticks?
Is That all?? No  
Dow Theory <ul><li>Market Discounts everything  </li></ul><ul><li>The 3 Trends </li></ul><ul><li>-> Primary Trends </li></...
Primary Trends and Secondary Trends
<ul><li>Primary Trends : They run for years </li></ul><ul><li>Secondary Trends : Few weeks to months </li></ul><ul><li>1/3...
Continued… <ul><li>The Bull market </li></ul><ul><li>-> Accumulation </li></ul><ul><li>-> Public Participation phase </li>...
Continued… <ul><li>The 2 Averages must confirm  </li></ul><ul><li>-> Industrial Average </li></ul><ul><li>-> Rail Average ...
Continued… <ul><li>A trend be assumed to continue in effect until such time as its reversal has been definitely signaled <...
Some Examples…
 
 
 
 
 
 
 
 
 
 
Support and Resistance
Role Reversals <ul><li>Support becomes Resistance and vise versa </li></ul>
Real world Example…
Chart Patterns <ul><li>Reversal Patterns  </li></ul><ul><li>Ex: Head and Shoulders, Rounding tops and bottoms, Triangles, ...
Head and Shoulders
Double tops and bottoms
Triangles
Flags and Pennants
Some Examples…
Bullish Flag
Falling wedge
Right Angles Triangle
Head and Shoulders breakout
Head and Shoulder formation
Triangular Consolidation breakout
Averages <ul><li>Simple moving average (20 DMA, 50 DMA, 100DMA) </li></ul><ul><li>Exponential moving average(20 EMA, 50 EM...
Simple Moving Average DAY PRICE SUM OF 3 DAYS 3 rd  COLUMN / 3 1 10 2 11 3 12 33 11 4 13 36 12 5 14 39 13 6 15 42 14 7 16 ...
Exponential Moving Average <ul><li>Exponential Percentage =  2 </li></ul><ul><li>---------------------------- </li></ul><u...
3 DAY EMA A B C D E DAY PRICE PRICE * 0.5 YESTERDAY E * 0.5 C + D 1 10 10.000 2 11 5.5 5 10.500 3 12 6 5.25 11.250 4 13 6....
Moving Averages as Support
 
 
Use of major moving average as support
 
 
Indicators <ul><li>Leading Indicators Ex: RSI, CCI, Stochastic, etc </li></ul><ul><li>Lagging Indicators Ex: MACD, moving ...
Bollinger Bands <ul><li>Shown in 3 bands </li></ul><ul><li>Middle Band = SMA </li></ul><ul><li>Upper Band = Middle band + ...
RSI <ul><li>Relative Strength Index </li></ul><ul><li>Usage  </li></ul><ul><li>-> Tops and Bottoms (70 and 30) </li></ul><...
Calculation <ul><li>100  -  (100 / (1 + (U/D))) </li></ul><ul><li>U -> Upward Price Change </li></ul><ul><li>D -> Downward...
Continued… A B C D E Closing Price Upward Price Change  Smoothed B Down word Price Change Smoothed D 10 11 1 0 9 0 2 13 4 ...
Some Examples…
 
 
 
MACD <ul><li>Moving Average Convergence and Divergence </li></ul><ul><li>Calculation </li></ul><ul><li>12 EMA – 16 EMA </l...
Examples…
 
Other Technical Indicators <ul><li>Absolute Breadth Index </li></ul><ul><li>Accumulation/Distribution Line </li></ul><ul><...
Pivot Points <ul><li>PP = (H + L + C) / 3 </li></ul><ul><li>R1 = (2*PP) - L </li></ul><ul><li>R2 = PP + (H - L) </li></ul>...
Other Important Things not Discussed <ul><li>Elliott Wave Theory </li></ul><ul><li>Fibonacci Studies </li></ul><ul><li>Gan...
<ul><li>Q&A </li></ul>
Thank You
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Introduction To Technical Analysis

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These are the slides used during the seminar "Introduction to Technical analysis". Will be blogging more about them in detail in further posts. Check out my blog http://trilokhg.blogspot.com for more.

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Introduction To Technical Analysis

  1. 1. Introduction to Technical Analysis
  2. 2. What to Expect? <ul><li>Not even T of Technical Analysis  </li></ul><ul><li>(3 Hours is too less a time to expect anything w.r.t Technical Analysis, there’s too much out there…) </li></ul><ul><li>Expect just an introduction to what is technical analysis </li></ul><ul><li>Get yourself convinced by end of the presentation that technical analysis is good enough to buy and sell stocks </li></ul>
  3. 3. <ul><li>What Is Technical Analysis </li></ul><ul><li>in two words? </li></ul>
  4. 4. <ul><li>Price & volume </li></ul>
  5. 5. What wiki says? <ul><li>Technical analysis is a security analysis discipline for forecasting the future direction of prices through the study of past market data, primarily price and volume. </li></ul>
  6. 6. Different Kind of Charts used: <ul><li>Line charts </li></ul><ul><li>Bar charts </li></ul><ul><li>Candlestics </li></ul>
  7. 7. Line Charts
  8. 8. Bar Charts
  9. 9. Candlesticks
  10. 10. An Example…
  11. 11. How to use Candle Sticks?
  12. 12. Is That all?? No 
  13. 13. Dow Theory <ul><li>Market Discounts everything </li></ul><ul><li>The 3 Trends </li></ul><ul><li>-> Primary Trends </li></ul><ul><li>-> Secondary Trends </li></ul><ul><li>-> Minor Trends </li></ul>
  14. 14. Primary Trends and Secondary Trends
  15. 15. <ul><li>Primary Trends : They run for years </li></ul><ul><li>Secondary Trends : Few weeks to months </li></ul><ul><li>1/3 , 50% , 2/3 retracements </li></ul><ul><li>Minor Trends : Day to day moments which are of not importance to dow theory. </li></ul>Continued…
  16. 16. Continued… <ul><li>The Bull market </li></ul><ul><li>-> Accumulation </li></ul><ul><li>-> Public Participation phase </li></ul><ul><li>-> Excess </li></ul><ul><li>The Bear Market </li></ul><ul><li>-> Distribution </li></ul><ul><li>-> Public Participation phase </li></ul><ul><li>-> Panic </li></ul>
  17. 17. Continued… <ul><li>The 2 Averages must confirm </li></ul><ul><li>-> Industrial Average </li></ul><ul><li>-> Rail Average </li></ul><ul><li>Volumes goes with the trend </li></ul>
  18. 18. Continued… <ul><li>A trend be assumed to continue in effect until such time as its reversal has been definitely signaled </li></ul>
  19. 19. Some Examples…
  20. 30. Support and Resistance
  21. 31. Role Reversals <ul><li>Support becomes Resistance and vise versa </li></ul>
  22. 32. Real world Example…
  23. 33. Chart Patterns <ul><li>Reversal Patterns </li></ul><ul><li>Ex: Head and Shoulders, Rounding tops and bottoms, Triangles, Rectangles, Double and triple tops and bottoms, diamonds, wedges etc </li></ul><ul><li>Continuation Patterns </li></ul><ul><li>Pennants and flags etc </li></ul>
  24. 34. Head and Shoulders
  25. 35. Double tops and bottoms
  26. 36. Triangles
  27. 37. Flags and Pennants
  28. 38. Some Examples…
  29. 39. Bullish Flag
  30. 40. Falling wedge
  31. 41. Right Angles Triangle
  32. 42. Head and Shoulders breakout
  33. 43. Head and Shoulder formation
  34. 44. Triangular Consolidation breakout
  35. 45. Averages <ul><li>Simple moving average (20 DMA, 50 DMA, 100DMA) </li></ul><ul><li>Exponential moving average(20 EMA, 50 EMA) </li></ul><ul><li>Triangular moving average </li></ul><ul><li>Volume adjusted moving average </li></ul><ul><li>Weighted moving average </li></ul>
  36. 46. Simple Moving Average DAY PRICE SUM OF 3 DAYS 3 rd COLUMN / 3 1 10 2 11 3 12 33 11 4 13 36 12 5 14 39 13 6 15 42 14 7 16 45 15 8 17 48 16 9 18 51 17 10 19 54 18
  37. 47. Exponential Moving Average <ul><li>Exponential Percentage = 2 </li></ul><ul><li>---------------------------- </li></ul><ul><li>Time Periods + 1 </li></ul><ul><li>Ex: for 3 day EMA, </li></ul><ul><li>E % = 2/(3 + 1) </li></ul><ul><li>E % = 2/4 = 0.5 </li></ul>
  38. 48. 3 DAY EMA A B C D E DAY PRICE PRICE * 0.5 YESTERDAY E * 0.5 C + D 1 10 10.000 2 11 5.5 5 10.500 3 12 6 5.25 11.250 4 13 6.5 5.625 12.125 5 14 7 6.062 13.062 6 15 7.5 6.531 14.031 7 16 8 7.015 15.015
  39. 49. Moving Averages as Support
  40. 52. Use of major moving average as support
  41. 55. Indicators <ul><li>Leading Indicators Ex: RSI, CCI, Stochastic, etc </li></ul><ul><li>Lagging Indicators Ex: MACD, moving averages etc </li></ul>
  42. 56. Bollinger Bands <ul><li>Shown in 3 bands </li></ul><ul><li>Middle Band = SMA </li></ul><ul><li>Upper Band = Middle band + 2 Standard Deviations </li></ul><ul><li>Lower Band = Middle band – 2 Standard Deviations </li></ul>
  43. 57. RSI <ul><li>Relative Strength Index </li></ul><ul><li>Usage </li></ul><ul><li>-> Tops and Bottoms (70 and 30) </li></ul><ul><li>-> Chart Formations </li></ul><ul><li>->Support and Resistance </li></ul><ul><li>-> Divergance </li></ul>
  44. 58. Calculation <ul><li>100 - (100 / (1 + (U/D))) </li></ul><ul><li>U -> Upward Price Change </li></ul><ul><li>D -> Downward Price Change </li></ul><ul><li>Ex : 3 day RSI </li></ul>
  45. 59. Continued… A B C D E Closing Price Upward Price Change Smoothed B Down word Price Change Smoothed D 10 11 1 0 9 0 2 13 4 1.66 0 0.66 10 0 1.33 3 1.33 14 4 2.66 0 1 C E F G H I = RSI C E C/F F + 1 100/G 100 - H 1.66 0.66 2.51 3.51 28.5 71.5 1.33 1.33 1 2 50 50 2.66 1 2.66 3.66 27.3 72.7
  46. 60. Some Examples…
  47. 64. MACD <ul><li>Moving Average Convergence and Divergence </li></ul><ul><li>Calculation </li></ul><ul><li>12 EMA – 16 EMA </li></ul><ul><li>Usage </li></ul><ul><li>-> Crossovers </li></ul><ul><li>-> Overbought/Oversold </li></ul><ul><li>-> Divergence </li></ul>
  48. 65. Examples…
  49. 67. Other Technical Indicators <ul><li>Absolute Breadth Index </li></ul><ul><li>Accumulation/Distribution Line </li></ul><ul><li>Advance/Decline Line and Ratio </li></ul><ul><li>Arms Index (TRIN) </li></ul><ul><li>AROON </li></ul><ul><li>Chalkin Oscillator </li></ul><ul><li>CCI </li></ul><ul><li>KST </li></ul><ul><li>OBV (There are 1000s of indicators  ) </li></ul>
  50. 68. Pivot Points <ul><li>PP = (H + L + C) / 3 </li></ul><ul><li>R1 = (2*PP) - L </li></ul><ul><li>R2 = PP + (H - L) </li></ul><ul><li>R3 = H + 2*(PP-L) </li></ul><ul><li>S1 = (2*PP) - H </li></ul><ul><li>S2 = PP - (H - L) </li></ul><ul><li>S3 = L - 2*(H - PP) </li></ul>
  51. 69. Other Important Things not Discussed <ul><li>Elliott Wave Theory </li></ul><ul><li>Fibonacci Studies </li></ul><ul><li>Gann angles </li></ul>
  52. 70. <ul><li>Q&A </li></ul>
  53. 71. Thank You
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