Final Project report.doc

Project report
On
“Selection of Stocks to Designate an Efficient Portfolio Using Fundamental and
Technical Analysis Method”
Department of Finance & Banking
Comilla University, Cumilla
“Selection Of Stocks To Designate An Efficient Portfolio Using Fundamental And Technical Analysis Method” 1

Comilla University
Supervised By
Sutapa Chowdhury
Assistant Professor
Faculty of Business Studies
Prepared By
Md. Mamun Miah
Class ID: 11617023
Session: -2015-16
BBA 10th Batch
Comilla University, Cumilla.

Letter of Transmittal
25 January, 2021
Sutapa Chowdhury
Assistant Professor
Comilla University
Subject: Submission of Project report on “Selection of stocks to designate a efficient portfolio
using Fundamental and Technical Analysis method”.
Dear madam,
With due respect, it is my great pleasure to submit my report on the topic as you have assigned me to
prepare my project paper. The report entitled “Selection of stocks to designate a efficient portfolio
using Fundamental and Technical Analysis method”, which is a partial requirement for the
completion of my BBA degree. Now I am looking forward for your kind appraisal regarding this
project report.
You would be very glad to hear that I have given my best effort to prepare this report. For preparing
this report, I have studied a lot of research papers, articles, stock trading related web sites and gathered
information on “Analysis of securities to designate a efficient portfolio using Technical Analysis and
Fundamental analysis method” in Bangladesh perspective. I have given my best efforts to prepare this
project report enough informative and practical which will be so interesting to a beginner in the stock
market. If there is any type of mistake or information gap is in this report then you kindly consider it
as my fault.
I have given my best efforts to avoid my lacking’s and weaknesses and I hope, my project report will
make you satisfy and I will be highly encouraged if you kindly accept this report. Your kind advice
will encourage me to do further research in future.
Thanking you.
Sincerely yours,
…………………………………….
Md. Mamun Miah
ID: 11617023
Comilla University

Acknowledgement
Generally the success of a Project report depends on the contribution of many people. Firstly, I would
like to reveal my gratefulness to the Almighty Allah to enabling me to complete this report on
“Selection of stocks to designate a efficient portfolio using Fundamental and Technical Analysis
method”.
I take this opportunity to disclose my insightful thankfulness and deepest honors to my guide Sutapa
Chowdhury, (Assistant Professor, Comilla University) for his special guideline, monitoring, constant
encourage, and thoughtful advice throughout the course of this project report. Without his guidance
and cooperation it would be very hard for me to submit this report.
I am thankful for the other members who helped me to complete this project report by providing their
valuable information in their respective fields. This report is not free from limitations and errors. There
might still be some minor typing mistakes, despite my utmost care. I do apologize for this.

Executive Summary
Applied knowledge is so important for the hypothetical aptitude. Bearing this in mind, the topic of this
report is selected to acquire the real and practical knowledge. I gratefully admit my indebt concepts,
various data and information providers. I have selected the topic, “Selection of stocks to designate a
efficient portfolio using Fundamental and Technical Analysis method”. In this report I have given
a brief overview of Capital market, the methods used in capital market, how Fundamental and
Technical Analysis method works to select an efficient portfolio in Bangladesh’s Capital market.
Importance, effectiveness, usefulness, advantages of Fundamental and Technical Analysis are
discussed here. Here, I also have given a brief overview of Security and Exchange Commission of
Bangladesh. Here, I also discussed about factors and the indicators by which the method Fundamental
and Technical Analysis work and help the investors to select a stock trend, predicting the future price.
The main objective of this report is to find out the effective ways of Fundamental and technical
analysis by which a trader can predict the stock price in this so competitive stock market and can
minimize their risk and can earn more profit.

Table of Contents
Letter of Transmittal.............................................................................................................................................3
Acknowledgement................................................................................................................................................4
Executive Summary..............................................................................................................................................5
Chapter One ...........................................................................................................................................................9
Introduction...........................................................................................................................................................9
1.1 Background of the study ................................................................................................................................9
1.2 Rationale of the study ....................................................................................................................................9
1.3 Objectives of the Report ..............................................................................................................................10
1.4 Methodology................................................................................................................................................10
1.5 Scope............................................................................................................................................................10
1.6 Limitations...................................................................................................................................................11
CHAPTER TWO .............................................................................................................................................12
LITERATURE REVIEW ...................................................................................................................................12
Chapter three .......................................................................................................................................................13
theoretical aspects................................................................................................................................................13
Message to Investors......................................................................................................................................13
Exclusions For Investors................................................................................................................................13
3.1 Capital Market .............................................................................................................................................14
3.2 Structure of Capital Market of Bangladesh..................................................................................................14
Securities segment:......................................................................................................................................14
Non Securities segment:.................................................................................................................................14
3.3 Fundamental Analysis..................................................................................................................................15
3.3.1 Earnings per Share (EPS):.........................................................................................................................15
3.3.2 Price to Earnings Ratio (P/E):...................................................................................................................16
3.3.3 Projected Earnings Growth (PEG):...........................................................................................................16
3.3.4 Net Asset Value (NAV) per share: ...........................................................................................................16
3.3.5 Price-to-Book (P/B): .................................................................................................................................17
3.3.6 Share Holding Pattern...............................................................................................................................17
3.3.7 P/S RATIO................................................................................................................................................17
3.3.8 ROE Ratio.................................................................................................................................................18
3.3.9 PRICE/SALES RATIO.............................................................................................................................18
3.3.10 PRICE/BOOK VALUE RATIO .............................................................................................................18
3.3.11 DEBT/EQUITY RATIO.........................................................................................................................18
3.3.12 Cash and Stock Dividend........................................................................................................................18

3.3.13 Net Income (EACS)................................................................................................................................18
3.4 Technical Analysis.......................................................................................................................................19
3.4.1 How Technical Analysis Works ...............................................................................................................19
3.4.2 Why Technical Analysis matters ..............................................................................................................19
3.4.2 (a) Channel line.........................................................................................................................................20
3.4.2 (b) Moving Average..................................................................................................................................20
3.4.2 (c) Relative Strength Index (RSI) .............................................................................................................20
3.4.2 (d) Support And Resistance .....................................................................................................................20
3.5 Technical VS Fundamental Analysis...........................................................................................................21
3.6 Investors’ decision making tools: ................................................................................................................21
CHAPTER - FOUR .............................................................................................................................................22
FINDINGS AND ANALYSIS .............................................................................................................................22
4.1 FUNDAMENTAL ANALYSIS ..................................................................................................................22
4.1.1 EARNINGS PER SHARE (EPS): ............................................................................................................22
4.1.2 CASH AND STOCK DIVIDEND:...........................................................................................................23
4.1.4 RETURN ON EQUITY (ROE) ................................................................................................................24
4.1.5 MARKET CAPITALIZATION................................................................................................................24
4.1.6 P/E RATIO................................................................................................................................................25
4.1.7 PEG RATIO..............................................................................................................................................26
4.1.8 Net Asset Value (NAV):...........................................................................................................................27
4.1.3 EARNING AFTER TAX (EAT): .............................................................................................................27
4.2 TECHNICAL ANALYSIS ..........................................................................................................................28
4.2.1 Assumptions of Technical Analysis:.......................................................................................................29
4.2.1.1 The Security Market discounts everything ............................................................................................29
4.2.1.2 Stock prices move in trends:..................................................................................................................29
4.2.1.3 History repeats itself: .............................................................................................................................30
4.3 Technical analysis method...........................................................................................................................30
4.3.1 Moving Average (MV) .............................................................................................................................31
4.3.2 Channel Line.............................................................................................................................................31
4.3.4 Support and resistance: .............................................................................................................................32
4.3.5 Trend analysis...........................................................................................................................................33
4.3.6 Prices move in trends................................................................................................................................34
4.3.7 Entry / Exit Point ......................................................................................................................................35
4.3.8 Line chart ..................................................................................................................................................36
4.3.9 Candlestick Chart......................................................................................................................................36
4.3.10 Point and figure Chart:............................................................................................................................37
5.1 Share analysis on term basis ........................................................................................................................38
Short-term share.............................................................................................................................................39

Portfolio at a Glance ......................................................................................................................................40
Sector Wise Investment .................................................................................................................................40
Kohinoor Chemical Company (Bangladesh) Ltd...............................................................................................41
Basic Information...........................................................................................................................................41
SHARE HOLDING PERCENTAGES..........................................................................................................41
Recommendation ...........................................................................................................................................42
Renata Limited...................................................................................................................................................42
Recommendation ...........................................................................................................................................43
Delta Brac Housing Finance Corp. Limited.......................................................................................................44
Recommendation ...........................................................................................................................................45
Brac Bank Limited.............................................................................................................................................45
Recommendation ...........................................................................................................................................46
Square pharmaceutical Ltd. ...............................................................................................................................47
Recommendation ...........................................................................................................................................47
Fine Foods Limited............................................................................................................................................48
Recommendation ...........................................................................................................................................49
Based on Fundamental and Technical Analysis Expected earnings are as follows: .................................50
Based on Fundamental and Technical Analysis, Expected earnings Vs real market earnings: .............................50
Major Findings.....................................................................................................................................................51
CHAPTER FIVE .................................................................................................................................................52
Conclusion & Recommendation .........................................................................................................................52
Conclusion .........................................................................................................................................................52
Recommendation ...............................................................................................................................................52
Bibliography ....................................................................................................................................................53
Reference..........................................................................................................................................................54

Chapter One
Introduction
1.1 Background of the study
“It is said that without Theory, Practice is blind and without Practice, Theory is meaningless.”
Hence, Practical training has been made integral part of the management education in our
Bangladesh. This Project is designed to give an investor for actual idea of securities as well as
investments. It exposes the potential of the investor of the future to the actual tune of the working in
portfolio management. This project has helped us to get the knowledge about the different
Securities risk and returns. Also about its market position, risk level, potential of each securities.
This will give us practical exposure about the working in portfolio and core work of finance
manager in the organization. This Project would also help us in future and it would provide more
knowledge about our subjects.
1.2 Rationale of the study
The simple fact that securities carry differing degrees of expected risk leads most investors to the
notion of holding more than one security at a time, in an attempt to spread risks by not putting all
their eggs into one basket. Most investor hope that if they hold several assets, even if one goes bad,
the others will provide some protection from an extreme loss. Portfolio Management routed through
diversification, it efforts to spread and minimize risk take the form of diversification. The more
traditional forms of diversification have concentrated upon holding a number of security types. It is
most valuable objective of efficient portfolio would agree that a portfolio consisting of two stocks is
probably less risk than one holding either stock alone. The selection of efficient portfolio mostly
depends on the Fundamental factors and Technical indicators. In this report, i try to do my best
effort to understand those factors and indicators which helps to designate a efficient portfolio
among the market securities. And Creation of efficient portfolio helps to reduce risk without
sacrificing returns.

1.3 Objectives of the Report
Broad Objective:

Main focusing objective of this report is to designate an efficient (optimal) portfolio from the
feasible securities comparing with expected risk & return basis.

Specific Objectives:
There are some specific objectives mentioned below:

To show the importance of using Fundamental and Technical Analysis method for stock
selection.



To exhibit the probable Risk and Return of the optimal portfolio.



Make the investors educated, interested and make the market less risky for the trades.



Build awareness the investors about their investment.

1.4 Methodology
This report has been prepared by the sources that I have collected from secondary sources. the
secondary sources are given below:
Secondary Sources:

Related research papers



Topic related books



Various journals and articles



Various Stock market related websites



Newspaper and stock market related blogs

1.5 Scope
There are many scopes to study on Analysis of securities to designate a efficient portfolio
using Technical Analysis and Fundamental analysis method. The contribution of Security and
Exchange commission, overall market economic condition, growth of the economy,
involvement of the investors in the share market, etc. But in this report, I have tried to find out
the effectiveness, usefulness and the rationality of using Fundamental and Technical analysis
for predicting the stock prices in the competitive share market. By this study one can get a
clear concept about the safe investing process through the Fundamental and Technical
Analysis.

1.6 Limitations
Though I have given my best efforts to make this project paper more informative and error free,
but still there are some limitations.

This is a theory based descriptive report which consumes a lot of time.



More fund is needed to carry out this study.



Related information unavailability and accessibility.


CHAPTER TWO
LITERATURE REVIEW
Fundamental analysis is a method which is used to determine the share price whether it is undervalued
or overvalued. It focuses to find out the intrinsic value of the shares. According to Gould, M. (2016) in
his “Fundamental vs. technical financial analysis” He practically realized and discovered that
Fundamental analysis is a technique that attempts to determine a security's value by focusing on
underlying factors that affect a company's actual business and its future prospects. The term simply
refers to the analysis of the economic well-being of a financial entity as opposed to only its price
movements. Fundamental analysis serves to answer questions, such as:

Is the company's revenue growing?



Is it actually making a profit?



Is it in a strong-enough position to beat out its competitors in the future?



Is it able to repay its debts?

Technical analysis method is used to find the predictable price patterns in stock prices. All over the
world the technical analysis method is the most spreading method for the analysts of stock market for
the understanding and forecasting the price and overall condition of a security or stock. “Modern
technical analysis dates from the work of Charles Dow, who in 1884 drew up an average of the daily
closing prices of 11 important stocks. Between 1900 and 1902, Dow wrote a series of articles in the
Wall Street Journal documenting stock price patterns and movements he observed in the average.
These articles were the first to describe systematic phenomena in the stock markets”. Now in the
present days, the technical analysis is composed with some techniques which is classified in three
primary categories, they are:

Pattern matching chart



Indicators and oscillators



Esoteric ways


Chapter three
theoretical aspects
Message to Investors


Beware of additional profitable investment temptations.

Make your individual budget and financial planning after
trading between income andexpenditure.

Know the risk of different unbeatable products and sectors.

Make investment decision about how much and in which security you want to
invest.

Make investment decision after making rational analysis and
judgment.

Never sell your valuable property only to invest in share market.

If you are not well educated about our share market than only
invest in primary share ofreputed companies and don't take risk anyway.

Learn rules and regulations regarding investment and abide them.

Before taking loan, take into consideration your ability to repay the
loan.

Determine the term of investment in accordance with your
financial plan.

Inform "Stock Exchange or Commission" if you
have any allegation.

Make timely investment and selling decision.


Exclusions For Investors


Don't invest whole of your savings.


Don't take loan beyond your ability to repay it.


Don't make investment by influencing of other.


Not making investment based on rumor.


Not making investment believing the fact that investment means profit.


Don't make investment without analyzing risk associated with it.


Don't make investment in non-institutional sector.


Don't signature any paper without understanding.


Don't attracted by flashy advertisement.


Don't signature any deed without sanction.





3.1 Capital Market
The market where long term debt or equity backed securities are traded is called capital market as well
as called financial market. With capital market money is provided for a longer period and that must be
more than one year. The investor of capital market always makes long term investment. In 1954 capital
market starts its journey in Bangladesh through two segments those are “Dhaka Stock Exchange” and
“Chittagong Stock Exchange”. The securities market permits sound listed companies to increase
surplus capital rapidly. Vibrant and liquid securities market lead to an upward sloping in savings
through attractive offering and rewarding in terms of higher yield.
Every capital market has to segment primary and secondary market. In the primary stock market newly
traded stocks are traded and in secondary market existing securities are traded. Investment bankers are
specialized in trading new securities in primary market. Equity markets, bond markets and derivative
markets are part of secondary market. It is a very encouraging thing to see the Bangladeshi capital
market is growing though at a slow motion and still at an emerging stage. Later on the bubble and
burst of the year 1996 and 2010, the stock market has touched a more responsive, importance and
consciousness which have guided to whatever structure we have at present. This flow of knowledge for
market further upgraded the awareness and knowledge level of investors as well as traders.
3.2 Structure of Capital Market of Bangladesh
The capital market has two sections. They are,

Securities segments



Non securities segments

A securities segment is alienated into the securities markets for

The Primary issues



The secondary issues.

Securities segment:
The process a firm can distribute its securities in the primary market through the public offering and
after the securities are traded in the secondary market. Stock, bonds, preference shares, debentures,
treasury bonds, etc. are the principle instruments. There are two group of securities segment in
Bangladesh. They are:
1) Stock Exchange
2) Investment Corporation of Bangladesh (ICB)
Non Securities segment:
The non-securities section of the capital market provides long term loans both in local and foreign
currencies. This segment also covers merchant banking. The followings are the players in this field:
1) Development Finance Institutions

2) Commercial & Specialized Banks.
Security analysis is all about the examination and valuation of various factors affecting the value of a
security. The main goal of security analysis is to understand the company, its products and services, its
customers and its competitive advantages. The better you understand a company, the better you will be
able to make appropriate investment decision. Therefore, there are multiple of techniques to perform
security analysis properly. But, security analyses are basically split out into two popular methodologies:

Fundamental analysis (FA)



Technical analysis (TA

3.3 Fundamental Analysis
Fundamental analysis is the process of investigating firms at its fundamental financial level with a view
to find out its intrinsic or true value. This type of analysis reveals financial health of a company and
give you an idea of the value of the stocks.
Although there are several tools of fundamental analysis, I have identified major different tools or
ratios of fundamental analysis. They focus on earnings, growth, and value in the market.
3.3.1 Earnings per Share (EPS):
The key element that all investors look after is earnings Before investing in a company you want to
know how much the company is making in profits. Future earnings are a key factor as the future
prospects of the company's business and potential growth opportunities are determinants of the stock
price. Factors determining earnings of the company are such as sales, costs, assets and liabilities. A
simplified view of the earnings is earnings per share (EPS). This is a figure of the earnings which
denotes the amount of earnings for each outstanding share. We can compute EPS simply using the
following formula-
EPS = Net profit after tax / Number of shares outstanding
In essence, EPS tells you how much money the company is making for its shareholders, so it is a
measure of earning power. In Dhaka stock exchange (DSE), we found various types of EPSs: annual
and quarterly EPS, EPS including and without extra ordinary income and, then basic and re-stated or
diluted EPS. However, all types of EPS are important to consider, but we have to give more emphasis
on quarterly EPS with restated figure which is current and more relevant in this regard. We should not
consider EPS including extra- ordinary income since this extra-ordinary income may not repeat in the
coming year. In fundamental analysis, earning is not the only consideration, and one cannot decide
which company shares to buy only on the basis of earning.

3.3.2 Price to Earnings Ratio (P/E):
When taking the current market price into consideration, the most popular ratio is the Price-to-Earnings
(P/E) ratio. As the name suggests it is the current market price divided by its earnings per share (EPS).
It is an easy way to get a quick look of a stock's value-
P/E Ratio = Stock Price per share / EPS
A high P/E ratio indicates that the stock is priced relatively high to its earnings, and companies with
higher P/E therefore seem to be more expensive. However, this measure, as well as other financial
ratios, needs to be compared to similar companies within the same sector or to its own historical P/E
This is due to different characteristics in different sectors and changing markets conditions. As EPS is
denominator of P/E ratio, akin to EPS we also find different types of P/E ratios in DSE. Accordingly,
we will deem those P/E ratios as we did for EPS in the earlier. This ratio does not tell the full story
since it does not account for growth. Normally, companies with high earnings growth are traded at
higher P/E values than companies with more moderate growth rate. Accordingly, if the company is
growing rapidly and is expected to maintain its growth in the future this current market price might not
seem so expensive. This is the reasoning for the existence of different investment styles
3.3.3 Projected Earnings Growth (PEG):
A PEG ratio is calculated by dividing the stock's P/E ratio by its expected 12 month growth rate. A
common rule of thumb is that the growth rate ought to be roughly equal to the P/E ratio and thus the
PEG ratio should be around 1. A relatively low PEG ratio indicates an undervalued stock and a PEG
ratio much greater than 1 indicates an overvalued stock-
PEG = P/E / Projected growth in earnings
3.3.4 Net Asset Value (NAV) per share:
There are several ways to a company’s worth or value. One of the ways you define value is market
capitalization or how much money would you need to buy every single share of stock at the current
price. Another way to determine a company’s value is to go to the balance statement and look at the net
asset value. The net asset value is simply the company’s assets minus it liabilities. NAV per share value
of a share in a company, calculated by subtracting a company’s total debt from its total assets and
dividing the result by the number of shares.
NAV per share = (Total Assets – Total Liabilities)/Number of shares outstanding
It is to be noted that the intangible assets and revaluation reserve are excluded from the net asset value.
Nonetheless, NAV per share can be a good analytical tool to investors. If the NAV is bigger than the
market value, many investors will believe that a particular company may be undervalued. Usually, it is
expected that the share price of a company should move closer to its NAV. A company which is
expected to perform well would have a share price higher than its NAV per share. A struggling firm
will trade at a discount to NAV; implying that shareholders are pessimistic about the future of the
company and have started to sell them. But, in case of mutual funds and investment funds, the funds’

price must move with its NAV. Investors can nor find the net asset value in the balance sheet. You can
also find it in DSE website or its publications.
3.3.5 Price-to-Book (P/B):
A price-to-book (P/B) ratio is used to compare a stock's market value to its book value. It can be
calculated as the current share price divided by the book value per share. In a broader sense, it can also
be calculated as the total market capitalization of the company divided by all the shareholders equity.
P/B Ratio = The current share price / The book value per share
High price for the stock as it denotes what would be the residual value if the company went bankrupt
today. A P/B ratio higher than 1 denotes that the share price is today. The difference indicates what
investors think about the future growth potential of the company.
3.3.6 Share Holding Pattern
Purchasing a stock is nothing but to become a partial owner of the business. As a partial owner you
need to consider the other investors on that business. Shareholding pattern tells us the detailed
ownership of that business. most importantly many a times, shareholding pattern indicates future stock
price movement Broadly shareholding pattern is divided into two groups Sponsored shareholders
group- those who incorporated the company and Public shareholders group- Share holders other than
promoters; i.e. BFI, banks, money managers, mutual funds, insurance companies, individuals, etc.
Promoters are the founders (or initial investors) of the company. Generally, promoter’s movements are
followed to predict the future outcome of the company. If a promoter raises his stake, it is
comprehended that he has high confidence in the business and may get positive results. But this doesn’t
always hold true. Investor should consider the company’s shareholding pattern with great importance
as it signifies that the company having very good prospect is unwilling to issue more shares to the
public. We should keep in mind that shareholdings pattern in isolation is not enough to take any
investment decision. You must have to consider other factors along with shareholding pattern
3.3.7 P/S RATIO
The price-to-sales (P/S) ratio is a valuation ratio that compares a company’s stock price to its
revenues. It is an indicator of the value placed on each dollar of a company’s sales or revenues.
It is a key analysis and valuation tool for investors and analysts. The ratio shows how much investors
are willing to pay per dollar of sales. Like all ratios, the P/S ratio is most relevant when used to
compare companies in the same sector. A low ratio may indicate the stock is undervalued, while a
ratio that is significantly above the average may suggest overvaluation.

3.3.8 ROE Ratio
Return on equity (ROE) is a measure of financial performance calculated by dividing net income by
shareholders' equity. Because shareholders' equity is equal to a company’s assets minus its debt, ROE
could be thought of as the return on net assets. ROE is considered a measure of how effectively
management is using a company’s assets to create profits.
3.3.9 PRICE/SALES RATIO
The formula of P/S ratio is, P/S= Share price / Revenue over a 12 month time period. "The price-to-
sales ratio is an indicator of the value placed on each dollar of a company’s sales or revenue.
3.3.10 PRICE/BOOK VALUE RATIO
The formula of P/B is, P/B= Stock price / (Total asset – Intangible assets and liabilities). This
ratio compared the share price with the stock’s intrinsic value and indicates overvaluation and
undervaluation of the stock. The lower P/B ratio indicates the undervalued stock.
3.3.11 DEBT/EQUITY RATIO
The formula of Debt / Equity ratio is, D/E= Total liability / Shareholder’s equity. “The D/E ratio
indicates how much debt a company is using to finance its assets relative to the value of
shareholders’ equity”. This ratio is a leverage measure in terms of the available capital vice the
capital employed. “A high D/E ratio generally means that a company has been aggressive in
financing its growth with debt. Aggressive leveraging practices are often associated with high levels
of risk”. A low level of this ratio indicated that the credit available was not fully utilized.
3.3.12 Cash and Stock Dividend
Dividend policy is an important factor for shareholders to consider in the stock-selection process
because dividends are a major cash outflow for companies.
3.3.13 Net Income (EACS)
Net income is one of the fundamental metrics that a company will use in determining whether or not to
invest in a particular company. Net income tells investors whether or not a company makes money and
as such, it offers insight into whether or not a company's business may succeed or fail.
Net income also provides investors with a benchmark that can be used to compare a company's
performance to its past or future performance, or to compare one company's performance to the
performance of a competitor.

3.4 Technical Analysis
“Technical analysis is a trading tool employed to evaluate securities and identify trading
opportunities by analyzing statistics gathered from trading activity, such as price movement and
volume”. Technical analysts focus on price charts on price trends and various analytical tools to
measure a security’s strengths and weaknesses. The target of technical analysts is to predict the
future stock market behavior using past price performance where they like to use behavioral
economics and quantitative analysis.
3.4.1 How Technical Analysis Works
To perform the technical analysis method, investors or the traders starts with technical analysis charts
that show the price, time period and trading volume history of a specific security or index. As well as
host of other statistical measures such as exponential moving average, simple moving average,
maximums and minimums, and percentage changes.
In technical analysis charts are used to find out the price moving tendency and their changes in these
trends. There are some price trends and patterns, namely, rectangles, triangles, Bollinger bands,
inverted heads and shoulders, candlesticks, the MACD histogram, and so forth.
3.4.2 Why Technical Analysis matters
Future behavior of a stock can be predicted by using the past market trends of an individual security,
considering this belief the main concept of technical analysis is built.
If a trader can interpret a chart’s “message” and predict a stock’s movement correctly, he can surely
make a huge profit. Some particular technical analysis perspectives are argumentative, in this scenario
there is a belief that the securities or stocks and the market moves in trends which can play for a longer
time period and there is an argument that the market action can find out the shifts in demand and supply
relationships.
Most of the traders or investors tend to either technical or fundamental investors. Along with this so
many investors believe that the combine result of fundamental and technical analysis may be the most
effective way to determine the Exit and Entry points and taking the best buying and selling decisions.
And there are some people who believe that the rules, techniques, tools and methods of technical
analysis can lead them to become self-fulfilling and they find it more important than any others
methods. They still believe this technical analysis method is the most effective way to know the stock
market for individual investor.
Here, Indicators of Technical analysis are described below-

3.4.2 (a) Channel line
Channel pattern is a combination of two lines that are parallel to each other and in combination, these
two lines look like a channel when placed on the price chart. This pattern is important because it helps
to indicate the continuation of a bullish or bearish market. When the direction of the price channel is in
the upward direction it is considered as the Bullish Price Channel and when the face of the price
channel is in the downward direction it is called Bearish Price Channel.
3.4.2 (b) Moving Average
Moving average is a process where an investor can get the single for buying or selling the securities
with the help of trend line. It is primarily the most recognized technical indicators used to decide the
direction of trading stocks. Every moving average model is the consequence of a statistical
computation of an averaging number of preceding information plotted into a chart enabling traders to
watch at smoothed data rather than focusing on daily price movements inherited in all financial
markets.
3.4.2 (c) Relative Strength Index (RSI)
Relative Strength Index (RSI) is a momentum oscillator, developed by J. Welles Wilder, which
measures the speed and velocity of price movement of trading instruments (stocks, commodity futures,
bonds, forex etc.) over a specified period of time.

The objective of RSI indicator is to measure the change in price momentum.



It is a leading indicator and is widely used by Technical Analysts over the globe.



RSI can be used to spot a general trend.



It is considered overbought when it goes above 70 and oversold when it goes below 30.

3.4.2 (d) Support And Resistance
Support is an area on a chart that price has dropped to but struggled to break below. On the other hand,
Resistance is an area on a chart that price has risen to but struggled to break above. Support and
resistance is one of the most widely followed technical analysis techniques in the financial markets. It
is a simple method to analyze a chart quickly to determine three points of interest to a trader:

The direction of the market



Timing an entry in the market



Establishing points to exit the market at either a profit of loss

If a trader can answer the three items above, then they essentially have a trading idea. Identifying levels
of support and resistance on a chart can answer those questions for the trader.

3.5 Technical VS Fundamental Analysis
In the equity market, the process of stock selection for the buying decision is a complex task as there
are many stocks available in the market for purchase. The two main decision making tools are used
widely in this process are fundamental and technical analysis. Here, history of each of these tools and
also the main components involved in each decision making tool is discussed.
Fundamental analysis is involved in economy analysis, industry analysis and company analysis of the
stock aimed for purchase. Technical analysis involves the place of several technical indicators like
MACD, OBV, Moving average, RSI, EMA, etc. on the past stock market prices. The advantages and
disadvantages of each of the tools are also discussed below.
3.6 Investors’ decision making tools:
The most commonly used analytical methods as decision making tools of stock selection are the
fundamental and technical analysis all over the world. Fundamental analysts uses the information
which is publicly available about the stock to analyze the stock in three forms with respect to the
economy, its industry and the company. On the other hand, Technical analysis places different types of
technical indicators on the available past history of the stock prices, statistical analysis in order to make
a right decision. The flowchart below explains the two tools of the decision making process in the stock
market very easily and systematically.

CHAPTER - FOUR
FINDINGS AND ANALYSIS
4.1 FUNDAMENTAL ANALYSIS
The fundamental analysis is the combination of the economy analysis, industry analysis and
company analysis. In fundamental analysis the stock price is determined with the information
which is publicly accessible and available after observing the industry scenario and
evaluating the company’s overall economic conditions. The economic indicators such as
inflation, interest rate, purchasing power, growth rate, GDP, etc. are used for economy
analysis.
The basic assumption behind analyzing the economy before buying a company’s stock was
that if the economy was growing and powerful and the company would also do well and in the
same way the share prices would increase.
Here some of the important ratios calculated during company analysis which include:
4.1.1 EARNINGS PER SHARE (EPS):
The formula of EPS is, EPS = The amount getting from subtracting dividends on preferred
stock from net income is divided by no. of outstanding shares. This ratio shows how much the
value of the share had gone up or down over a given period of time. “Earnings per share
serves as an indicator of a company's profitability. The EPS is an important fundamental used
in valuing a company because it breaks down a firm's profits on a per share basis.
Here, a line chart is given below:
10
8
6
4
2
0
EPS
EPS
2013 2014 2015 2016 2017 2018 2019
Fig. EPS of DBH

Interpretation:
From this chart, we see that EPS of DBH from 2013 to 2019 are:
YEAR 2013 2014 2015 2016 2017 2018 2019
EPS 4.47 5.15 5.90 6.45 7.79 8.6 8.4
That means every year EPS is increasing in progressive manner which indicates the positive
performance of the DBH company. It is clearly visualized that DBH makes the profits in
each year in upward which positively impacts on the shares price.. So, From this chart an
investor can understand that this is up trending stock and EPS is increasing and he must
select this stock to buy for the longer investment. When an investor buys a share, he/she
should consider EPS before going investment. Strong EPS protects him from the upcoming
unfavorable losses.
4.1.2 CASH AND STOCK DIVIDEND:
An investor purchase a share for the two reason. The first one is Dividend and the second one
is for capital appreciation.
150
100
50
0
Cash Dividend
Cash Dividend
2013
2014
2016
2017
2018
2019
30
25
20
15
10
5
0
Stock dividend
Stock dividend
2013
2014
2016
2017
2018
2019
Fig. Cash and Stock dividend of Renata limited
Interpretation:
This is the Cash and Stock Dividend chart of RENATA LIMITED from year 2013 to 2019. In
this chart we will see that Cash dividend Of RENATA would increase each year in upward
trend which indicates the effectiveness of the company. On the contrary, Stock dividend of
Renata Limited decrease in downward trend which indicates the strong potentiality, efficient
Management and High profitable margin of the company. Remember that, when a company
makes the profits, they try to provide the Cash Dividend to their shareholders and the
shareholders are satisfied. On the other hand, if a company fails to earn the profits, they
convince their shareholders by providing the Stock dividend. So, From this chart an investor
can understand that this is up trending stock and Cash dividend is increasing & Stock dividend
is decreasing because of high profitable margins. That’s why he must select this stock to buy for
the longer investment.

4.1.4 RETURN ON EQUITY (ROE)
Formula of ROE is, ROE= Net income divided by Shareholder’s equity. “This ratio shows
that how well the shareholders’ money was utilized and how profitably that money was
invested. The ROE is useful for comparing the profitability of a company to that of other
firms in the same industry. It illustrates who effective the company is at turning the cash put
into the business into greater gains and growth for the company and investors. The higher
the ROE, the more efficient the company’s operations are making use of those funds”. A
low ROE indicated that the shareholders’ money was not properly utilized.
ROE
30
20
10
0
ROE
2012 2013 2014 2015 2016 2017 2018
Fig. ROE of ACI Limited
Interpretation:
This a chart of ACI limited. This chart is from the year 2012 to 2018. ROE from 2012 to 2018
are-
YEAR 2012 2013 2014 2015 2016 2017 2018
ROE 10.73 13.56 14.38 27.17 9.97 9.21 3.82
Year from 2012 to 2015, the ROE was in upward trend which indicates the proper utilization of
the of the Shareholders capital. They turned the cash put into the business into greater gains and
growth for the company and they were succeed. After 2015, ROE fall down drastically and it
continued to the year of 2018. Remember, When the ROE ratio began to decline it implied that
the stock prices would soon fall. Here, ACI limited were unable to proper utilize the
shareholders’ capital. As a result, it negatively impact on THE profitability, EPS, NAV etc. So,
this chart gives a clear idea about the specific share in the market and if an investor select a
stock considering these trends he might make a loss specially for long term investment.
4.1.5 MARKET CAPITALIZATION
The formula of market capitalization is, MC= No of shares* price per share. This is the
measure of shares are traded in the market. Based on market capitalization stocks are
categorized as, small cap, medium cap, large cap, and mega cap. Ranges of small-cap is $300
million to $2 bilion, medium-cup is $2 billion to $10 billion, large-cap is $10 billion to $200
bilion, and mega-cap is $200 billion.

Market capitalization
40000
30000
20000
10000
0
Market
capitalization
2015 2016 2017 2018 2019
Figure: Market capitalization of Dutch Bangla Bank (in million)
Interpretation:
This is the market capitalization chart of DUTCHBANGLA Bank limited. market
capitalizations from 2015- 2019 are-
In million
YEAR 2015 2016 2017 2018 2019
Market capitalization 21520 23340 30620 28880 35650
Market capitalization is the measure of shares are traded in the market. Are the trades good or
not understanding through appearing of MC. From this chart we can recognize the
DUTCHBANGLA as a `Large cap’ securities. And the market capitalization value are
increasing year to year which is the good sign of strong company. So, From this chart an
investor can understand that this is Up trending stock and price is increasing and he must
select this stock to buy.
4.1.6 P/E RATIO
The formula of P/E s, P/E= Market price per share / EPS. Price-to-earnings ratio is simply a
way to gauge how a company's earnings stack up against its share price This ratio showed
how closely the stock price followed the EPS. If the price earnings ratio was high, it implied
that the market participants were expecting the stock price to continue to increase. When the
P/E ratio began to decline it implied that the stock prices would soon fall.
A high P/E ratio indicates that the stock is priced relatively high to its earnings, and companies
with higher P/E therefore seem to be more expensive. Normally, companies with high earnings
growth are traded at higher P/E values than companies with more moderate growth rate.
Accordingly, if the company is growing rapidly and is expected to maintain its growth in the
future. this current market price might not seem so expensive. This is the reasoning for the
existence of different investment styles.

P/E RATIO
20
15
10
5
0
P/E RATIO
2013 2014 2015 2016 2017 2018 2019
Fig: P/E Ratio of BRAC BANK
Interpretation:
This is the P/E Ratio chart of BRAC Bank. P/E ratio of BRAC Bank from 2013 - 2018 are-
YEAR 2013 2014 2015 2016 2017 2018 2019
P/E RATIO 11.2 11.88 14.85 14.09 17.85 15.81 14.22
From this chart, we can see that P/E ratios of BRAC Bank are continuously increasing each and
every year. If we look at year 2013, P/E is 11.2 that means you're going to pay BDT 11.2 for
every BDT 1 of earnings that you gain access to by buying stock. And the year till 2017, P/E
ratio are increased which is a good sign of BRAC Bank. But unfortunately, P/E ratios are
decreased in year 20118 and 2019. So, From this chart an investor can understand that this is
both Up trending and Down trending stock and price is fluctuating. Here, if the investor is risk
taker, he can select this stock to buy.
4.1.7 PEG RATIO
While the P/B ratio is used to gauge the respective value of a corporation and assist conclude if
its stock is under or overvalued the PEG ratio is a favorite valuation metric used by GARP
investors to assess growth potential in relation to the value of the company. “It is calculated by
dividing the P/E ratio by the projected growth in earnings of the company (PEG Ratio = P/E
ratio / Projected Growth in Earnings). For the GARP investor, a PEG ratio of 1 or less is a
good indicator.
For example, a company with a P/E ratio of 15 and a projected growth in earnings of 25%, or
15/25 equals a PEG ratio of 0.6 and, would be considered a good investment by most GARP
investors. While a 1 or less is desired, companies with a PEG ratio of around 0.5 are considered
better as they have good growth potential but, are also slightly undervalued - Growth at a
Reasonable Price.

4.1.8 Net Asset Value (NAV):
60
50
40
30
20
10
0
NAV
NAV
2013 2014 2016 2017 2018 2019
Fig: NAV OF KOHINOOR
Interpretation:
This is the NAV chart of KOHINOOR. NAV of KOHINOOR from 2013 - 2019 are-
YEAR 2013 2014 2016 2017 2018 2019
NAV 19.99 23.35 34.25 39.53 51.93 52.42
From this chart, it is clearly visualized that NAV are continuously growing year to year which
indicates the efficiency of the KOHINOOR to create a value in the market . NAV tell us how
much money an investor wants to pay against one TK equity value. if we see the year of 2019,
we find that an investor are interested to pay 52.42 against single TK the of equity value.
4.1.3 EARNING AFTER TAX (EAT):
Earning after tax refers to the income that is available for shareholders (common stockholders
and preferred stockholders). After giving the dividend to the preferred stockholders, the
remaining income hold the common stockholders.
EAT
6,000
4,000
2,000
0
EAT
2015 2016 2017 2018 2019
Fig: EAT OF KOHINOOR

Interpretation:
From this chart, it is clearly visualized that EAT are continuously growing year to year which
indicates the operational efficiency of the KOHINOOR. As the EAT are continuously increasing,
KOHNOOR is able to cover the short term obligations and can satisfy the shareholder through
providing the dividend. It recommended that an investor can buy that kind of share.
4.2 TECHNICAL ANALYSIS
The founder of the Wall Street Journal, Charles H. Dow was regarded as the Father of
Technical Analysis. Charles Dow started a newsletter which was called Customers’ Afternoon
Letter in the decade of 1870 when the stock market was not a profitable, attractive and popular
option for investment where the information about the security, stock and equity market was so
limited. The method of technical analysis by Dow opened up the exclusive idea that if the
traders or the investors could know about the stocks how they were performing in the current
stock market, then the investor can predict the growth of the economy. In technical analysis the
concept of Dow Theory is the cornerstone. Employing some technical tools and based on the
past patterns of stock prices the technical analysts predict the future changes in the stock
prices. In Technical Analysis the analysts and the investor using technical indicators could take
decision if the stock was uptrend or downtrend. “The main theoretical underpinning of
technical analysis was that at any given point in time, the stock prices reflected all the known
factors influencing the demand and supply for any given market”. In the method of technical
analysis a detailed analysis of the monthly, weekly, daily, hourly, minute basis price
fluctuations which was done to predict the changes in security prices.

4.2.1 Assumptions of Technical Analysis:
“Technical analysis is a method of evaluating securities that involves a statistical analysis
of market activity, such as price and volume. Technical analysts do not attempt to
measure a security’s intrinsic value, but they use charts and other tools to identify price
patterns that can be used as a basis for investment and buying decisions”.
There are various forms of technical analysis, some are depends on the price chart patterns,
some use indicators and oscillators, and combination of techniques are used by the investor
mostly.
Technical analysis is formed based on some core assumptions by observing the condition
where the stock market runs. These assumptions are the integral as well as are the central of
technical analysis concept. The three basic assumptions of technical analysis:

The security market discounts everything.



Stock prices move in trends.



History repeats itself.

4.2.1.1 The Security Market discounts everything
This first assumption of technical analysis seeks to incorporate all the fundamental,
political, macro and micro economic data as well as the risk component of a stock into the
current market price. Many stock market experts criticize technical analysis because this
analysis only considers price movements and chart pattern and ignores the fundamental
factors like the company’s overall conditions and the publicly available information. The
counter argument is based on the currently efficient market hypothesis, which states that a
stock’s price already reflects everything that has or could affect a company – including the
fundamental factors. Technical analysts believe that everything from a company’s
fundamentals to broad market factors to market psychology are already priced into the
stock. This removes the need to consider the factors separately before making an
investment decision. The only thing remaining is the analysis of price movements, which
technical analysts view as the product of supply and demand for a particular stock in the
market.
4.2.1.2 Stock prices move in trends:
Prices usually occur in trends, though some technical analysis theorists argue that prices
are completed randomly. Randomness of price is specifically related to the efficient
market hypothesis. This theory is based on the fact that markets are “efficient” and
information dissemination occurs promptly across the market. The more efficient a
market becomes, the faster information is dispersed to the market and as a consequence,
the faster price changes to reflect this information. Technical analysts believe that prices

move in short-, medium-, and long-term trend. In other words, a stock price is more
likely to continue a past trend than move erratically. Most technical trading strategies are
based on this assumption.
4.2.1.3 History repeats itself:
The belief of technical analysts is, the history of the stock market repeats itself. Studying
the history is found that the set patterns of the market repeat themselves over a longer
time period. To understand the market psychology price movement’s repet itive nature is
used and based on investors fear or excitement emotions it becomes so predictable.
In technical analysis price chart, chart patterns are used to analyze the emotions and
follow price movements to understand the trends. Many forms of technical analysis is
used more than 100 years still some investor believe because the price movement pattern
are often repeats by themselves.
4.3 Technical analysis method
Technical strategies placed mathematical calculations which were designed mainly to
observe the activity of stock prices. Based on the buy and sell signal generated by the
charts, computers and manual calculations, stock decisions are taken.
Technical Analysis is very crucial for the short term and mid term investment. The
persons who are technically sound are taken the technical steps to make transactions in
the market.
There are various indicators of technical analysis is existing in the market for taking the
stock buying and holding decision. Among them the short term investors are interested to
use technical analysis. The technical indicators which must be analyzed before selecting
the stocks are -
3.1 MA 3.2 Channel Line
3.3 RSI 3.4 Support and Resistance
3.5 Trend analysis: 3.6 Prices move in trends:
3.7 Entry / Exit Point 3.8 Line Chart
3.9 Candlestick Chart 3.10 Point and Figure Chart

4.3.1 Moving Average (MV)
Moving averages are primarily the most recognized technical indicators used to decide the
direction of trading stocks. Every moving average model is the consequence of a statistical
computation of an averaging number of preceding information plotted into a chart enabling
traders to watch at smoothed data rather than focusing on daily price movements inherited
in all financial markets.
Here, a moving average chart of SQURPARMA ltd. has been given. there are 10 days,
20days and 200 days chart. From this chart price trends will be clear to understand and it
will help the investor wheatear they will buy the share of SQURPARMA or not. Along
with this chart an interpretation is given for better understand:
Interpretation:
Here, The most popular advantages of MV are given the following things:

An investor can determine the current trend of price.



Identify areas of short term support/resistance.



Investor can manage the risk of the shares.



The investor can enter and exit with the help of Moving Average. When the
price moves under the moving Average, investor can exit from the market and
vise versa.

4.3.2 Channel Line
This pattern is important because it helps to indicate the continuation of a bullish or bearish
market. When the direction of the price channel is in the upward direction it is considered as
the Bullish Price Channel and when the face of the price channel is in the downward
direction it is called Bearish Price Channel.

Interpretation:
Channel patterns are an integral part of technical analysis, but successful traders combine
these techniques with other technical indicators to maximize their odds at success.The
upper trend line connects the swing highs in price, while the lower trend line connects the
swing lows. The upper line of Channel represents the resistance line while the lower one
acts as a support line.
4.3.4 Support and resistance:
In technical analysis support & resistance concepts are highly discussed and useful two
branches. Considering demand support level is an expected downtrend of price level. When
security prices falls then share demand increases and forms the support line. Similarly when
the security prices rises then the share demand decreases and forms the resistance level.
The identified support & resistance level gives potential and valuable entry or exit points of
trading.
Here, a support and resistance chart of ACI ltd. has been given. This is a 6 months chart.
From this chart price trends will be clear to understand and it will help the investor
wheatear they will buy the share of ACI or not. Along with this chart an interpretation is
given for better understand:

Fig: Support and Resistance
Interpretation:
This is a Technical Analysis chart of ACI Company where an investor can get 6 months
data of ACI. It is a candlestick chart and every candle indicates 1 day. The data are from
January 1, 2019 to July 7, 2019. In this chart support and resistance lines has been
marked. This chart shows that ACI’s stock prices are down trending, it means price is
decreasing. Sometimes it becomes a good decision to buy this type of share in decreasing
prices. But investor should consider the support and resistance level if they want to gain
money. Here I have drawn a support line for better understand. This support line shows
that, price decreases up to tk. 330 in the last two months. So it can be said that there is
less possibility to decrease prices and I have drawn 3 resistance lines, resistance line 1
indicates the very recent price and resistance line 2 indicated the last 2 months price
resistance level and resistance level 3 indicates last 4 months price resistance level. An
investor should consider the recent resistance level and he can consider resistance line for
2 months at most. Resistance line 1 show the price can increase up to 355 tk. & resistance
line 2 shows price can increase up to 375 tk. & resistance line 3 shows price can increase
up to 413 tk. So, if an investor buy a share at tk. 330 then he can sell that share at tk. 355
and if it further increase it will be up to tk.
There is very low possibility that price will increase more and if an investor wants to buy
ACI’s share he should take decision considering support line. Considering resistance line
might be a bad decision and it may causes loss cause price never increase after the
resistance level if market it normal. So, before taking decision, an investor should
observe the support and resistance to be gainer.
4.3.5 Trend analysis
The most effective benefits of technical analysis is that it helps an investor predicting
stock price trend of future market. In chart analysis the uptrend, downtrend, and sideways
moves are found which makes the prediction easy.
Here a Technical Analysis chart of ACI limited is given to understand the trend:
Fig: 5 month TA chart of DUTCHBANGLA

Interpretation:
This 5 months Technical Analysis chart shows some information about
DUTCHBANGLA’s current market information and its stock trends also. This analysis
starts from month of October 2019. From the beginning, price fell down to the next 15
days and after that day price goes up slowly to end that month, and it indicates Uptrend
and from month November price started to goes up slowly to one- third of the month and
it indicates the stocks uptrend and then the price moves down very slowly to the end of
the month and from month Dec. price remains almost same and it indicates sideways. And
after that price again falls rapidly and indicates the downtrend and keeps sideways to 15th
January then indicates the uptrend for a couple of days. Next 15 days of January, price
move in static manner. And from 15th
Feb. price move in downtrend. So, From this chart
an investor can understand that this is down trending stock and price is decreasing and he
must not select this stock to buy.
4.3.6 Prices move in trends
If the share prices move wildly and very frequently then it becomes hard to make profit
and for wild movement occurrence overall price move in trends. This is also an advantage
of technical analysis. Trend following methods is the most profitable trending strategy and
here the investor can isolate trend along with find opportunities for entering with the right
direction which capitalize the direction wise biased price movement. Trends happens on
different “degrees”. Say for an example, in a weekly chart there may be an uptrend and
short term time frame there may be a downtrend and traders make profit weather it is short
term or long term. Using this tool of technical analysis makes the future market more
realistic and predictable which can minimize his losses.
A chart is given below where different types of trends are marked and there is also a brief
description:
Fig: Prices moves in trends

Interpretation:
This is a Candlestick chart of DESCO from January 2019 to July 2019. From this chart we
will see different types of trend behavior of prices. All the trends are market in this chart.
When the prices falls we call it downtrend and the point from where prices starts to
increase we called this line uptrend. When the price shows downtrend that’s the high time
to buy a share and when the price increases and reach the resistance level then that’s wise
to sell the share. The point from where price starts to decrease that point is called swing
high and the point where the price starts to increase that point is called swing low. And the
resistance level indicates that the prices of DESCO is not increasing than 44tk for the
recent time frame on the other way support line indicates that the prices is not decreasing
than 41tk for the recent time periods. This trend lines gives a clear idea about the specific
share in the market and if an investor select a stock considering these trends he might not
make a loss.
4.3.7 Entry / Exit Point
Providing the ways to “time” of trading as well as investing is one of the major advantage
of technical analysis for the investors. Traders can predict the right “exit” and “enter” time
by analyzing technical analysis which helps to make good returns. Price chart patterns,
candle sticks, moving averages, Elliot wave analysis indicator etc. are so useful to make
entry and exit points to the stock traders.
Here, a chart is given below where the entry and exit point is marked within in a box:
Fig: Entry and Exit point
Interpretation:
It’s a candlestick chart where we green and red candles are seen. Green candle indicates
the bullish market and the red candle indicates the bearish market. The market green
candle shows that price did not increase than the price starts and close with the low price
in that day. It’s the entry point and in the same way red candle indicates the exit point.

4.3.8 Line chart
One of the basic chart is line charts where the closing prices are presented only for a
time period. This line is built by the connection of each time periods closing prices. This
chart cannot provide the deep insight about the price movement of an intraday. Within a
given time period closing prices are more important than the open, high or low prices to
many investors as it is the easiest and simple and for its low noise.
Here, a line chart is given below:
Fig: Line Chart
Interpretation:
This a line chart of IDLC finance. This chart is from January 2019 to July 2019. Line chart
is the easiest chart where only closing prices are seen. In this chart there are 2 axis, one is X
axis which presents the time period and another is Y axis which presents the prices. This
line chart does not provide enough insight about the share as well as the market although
some long term traders like to use it because it is the easiest to find the closing prices and
they believe that this closing price is more important than the high, low or open prices in the
time period and they are not interested in intraday movements. Though many long term
investors are interested in line charts but this chart is not that much useful.
4.3.9 Candlestick Chart
Candlestick chart has thin vertical line like Bar chart that shows a price range for a time
period having different color candles with tails based on the stock’s higher or lower ending.
The body of the candles shows the difference between opening prices and closing prices.
Declining periods have red candlestick body and rising periods have green candlestick body.
When a day’s opening and closing prices remain same there is no wide candle body is
required.
A Japanese Candle stick chart is given below from where we will see what information this
chart gives to the investors:

Fig: Candlestick chart
Interpretation:
This is a candlestick chart of OLYMPIC. It is a one month chart starts from June 3 to July 7
In this candle stick chart we get a candle body and this is the basic difference from a Bar
chart. A candle has real body, shadow or tails and color and it has open price, closing price,
high and low prices and the tails are stays at the middle point of the candle. In this chart, all
these candle presents a single day each. We consider a bullish green candle of June 10, this
candle shows that the opening price was 237.5tk and in any time on that day price goes
down to 237tk after that buy pressure increases and the price goes up to 241tk and then sell
pressure increases and finally the closing price was 239.80tk. End of the price of the share
was 2.3tk but the total price movement was 4tk. In the same way we consider a bearish red
candle of July 2, this candle shows that the opening price was 225.80tk and in any time on
that day price goes down to 215tk, and then for buy pressure price goes up and the closing
price was 219.10tk. At that day share price was 6.7tk but total price movement was 10.80tk.
This candle provides all the available information and it’s the most popular chart for the
Technical Analysts because it is very useful to understand the market and it helps the
investors to select the stock mostly.
4.3.10 Point and figure Chart:
A point and figure chart is a chart for a day to day basis where only the price movements are
considered and there is no time period is required. This chart is consist of a number of
columns having the stacked either “X’s” or “O’s” where “X” presents the rising price and
“O” presents the falling price. This kind of chart is used for filtering the non-significant
movements of price and helps the trader to find out the complex support & resistance line.

A point and figure chart is given below:
Fig: Point and figure chart
Interpretation:
This point and figure chart is only the price chart here there is no time period. The beauty
of Point & Figure charts is its simplicity. Here the “X” sign presents that the share price is
increasing by $1 and the “O” sign presents that the share price is decreasing by $1. If the
price increased by $2 then used 2 X, in the 1st
line we see 5X that means price increased
by $5 and in the 2nd
line we see 6 O that means price decreased by $6. For making change
in the direction here at least $3 price movement is required. By using this chart support
and resistance can also be found.
5.1 Share analysis on term basis
In the previous chapter, I have analyzed the Fundamental and Technical factors with the help
of chart and interpretation . The main reasons of the analysis is how to understand and
determine the share face whether it weak or strong and how to determine the intrinsic value
of a share in order to select the shares for investment. Now, in this chapter I have to make an
Efficient portfolio with the help of these factor and I will see why efficient portfolio are
important.
In the portfolio, there should be three types of share. Short term share, midterm shares and
long term share.

Short-term share
To invest in short-term market must have technical knowledge about the market indicators.
So the criteria are:
Short-term share Medium & Long-term share:
Technical indicator Fundamental Analysis
 Moving Average

EAT
 RSI

P/E
 Channel Line

Cash and Stock Dividend
 Price Movement

EPS
 Support and Resistance

NAV
 EAT

ROE
 AGM Date

P/S

Is the Company's Revenue growing  P/B
 Number OF share

Debt/Equity Ratio
 Moving Average  Beta
 RSI

Market Capitalization
 Channel Line

EAT

Portfolio at a Glance
In the portfolio, I have considered TK 10,00,000 for investment. Here, the weight and holding types
are given below-
Security Weight In terms of LTP No of Share Holding Intention
TK
KOHINOOR 25% 2,50,000 472.80 20182500 Long-term
RENATA 20% 2,00,000 1160 88589242 Long-term
SQURPARMA 10% 1,00,000 202.60 844239059 Long-term
DBH 15% 1,50,000 92.60 154142581 Mid-term
BRACBANK 15% 1,50,000 39.30 1325878476 Mid-term
FINEFOODS 1,00,000 90 13973920 Short-term
10%
Government T. bill 5% 50,000
TOTAL 100% 10,00,000
Sector Wise Investment
Sector Weight In terms of TK
Pharmaceuticals & Chemicals 55% 5,50,000
Bank 15% 1,50,000
Financial Institutions 15% 1,50,000
Food & Allied 10% 1,00,000
Risk-Free 5% 50,000

Kohinoor Chemical Company (Bangladesh) Ltd.
Trading Code : KOHINOOR Scrip Code : 18463
Kohinoor Chemical Company (Bangladesh) Limited (KCCL) is popularly known by its legendary
beauty product under the brand "Tibet". For more than half a century Tibet has made its mark in
the hearts of millions. we are the pioneer amongst the soap, cosmetics and toiletries manufacturing
industries of Bangladesh, producing highly value-added products with quality in the center of
focus. We care for the customers and are determined to count extra mileage to meet their daily
needs. We believe that it is the quality that has kept Tibet going and growing for 55 years. We
produce every product that you need to feel noticed for your standout freshness.
Basic Information
Authorized Capital (MN) 500.00 Listing Year 1988
Paid-up Capital (MN) 201.83 Market Category A
Face/Par Value 10.0 Market Lot 1
Total No. of Share 20182500 Sector Pharmaceuticals & Chemicals
SHARE HOLDING PERCENTAGES
Sponsor/ Director 48.72%
Government 0.00%
Institute 14.48%
Foreign 0.00%
Public 36.80%
YEAR
DIVI DIVI
ROA
EAT P/E DEN DEND EPS NAV
BETA
P/B ROE
D STOC
a
v
e
r
a
g
e
K
CAS
H
2013 1246000000 0 25% 14.33 19.99
Yea
rs
2014 2092000000 37.41 0 25% 10.56 23.35
2016 4062139715 36.37 10 20% 9.79 34.25
.98
5
10.09 33.48 8.05%
2017 5192790974 39.87 15 15% 10.47 39.53
2018 5265000000 40.10 10 20% 11.02 51.93 %
2019 530110000 37.10 20 20% 10.37 52.42

Recommendation
After analyzing the fundamental factors, If we look at the Kohinoor pharmaceuticals and chemicals
Ltd. We find that the company provides cash dividend and stock dividend that is continuously
increasing year to year.

The revenues of Kohinoor Company are growing continuously year to year such as from 2013 to
2019, which is a good sign of a company.



EPS are increasing in upward trend year to year from 2015 to 2019.


NAV are also increasing year to year such as from 2013 to 2018.


Beta of Kohinoor pharmaceuticals Ltd is .98

5 years average P/B Ratio is 10.09. It indicates that the investor is willing to pay TK 10.09
against TK 1 value of the company.

5 years average ROE Ratio is 33.48% . It indicates that the company has earned TK. 33.48%
revenues against equity.

5 years average ROA Ratio is 8.05%. It indicates that the company has earned 8.05%
revenues against Assets.


At long last, it is clearly recommended that the investor without any doubt can buy that share.
Because, most of all factors support to the investor to buy that share.
Renata Limited
Trading Code : RENATA Scrip Code : 18457
Renata Limited (formerly Pfizer Limited) is one of the leading and fastest growing
pharmaceutical and animal health product companies in Bangladesh. The company started
its operations in 1972 as Pfizer (Bangladesh) Limited. In 1993, Pfizer transferred the
ownership of its Bangladesh operations to local shareholders and the name of the company
was changed to Renata Limited.
Basic Information
Face/Par Value 10.0 Market Lot 1
Total No. of Share 97448166 Sector Pharmaceuticals & Chemicals

Government 0.00%
Institute 19.02%
Foreign 22.74%
Public 7.06%
YEAR
DIVI DIVID
BE
TA
D STOCK
EAT P/E DEN END EPS NAV ROE Current
CASH
Ratio
2013 n/a 17.12 75 25 39.57 178.32 n/a n/a
2014 2006641 19.23 80 20 38.24 181.04 20.84% 1.15 (‟15)
(„15)
2016 2612142 21.78 85 15 54.43 179.66
.45
20.94% 1.75
2017 3196951 31.02 130 15 38.24 184.82 21.13% 2.22
2018 3823362 29.23 95 15 44.35 221.45 20.19% 2.67
2019 4129596 25.70 100 10 46.63 192.56 19.17% 2.53
Recommendation
After analyzing the fundamental factors, If we look at the Renata pharmaceuticals and chemicals
Ltd. We find that the company provides cash dividend and are continuously increasing year to year
and also provided stock dividend.

The revenues of Renata Limited are growing continuously year to year such as from 2014 to 2019,
which is a good sign of the company.







Beta of Renata Limited is .45 that is lower than average market risk.


5 years ROE Ratio are in consistently positive pattern that indicate the ability of the company to
generate positive rate of return.



5 years Current Ratio is increased in progressive trend that indicates the ability of the company to
cover the short term obligations with the current assets. e.g. company has enough more liquid

assets. 


Delta Brac Housing Finance Corp. Limited
Trading Code : DBH Scrip Code : 20621
Delta Brac Housing Finance Corporation Ltd. (DBH) is the pioneer, largest and specialist
Housing Finance Institution in the private sector of the country. After commencing operation
in 1996 the company has registered commendable growth in creating home ownership in
Dhaka and other major cities of the country. At the same time, the company has been playing
an active role in promoting the real estate sector to the large cross sections of prospective
clients who had but yet unfulfilled dream of owning a home.
Basic Information
Authorized Capital (MN) 2000 Listing Year 2008
Face/Par Value 10 Market Lot 1
Total No. of Share 154142581 Sector Financial Institutions
Government 0.00%
Institute 13.07%
Foreign 21.94%
Public 13.67%
YEAR
DIVI DIVID
BETA
D STOCK per
EAT P/E DEN END EPS NAV ROE BV
CASH share
2013 607.34 11.31 25 - 4.47 21.08 - -
2014 685.25 12.04 25 - 5.15 23.92 - -
2016 330.80 16.54 30 5 6.45 29.62
.96
- -
2017 949 17.46 30 - 7.79 35.76 18.38% 29.47
2018 1048 16.55 25 10 8.6 37.60 23.88% 35.76
22.30% 41.36
2019 1077 14.23 20 15 8.04 43.36 19.85% 43.36

Recommendation
After analyzing the fundamental factors, If we look at the Delta Brac Housing Ltd. We find that the
company provides cash dividend and stock dividend that are consistent year to year which are good
sign for the investor to invest the surplus fund .

The revenues of Delta Brac Housing are growing continuously year to year such as from 2013 to 2019,
which is a good sign of a company.







Beta of Delta Brac Housing Ltd is .96 that is lower than average market risk.


5 years ROE Ratio are in consistent pattern that indicate the ability of the company to generate
positive rate of return.


5 years BV per share is increased in progressive pattern that indicates the Strength of the company

to create the own value.


Brac Bank Limited
Trading Code : BRACBANK Scrip Code : 11138
BRAC Bank was founded on 4 July 2001 to reach the large number of unbanked people
which were not covered by traditional bank. The main concept of the bank was to facilitate
Small and Medium Enterprises (SME).
Basic Information
Paid-up Capital (MN) Market Category A
13258.80
Total No. of Share 1325878476 Sector Bank
Government 0.00%
Institute 10.08%
Foreign 37.04%
Public 8.59%

YEAR
DIVID DIVIDEN
BETA
EAT P/E END D EPS NAV ROE TC/R ROA
(MN) CASH STOCK WA
2013 12460 11.20 10 10 2.91 26.71 - - -
2014 2092 11.88 25 - 3.13 27.19 11.46% 12.29% 1.02%
2016 4046 14.09 10 20 4.55 26.06
1.12
18.33% 12.06% 1.05%
2017 5498 17.85 25 25 4.84 24.80 21.30% 11.97% 1.83%
2018 5670 15.81 15 15 5.17 28.58 17.94% 15.70% 1.66%
2019 4583 14.22 7.5 7.5 4.01 32.90 13.06% 16.16% 1.28%
Recommendation
After analyzing the fundamental factors, If we look at the BRAC Bank Ltd. We find that the
company provides cash dividend and stock dividend that are consistent year to year which are good
sign for the investor to invest the surplus fund .

The revenues of BRAC Bank are growing continuously year to year such as from 2013 to 2019, which
is a good sign of a company.







Beta of BRAC Bank Ltd is 1.12 that that indicates stock price moves in the same direction, but moves
quickly than market.



5 years ROE Ratio are in consistent pattern that indicate the ability of the company to generate
positive rate of return.

5 years average ROA Ratio is 1.37% It indicates that the company has earned 1.37% revenues

against Assets. but, it should increase that performance through following economic of scale and
economic of scope policies.



Square pharmaceutical Ltd.
Trading Code : SQUAREPARMA Scrip Code : 18473
Square Pharmaceuticals Limited, the flagship company of Square Group, is holding the strong leadership
position in the pharmaceutical industry of Bangladesh since 1985 and is now on its way to becoming a
high performance global player.
Basic Information
Authorized Capital (MN) 10000 Listing Year 1995
Total No. of Share 886451011 Sector Pharmaceutical & Chemicals
Government 0.00%
Institute 12.38%
Foreign 16.89%
Public 36.16%
YEAR
DIVIDE DIVID
BETA
EAT P/E ND END EPS NAV
CASH STOCK
2016 7792498 15.47 40 10% 13.41 65.04
2017 5219526 18.71 35 7.5% 15.51 71.47
.92
2018 10562864 18.64 36 7% 15.72 78.41
2019 12955974 16.49 42 7% 16.03 86.03
Recommendation
After analyzing the fundamental factors, If we look at the Square pharmaceuticals and chemicals Ltd.
We find that the company provides cash dividend are Square continuously increasing year to year and
stock dividend are also provided to the shareholders.

The revenues of Square parma. are growing continuously year to year such as from 2016 to 2019,
which is a good sign of the company.






Beta of Square pharmaceuticals Ltd is .92 which is lower than market Beta that are favorable.


At long last, it is clearly recommended that the investor without any doubt, can buy that share.
Fine Foods Limited
Trading Code: FINEFOODS Scrip Code : 14292
Fine Foods Limited started as a Public Limited Company (Agro based) in 2002 aiming to
contribute to the local development through meeting the nutrition demand. It started its business
activity by a Fish project in the village Mondolvog of Manikkhali UP Chandpur under PS Katiadi,
District: Kishoregonj. Alongside its abundant production of common water fish and fingerling in
the said project it gradually bloomed through production and marketing of fish feed, greens, cow,
milk and trees of different species. Fine Foods Limited now has launched another fish project by
purchasing lands in village Machera of Chandpur Union under PS Tarakanda, District: Mymensing.
Basic Information
Paid-up Capital (MN) 139.74 Market Category B
Total No. of Share 13973920 Sector Food & Allied
Government 0.00%
Institute 17.93%
Foreign 0.00%
Public 75.69%
MA MA20 MA50 MA100 MA200
50.46 40.42 26.70 22.02
Buy Buy Buy Buy
Figure: Yearly closing price graph

Last Trading RSI MACD Outstanding Shares 52 Week‟s Moving Range AGM Date
Price
52.80 41.52 6.80 13973920 37.80 - 101.20 26-12-2020
YEAR 2013 2014 2015 2016 2017 2018 2019
EAT 1246 2092 2339 4062 5192 5265 5293
NAV 10.63 9.94 9.79 10.40 10.83 10.91 10.83
Recommendation

The revenues of FINEFOODS are growing continuously year to year such as from 2013 to 2019.



NAV are also increasing in upward trend such as from 2013 to 2019.



RSI is 41.52, This oscillator indicates that the security can be bought because it is staying long time in bull
market.


52 weeks moving average are 37.80 -101.20 which indicates the higher fluctuation of share price. So, there
is a equal chance to make the profit/ loss in the market.



Moving average refers to the positive sign which indicates that the securities can be
bought.

At long last, it is clearly visualized that the investor can buy that share. Because, here most of
all factors support to the investor to buy that share.

Based on Fundamental and Technical Analysis Expected earnings are as
follows:
Expected Profit = Expected Selling price – Total investment
(13,15,048- 10,00,000) = 3,15,048 Taka
In Tk
Serial Name Of Purchasi Number Of Total Expected Future Value
Nb. The Share ng Price The Share Investment Selling Price With Inflation
1 KOHINOOR 472.80 529 250000 672*529 = 250000*(1+.06)^5
355488 = 334556
2 RENATA 1160 172 200000 1460*172 = 200000*(1+.06)^5
251120 = 267645
3 SQUAREPA 202.60 494 100000 270*493 = 100000*(1+.06)^5
RMA 133110 = 130236
4 DBH 92.60 1620 150000 120*1620 = 150000*(1+.06)^3
194400 = 178652
5 BRACBANK 39.30 3816 150000 50*3816 = 150000*(1+.06)^3
190800 = 178652
6 FINEFOODS 90 1112 100000 115*1112 = 150000*(1+.06)
127880 = 106000
7 TREASURY 50000 50000*(1+.04 50000*(1+.06)^5
BOND 48)^5 = 62250 = 66911
TOTAL 10,00,000 13,15,048 12,62,652
Based on Fundamental and Technical Analysis, Expected earnings Vs real
market earnings:
In TK
Serial Name Of Purchasing Number Of Total Expected Real
Nb. The Share Price The Share Investment Selling Price Earnings
1 KOHINOOR 472.80 529 250000 355488 279*529 =
147591
2 RENATA 1160 172 200000 251120 904*172 =
155488
3 SQUAREPA 202.60 494 100000 133110 218*494 =
RMA 107692
4 DBH 92.60 1620 150000 194400 110*1620 =
178200
5 BRACBANK 39.30 3816 150000 190800 52*3816 =
198432
6 FINEFOODS 90 1112 100000 127880 82*1112 =
91840
TREASURY 50000 62250 -
BOND
TOTAL 10,00,000 13,15,048 7,87,403

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