Technical analysis has been used by traders, analysts, and investors for centuries and has achieved broad acceptance among regulators and the academic community—particularly with regard to its behavioral finance aspects. This reading gives a brief overview of the field, compares technical analysis with other schools of analysis, and describes some of the main tools used in technical analysis. Although technical analysis follows predefined rules and principles, the interpretation of results is generally subjective. That is, although certain aspects, such as the calculation of indicators, follow specific rules, the interpretation of findings is often based on a melding of techniques that suit the style and approach of the individual analyst. In this respect, technical analysis is similar to fundamental analysis, which has specific rules for calculating ratios, for example, but introduces increased subjectivity in the evaluation phase.

1. “Technical Analysis”
Chandrayani N.Rokde

2. Introduction to Technical Analysis
• Basics & Definitions
• Stock charts & chart types
• Major Chart Patterns
• Trends / Channels
• Support & Resistance
• Indicators

3. WHAT IS TECHNICAL ANALYSIS
• Technical Analysis is a method of forecasting
future prices of securities based on
information available to us in hand.
• Studying stock price graphs and a few
momentum oscillators.
• They are looking for trends and patterns in data that
indicate future price movements.
• Do not include Balance Sheets, P&L
Accounts (fundamental analysis)
• The assumption being that the markets are efficient
and all possible price sensitive information is built
into the price graph of a security / index.
• Exclusive use of historical data.

4. BASIC ASSUMPTIONS
1.Market discounts for everything: Technical
analysis makes the assumption that everything that has or
affects the company will be reflected in the price of the
share at any given time.
2.Price moves in a trend: Another assumption of
technical analysis is that the future price is likely to move
in a trend that has been established rather than move
against it.
3.History tends to repeat itself: Technical analysis
assumes that price patterns of shares tend to be repetitive
which can be used to generate buy or sell signals.

5. CHARTING : THE BASIC TOOL
• Chartist use bar charts,candlestick,or point and figure
chart to look for patterns which may indicate future
price movements.
• Trend used to forecast future behaviour.
The technical analysis time frames shown on charts
range from one-minute to monthly, or even yearly,
time spans. Popular time frames that technical
analysts most frequently examine include:
5-minute chart
15-minute chart
Hourly chart
4-hour chart
Daily chart

6. LINE CHART
• Line chart represents any variable over a set period of
time.
• The line is formed by connecting value of represented
variable over the time frame.
• Line charts do not provide visual information of the
trading range for the individual points such as the high,
low and opening prices and closing price.
• They depict any variable like volume of a security, index
number, price etc .

7. Example for Line chart

8. POINT AND FIGURE CHART
• The point and figure chart is not well known or used by the
average investor but it has had a long history of use
dating back to the first technical traders.
• This type of chart reflects price movements and is not as
concerned about time and volume in the formulation of the
points.
• In order to prepare this type of graph ,the analyst has to
decide as to what is a significant price change .
• It uses a chart with "X"s and "O"s for predicting financial
asset prices. The "X"s are used to indicate rising prices
and "O"s to indicate falling prices

9. Example for Point and Figure chart

10. CANDLESTICK CHART
• Similar to the bar chart, the candlestick also has a thin vertical
line showing the period's trading range.
• Candlesticks rely heavily on the use of colors to explain what
has happened during the trading period. There are two color
constructs for days up and one for days that the price falls.
• When the price of the stock is up and closes above the opening
trade, the candlestick will usually be white or clear. If the stock
has traded down for the period, then the candlestick will usually
be red or black.
• If the stock's price has closed above the previous day's close but
below the day's open, the candlestick will be black or filled with
the color that is used to indicate an up day.

11. Candlestick Charts

12. T H I S I S J A P A N E S E
C A N D L E S T I C K ( O P E N , H I G H , L O W , C L O S E ) C H A R T O F
S B I F R O M E A R L Y A U G T O D E C 2 0 2 2
Example for Candlestick chart

13. Candlestick Patterns
 Candlestick Charts is with multiple candlesticks forming reversal and continuation
patterns.
• Bullish Engulfing Pattern
• Bearish Engulfing Pattern
• Dark Cloud Cover
• Doji
• Dragonfly Doji
• Gravestone Doji
• Evening Star
• Morning Star
• Hammer
• Hanging Man
• Harami
• Inverted Hammer
• Piercing Line Pattern
• Shooting Star

14. Types of Candlesticks
DOJI
 A doji candlestick is a neutral indicator that provides
little information.
 Dojis are formed when the price of a currency pair
opens and closes at virtually the same level within
the timeframe of the chart on which the Doji occurs
 They are rare, so they are not reliable for spotting
things like price reversals.
 Doji formations come in three major types:
gravestone, long-legged, and dragonfly.

15. Patterns in DOJI

16. Doji Example

17. Basic Technical Tools
 Trend Lines
 Moving Averages
 Price Patterns
 Indicators

18. Trend Lines
➢ There are three basic kinds of trends:
• An Up trend where price are generally increasing.
• A Down trend where price are generally decreasing.
• A Trading Range

19. SUPPORT AND RESISTANCE LEVELS
•Technical analysts use support and resistance levels to
identify price points on a chart where the probabilities favor a
pause or reversal of a prevailing trend.
•Support occurs where a downtrend is expected to pause due
to a concentration of demand.
•Resistance occurs where an uptrend is expected to pause
temporarily, due to a concentration of supply.
•Support and resistance areas can be identified on charts
using trendlines and moving averages.

20. AMZN Example of Supports
AMZN retraces from a
monstrous rally to
$60
AMZN stops tanking at
$60. NOT A
COINCIDENCE.

22. SELL IF SUPPORT “BREAKS
DOWN”, BECAUSE IT SIGNIFIES
THAT BUYERS NO LONGER
OVERPOWER SELLERS.
BREAKDOWNS ARE A BEARISH
SELL SIGNAL.
Support Breakdowns
You should have sold here,
at the BREAK DOWN.

23. Simple Moving Average
➢ Moving averages are used to
identify current trends and trend
reversals as well as to set up
support and resistance levels.
➢ Moving averages can be used to
quickly identify whether a stock is
moving in an uptrend or a
downtrend depending on the
direction of the moving average.
➢ when a moving average is heading
upward and the price is above it,
the stock is in uptrend. Conversely,
a downward sloping moving
average with the price below can
be used to signal a downtrend.

24. Price Patterns
 Technicians look for many patterns in the historical time
series of prices.
 These pattern are reputed to provide information regarding
the size and timing of subsequent price moves.

25. HEAD AND SHOULDER
• The head-and-shoulders top signals to chart users that a security's price is likely
to make a downward move, especially after it breaks below the neckline of the
pattern.
• Due to this pattern forming mostly at the peaks of upward trends, it is
considered to be a trend-reversal pattern, as the security heads down after the
pattern's completion.
•

27. DOUBLE TOPS&BOTTOM
• A double bottom appears when a share hits a
low, comes higher, again pulls back.
• A double bottom appears at the end of a
bearish trend and indicates the start of the
bullish trend.It describe the drop of stock.

28. ROUNDING BOTTOM
• The Rounding Bottom is a long-term reversal pattern
that is best suited for weekly charts.
• It is also referred to as a saucer bottom, and
represents a long consolidation period that turns
from a bearish bias to a bullish bias.

29. THE CUP AND THE HANDLE
• The Cup with Handle is a bullish continuation pattern that
marks a consolidation period followed by a breakout.
• As its name implies, there are two parts to the pattern: the
cup and the handle.
• The cup forms after an advance and looks like a bowl
or rounding bottom.As the cup is completed, a trading
range develops on the right hand side and the
handle is formed.

30. TRIANGLES
• A triangle is formed when each succeeding peak is
lower than the previous peak
• Or each succeeding bottom is higher than the previous
bottom
• The series of peaks and bottoms are joined by a line
which converges and form a shape of triangle.

31. ASCENDING TRIANGLES: (BULLISH)

32. Technical Indicators
 Technical indicators used to generate buy and sell
signals.
 By analzing historical data,technical analyst use
indicators to predict future price moments.

33. RELATIVE STRENGTH INDEX
• Developed J. Welles wilder, the relative
strength index (RSI) is a momentum oscillator
that measures the speed and change of price
movements.
• RSI measures the speed and change of price
movements. It's intended to evaluate the
relative value of a stock, index, or other
investment—based on its recent price history.
• Rsi = 100 - 100/(1 + rs*)
Where RS = average of x days' up closes /
average of x days' down closes.

34. RELATIVE STRENGTH INDEX

35. RSI
 RSI is used primarily to determine whether an
investment is overbought or oversold. It is
calculated using the average gain and average loss over a
defined period of time
 In RSI above 70 indicates stock is overbought and a level
below 30 indicate oversold(it can range from 0 to 100)
 RSI can remain in overbought or oversold territory for an
extended period of time (weeks or even months).
.

36. Moving Average Convergance /Divergence
 The Moving Average Convergence/Divergence
indicator is a momentum oscillator primarily used to
trade trends.
 Although it is an oscillator, it is not typically used to
identify over bought or oversold conditions.
 It appears on the chart as two lines which oscillate
without boundaries.
 The crossover of the two lines give trading signals
similar to a two moving average system.

37. MACD
 MACD crossing above zero is considered bullish, while crossing below zero is
bearish. Secondly, when MACD turns up from below zero it is considered
bullish. When it turns down from above zero it is considered bearish.

38. • Daily pivot point indicators, which usually also
identify several support and resistance levels in
addition to the pivot point, are used by many
traders to identify price levels for entering or
closing out trades.
• Pivot point levels often mark significant support or
resistance levels or the levels where trading is
contained within a range.
Technical Indicators – Pivots and Fibonacci
Numbers

39. • Fibonacci levels are another popular technical
analysis tool. Fibonacci was a 12th-century
mathematician who developed a series of ratios that
is very popular with technical traders.
• The primary Fibonacci ratios are 0.24, 0.38, 0.62,
and 0.76. These are often expressed as percentages
– 23%, 38%, etc. Note that Fibonacci ratios
complement other Fibonacci ratios: 24% is the
opposite, or remainder, of 76%, and 38% is the
opposite, or remainder, of 62%.
Fibonacci Retracements

40. WEAKNESSES OF TECHNICAL ANALYSIS
 Experience careful identification and interpretation
of pattern requires a lot of experience.
 Everchanging Chart pattern.
 Market repeat the pattern but this patterns are
constantly changing making it difficult to make
money in the long term by using the same trade.

41. Conclusion
 Technical analysis is particular approach to investing
that will appeal to some investors not to others.
 Whereas most investors concentrate on FA of
company(turnover,profits,growth etc),TA are
concerned with the share price itself.
 They believe that prices are driven by psychology of
investors rather than Fundamentals.By
understanding investor psychology ,they can predict
which way price will move.