Technical analysis of stocks

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Technical analysis of stocks

  1. 1. THE FINAL REPORT ON TECHNICAL ANALYSIS OF SECURITIES By Kanika chauhan A report submitted in partial fulfillment of the requirements of MBA 1
  2. 2. TABLE OF CONTENTS 1)Acknowledgements…………………….…................3 2)List of illustration……………………………………4 3)Abstract…………………………………..………….5 4)Introduction………………………………………….6 5) Final report…………………………………………..8 a) Trading mantra……………..……………………8 b) Important points to be considered……………….12 c) Goal, style and strategy………...………………..15 d) How to use technical analysis….………………..17 e) Steps in technical analysis……...……………….17 f) Analysis of BSE index…………………….18 6) Reference…………………………………………79 2
  3. 3. ACKNOWLEDGEMENTS Success of a project is never a result of one man’s effort, it springs out of multiple or combined efforts, assistance and guidance. Now when I have acquired substantial knowledge about the subject and successfully accomplished the project I would like to thank, Mr. Anshuman Malik (company guide, Asst manager) for his cooperation, willingness to share his knowledge and making me work on such a crucial and informative project. I would also like to thank Mr. Amit Pathak (Faculty guide) for providing me an opportunity to work under his expert guidance and finally Icfai Business School for providing me such a corporate exposure to enhance my knowledge, skills and gain experience. I appreciate their faith, support and expect the same in future course of my project. 3
  4. 4. List of illustration Figure 1: weekly chart of WIPRO…………………………………………………..21 Figure 2: weekly chart of TCS LTD………………………………………………..23 Figure 3: weekly chart of TATA STEEL…………………………………………..25 Figure 4: weekly chart of TATA MOTORS………………………………………..27 Figure 5: weekly chart of STATE BANK OF INDIA…………………………..….29 Figure 6: weekly chart of SATYAM COMPUTERS…………………………....…31 Figure 7: weekly chart of RELIANCE ENERGY……………………………..…..33 Figure 8: weekly chart of RELIANCE LTD…………………………………..…...35 Figure 9: weekly chart of RANBAXY LABS………………………….....….……37 Figure 10: weekly chart of ONGC……………………………………………..…..39 Figure 11: weekly chart of MARUTI UDYOG……………………………….…...41 Figure 12: weekly chart of LARSON AND TOURBO…………………….………43 Figure 13: weekly chart of ITC…………………………………………………….45 Figure 14: weekly chart of INFOSYS……………………………….……………..47 Figure 15: weekly chart of ICICI………………………………….……………….49 Figure 16: weekly chart of HINDALCO……………………….……………….....51 Figure 17: weekly chart of HINDUSTAN LEVER……….……………………….53 Figure 18: weekly chart of HERO HONDA……………….………………………55 Figure 19: daily chart of HDFC BANK……………….…………………………...57 Figure 20: weekly chart of HDFC……………………..……………………….…..59 Figure 21: weekly chart of GUJARAT AMBUJA…..………………………….….61 Figure 22: weekly chart of GRASIM INDIA ……..……………………………....63 Figure 23: weekly chart of DR.REDDY’S ………..……………………………....65 Figure 24: weekly chart of CIPLA LTD………….………………………………..67 Figure 25: weekly chart of BHEL………………..………………………………...69 Figure 26: daily chart of BHARTI TELEVENURE………………………………..71 Figure 27: weekly chart of BAJAJ AUTO…….……………………………….…..73 Figure 28: weekly chart of ACC……………………………………………………75 Figure 29: weekly chart of MTNL………………………………………………….77 4
  5. 5. Abstract The project assigned to me is “Technical analysis of securities”. The report reflects the understanding that has been developed during the course of the project. Technical analysis is the process of analyzing a securities historical price in an effort to determine probable future prices. This is done by comparing current price action (i.e current expectation) with comparable historical price action to predict a reasonable outcome. The report involves good conceptualization of various aspects of technical analysis. Charting is the most important tool for technical analysis. This report shows various types of charts and the different price movements that can be reflected through these charts. A good analyst needs to keep a track of these price charts and decide the right time to buy and sell securities. In order to achieve accuracy in timing one’s buying and selling decision the analyst is required to identify various patterns and formations. The report includes a strategy that can be followed by stock market investors to gain lucrative return on their capital. These patterns alone are insignificant and can be misleading which can result in losses. These patterns should be confirmed by various market indicators and technical indicator of security. Some of the important technical indicators are covered in the report. Using all these patterns and indicators collectively will not increase the degree of accuracy and therefore it is very important for an analyst to develop his own set of patterns and indicators. The report involves the analysis of the scrips of BSE. The report involves the performance of these scrips in the given period and also the investing strategy that could have been followed. 5
  6. 6. INTRODUCTION The PROJECT PROPOSAL given to me for study is technical analysis of securities. Technical analysis is a method of predicting future prices of a share based on its past performance. Technical analysis is a specific tool to predict price movement of a share in near future. Technical analysis is necessary for any investor and specifically for those companies involved in equity trading like share khan. It is method of evaluating securities by analyzing statistics generated by market activity, such as past prices and volume. Technical analysts do not attempt to measure a security's intrinsic value, but instead use charts and other tools to identify patterns that can suggest future activity. Technical analysts believe that the historical performance of stocks and markets are indications of future performance. In a shopping mall, a fundamental analyst would go to each store, study the product that was being sold, and then decide whether to buy it or not. By contrast, a technical analyst would sit on a bench in the mall and watch people go into the stores. Disregarding the intrinsic value of the products in the store, his or her decision would be based on the patterns or activity of people going into each store. Sharekhan takes the responsibility to provide their existing and potential clients with good, profitable investment propositions. The technical analysis acts as the backbone of Sharekhan’s emerging success. It is the primary responsibility for such companies to advice their customer on investment to be made which can be done through technical analysis of securities. Companies like share khan has a big client base who may ask for a explanation on the techniques do they follow while recommending share technical analysis is one of them, hence a project on technical analyses will not only help share khan marketing executive to market their product and could also clients if a written explanation is given to them about technical analysis in brochures issued by share khan like first step kit. 6
  7. 7. The need for technical analysis occurs when it is tried to convince customers who are not interested in investing or who are not believers of share market such persons can be explained about technical analysis and they can be taught evaluation by themselves so that they feel free in investing. A complete explanation could be given about technical analysis in its brochure so that potential clients can understand it and they might get converted in regular and loyal clients of the company .this could be a mutual benefit position for both the company and client both and work out to be a long working relationship . 7
  8. 8. THE FINAL REPORT THE TRADING MANTRA HOW MUCH CAPITAL DOES ONE NEED: This is a very common question that one receives quite often. By the same token, it's also somewhat difficult to answer. How much does one really need in order to start day trading? How big a "stake" (a term used to refer to one’s starting capital) is required to get going? REDUCING RISK AND PROTECTING CAPITAL: Reducing risk to one’s money and protecting one’s trading capital must come before making money in the stock market; it must always be put first in one’s mind when trading. Always consider the risk to reward ratio of any trade one plan to take up. What is the risk? What is the reward? Keep that ratio in one’s favor and one will be well on one’s way to making a good start in the trade and protecting one’s trading capital. Make a profit, but never at the expense of taking silly risks. GET ONER FINANCIAL HOUSE IN ORDER FIRST: Generally speaking, unless one has tremendous earning power, one should have very little debt and a stable housing situation before using much capital in the markets for trading. KNOW ONE’S LIMITATIONS: one must assess his/her shortcomings whether in terms of financial constraint, risk taking ability, stock knowledge etc and trade accordingly. HAVE A COMPLETE PLAN BEFORE ENTERING ANY TRADE: Before one even place a trade, one must - have a plan of action for how one is going to handle the trade. What price one is going to pay, what price one is going to sell at, how many shares one will buy, what price one will cut one’s losses at, etc. This is critical. One must have a strategy to handle not only the upside, but also the down side. 8
  9. 9. DIVERSIFICATION: Diversification, even in trading, is very important for risk reduction. Since one isn’t going to be correct in every trade one make, diversification is necessary and important as a means to risk reduction and capital preservation. The simple fact is this: if one put all one’s trading capital in one or a very limited number of stocks, one is just asking for trouble and increasing the risk one is exposing one’s money to. At some point, if one trade long enough, one will undergo owning a stock that drops like a rock for one reason or another. Most people who have traded for any length of time have been there and it's no fun at all. Avoiding putting all of one’s eggs in one basket is the first step in limiting risk when it comes to both investing and trading. AVOID INVESTING TOO MUCH IN A POSITION: The smart trader takes up no position in such large quantities that it makes him overly nervous or subjects him to loss of sleep. Trade at levels which one can afford and one will generally feel much more comfortable in one’s trading. This will generally result in much clearer thinking and smarter decisions on one’s part. Too much risk will result in too much fear and that will cloud one’s thinking and judgment. TRADE STOCKS ONE KNOWS: Part of being confident about a position one take up relates to having some understanding of the company behind the stock. Clearly it is impossible to know every little detail about the day to day operation of every business one buy stock in. However, it does help if one has a basic understanding of the type of business they are in and how news (positive or negative) may relate to and/or impact a company and their stock. This will not only help one feel more comfortable about the position one take up, but it will allow one to more quickly evaluate news which may be released regarding the company. Trade stocks one know or that are in areas one may have experience in TRADE POPULAR/LIQUID STOCKS: Stocks that are "popular" with the public and investment community have a very real benefit to one’s trading - specifically, they tend to be very liquid. Liquidity is a measure of how much volume changes hands on a specific stock (typically on a daily basis). The more liquid the stock is (i.e. the more shares it trades), the more likely one will get a fair price when buying or selling the stock. 9
  10. 10. TRADE STOCKS THAT ARE MAKING MONEY: The stock market is based largely on economics and business (with some emotion and perception thrown in). As a result, I personally feel it's a good idea to trade stocks on companies which are currently showing a profit, as opposed to companies which "might show a profit someday". Generally speaking, stocks which are currently showing a profit or are very close and very likely to show a profit in the near term, trade better and are somewhat less risky than stocks which are either in the red or struggling to show profits on their financial statements. Part of this is because valuations are much easier to calculate from real earnings (i.e. using the company's P/E ratio) than trying to base valuations on "what might happen" down the road. GOLD, OIL, PRECIOUS METAL STOCKS, ETC: Some people really enjoy owning Gold stocks or stocks related to oil drilling or diamond mining. I personally do not. Stocks of these types lack some of the inflation fighting components that traditional businesses provide. As a general rule of thumb, if the stock doesn't produce a product or provide a service, then it's generally best to limit one’s trading in them, at least in my opinion. Stick to companies that produce a product or provide a service and one never have to worry about hitting a "dry hole" or a sudden drop in the price of Gold or Silver. DON'T CHASE STOCKS: Stocks go up because people (usually large numbers of people) are buying the stock. As a trader, this is usually not a good time to also be buying. As such, be very cautious about buying stocks that are rapidly moving away from one. The true money in stocks is made by buying stocks prior to a sudden move, not during a sudden move. The one possible exception to this may be if there is some very positive news that has caught the markets off guard and/or if the news is so outstanding that there is a high probability that the stock may benefit for multiple days. Keep in mind, however, that a sudden move in a stock is often quite different than a change in the overall trend. Sudden moves tend to reverse and if one get into the habit of chasing stocks that are moving up, more times than not one will end up paying overly high prices and/or getting caught in a downward move shortly thereafter. Again, generally people that buy late are buying on pure emotion (greed and fear). Those are the two worst reasons to buy anything - not just stocks. True one may miss out on the stock, however, in most all cases, it's better to wait and find another stock, than to pay too much. 10
  11. 11. Patience in the stock market is very important; usually one will do better by avoiding the temptation to "jump" when that impulse is largely a result of a move in the share price alone. DON'T GET GREEDY: Two of the biggest emotions a trader has to over come are fear and greed. Many traders fall victim to greed once they see a trade become profitable - simply by not having a firm exit point in mind. It's generally best to decide at what levels one wish to sell prior to entering into a trade to avoid this. If one feel oneself trying to justify higher levels from the stock and/or ignoring the current profit "as though it were nothing" one probably need to stop and consider not only the value of one’s profit, but the current risk to it by holding longer. CONTRARIAN THINKING: Often time’s crowds (such as the markets) are wrong in their actions and over react to the up or down side. When the "markets" as a whole are moving up dramatically or down dramatically, there is a strong case to be made that these actions ultimately will be wrong or will tend to reverse simply as the contrary views of things builds on each side of the fence. If one can train oneself to go against one’s natural emotions, one will tend to be able to keep a clearer outlook on the markets. When stocks are being bought, one have to train oneself to think "These stocks are buying bid up too high - maybe I should sit back and wait". By the same token, when there is a great deal of panic selling in the market, one need to train oneself to think "Wow, look at all these prices falling - I may find good deals here soon". STOPS: Some people use stop orders quite often; some people hardly use them at all. In my view, stops are best used to protect a nice profit and/or limit down side risk in a trade that isn't acting as one think it should. How a stop is used (or placed) is largely dependant on the individual stock and how the overall market is behaving at any given time as well. Often times using stops also helps to remove some of the emotions from trading. It's far easier to place a stop on a trade than watch it trade tick-by-tick and try to decide the exact moment to get out. 11
  12. 12. Important points to be considered while investing in stocks 1. The first and most important rule is - in bull markets, one is supposed to be long. This may sound obvious, but how many of us have sold the first rally in every bull market, saying that the market has moved too far, too fast. I have before, and I suspect I'll do it again at some point in the future. Thus, we've not enjoyed the profits that should have accrued to us for our initial bullish outlook, but have actually lost money while being short. In a bull market, one can only be long or on the sidelines. Remember, not having a position is a position. 2. Buy that which is showing strength - sell that which is showing weakness. The public continues to buy when prices have fallen. The professional buys because prices have rallied. This difference may not sound logical, but buying strength works. The rule of survival is not to "buy low, sell high", but to "buy higher and sell higher". Furthermore, when comparing various stocks within a group, buy only the strongest and sell the weakest. 3. When putting on a trade, enter it as if it has the potential to be the biggest trade of the year. Don't enter a trade until it has been well thought out, a campaign has been devised for adding to the trade, and contingency plans set for exiting the trade. 4. On minor corrections against the major trend, add to trades. In bull markets, add to the trade on minor corrections back into support levels. In bear markets, add on corrections into resistance. Use the 33-50% corrections level of the previous movement or the proper moving average as a first point in which to add. 5. Be patient. If a trade is missed, wait for a correction to occur before putting the trade on. 6. Be patient. Once a trade is put on, allow it time to develop and give it time to create the profits one expected. 7. Be patient. The old adage that "one never goes broke taking a profit" is maybe the most worthless piece of advice ever given. Taking small profits is the surest way to ultimate loss I can think of for small profits are never allowed to develop into enormous profits. The real money in trading is made from the one, two or three large trades that develop each year. One must develop the ability to patiently stay with winning trades to allow them to develop into that sort of trade. 8. Be patient. Once a trade is put on, give it time to work; give it time to insulate itself from random noise; give it time for others to see the merit of what one saw earlier than they. 12
  13. 13. 9. Be impatient. As always, small loses and quick losses are the best losses. It is not the loss of money that is important. Rather, it is the mental capital that is used up when one sit with a losing trade that is important. 10. Never, ever under any condition, add to a losing trade, or "average" into a position. If one is buying, then each new buy price must be higher than the previous buy price. If one is selling, then each new selling price must be lower. This rule is to be adhered to without question. 11. Do more of what is working for one, and less of what's not. Each day, look at the various positions one are holding, and try to add to the trade that has the most profit while subtracting from that trade that is either unprofitable or is showing the smallest profit. This is the basis of the old adage, "let one’s profits run." 12. Don't trade until the technical and the fundamentals both agree. This rule makes pure technicians cringe. I don't care! I will not trade until I am sure that the simple technical rules I follow, and my fundamental analysis, are running in tandem. Then I can act with authority, and with certainty, and patiently sit tight. 13. When sharp losses in equity are experienced, take time off. Close all trades and stop trading for several days. The mind can play games with itself following sharp, quick losses. The urge "to get the money back" is extreme, and should not be given in to. 14. When trading well, trade somewhat larger. We all experience those incredible periods of time when all of our trades are profitable. When that happens, trade aggressively and trade larger. We must make our proverbial "hay" when the sun does shine. 15. When adding to a trade, add only 1/4 to 1/2 as much as currently held. That is, if one is holding 400 shares of a stock, at the next point at which to add, add no more than 100 or 200 shares. That moves the average price of one’s holdings less than half of the distance moved, thus allowing one to sit through 50% corrections without touching one’s average price. 16. Think like a guerrilla warrior. We wish to fight on the side of the market that is winning, not wasting our time and capital on futile efforts to gain fame by buying the lows or selling the highs of some market movement. Our duty is to earn profits by fighting alongside the winning forces. If neither side is winning, then we don't need to fight at all. 17. Markets form their tops in violence; markets form their lows in quiet conditions. 13
  14. 14. 18. The final 10% of the time of a bull run will usually encompass 50% or more of the price movement. Thus, the first 50% of the price movement will take 90% of the time and will require the most backing and filling and will be far more difficult to trade than the last 50%. There is no "genius" in these rules. They are common sense and nothing else but "Common sense is uncommon." Trading is a common-sense business. When we trade contrary to common sense, we will lose, not always but enormously and eventually. Trade simply. Avoid complex methodologies concerning obscure technical systems and trade according to the major trends only. . 14
  15. 15. GOAL, STYLE AND STRATEGY: THE TRISOME Before investing or trading, it is important to develop a strategy or game plan that is consistent with one’s goals and style. The ultimate goal is to make money (win), but there are many different methods to go about it. As with many aspects of trading, many sports offer a good analogy. A football team with goals geared towards ball control and low-scoring games might adapt a conservative style that focuses on the run. Teams that want to score often and score quickly are more likely to pursue an aggressive style geared towards passing. Teams are usually aware of their goal and style before they develop a game plan. Investors and traders can also benefit by keeping in mind their goals and style when developing a strategy. GOAL First and foremost are goals. The first set of questions regarding goals should center on risk and return. One cannot consider return without weighing risk. It is akin to counting one’s chickens before they are hatched. Risk and return are highly correlated. The higher the potential return, the higher the potential risk. At one end of the spectrum are Treasury bonds, which offer the lowest risk (so-called risk free rate) and a guaranteed return. For stocks, the highest potential returns (and risk) center on growth industries with stock prices that exhibit high volatility and high price multiples (PE, Price/Sales, Price/Hope). The lowest potential returns (and risk) come from stocks in mature industries with stock prices that exhibit relatively low volatility and low price multiples. STYLE After one’s goals have been established, it is time to develop or choose a style that is consistent with achieving those goals. The expected return and desired risk will affect one’s trading or investing style. If one’s goal is income and safety, buying or selling at extreme levels (overbought/oversold) is an unlikely style. If one’s goals center on quick profits, high returns and high risk, then bottom picking strategies and gap trading may be one’s style. 15
  16. 16. Styles range from aggressive day traders looking to scalp 1/4-1/2 point gains to investors looking to capitalize on long-term macro economic trends. In between, there are a whole host of possible combinations including swing traders, position traders, aggressive growth investors, value investors and contrarians. Swing traders might look for 1-5 day trades, position traders for 1-8 week trades and value investors for 1-2 year trades. Not only will one’s style depend on his/her goals, but also on one’s level of commitment. Day traders are likely to pursue an aggressive style with high activity levels. The goals would be focused on quick trades, small profits and very tight stop-loss levels. Intraday charts would be used to provide timely entry and exit points. A high level of commitment, focus and energy would be required. On the other hand, position traders are likely to use daily end-of-day charts and pursue 1-8 week price movements. The goal would be focused on short to intermediate price movements and the level of commitment, while still substantial, would be less than a day trader. Make sure one’s level of commitment jibes with hi/her trading style. The more trading involved, the higher the level of commitment. STRATEGY Once the goals have been set and preferred style adopted, it is time to develop a strategy. This strategy would be based on one’s return/risk preferences, trading/investing style and commitment level. There are many potential trading and investing strategies complementing one’s trading style. My indicator arsenal would consist of two momentum indicators (RSI and Stochastic Oscillator) and one volume indicator (Accumulation/Distribution Line). 16
  17. 17. HOW TO USE TECHNICAL ANALYSIS 1) Identify the trend of the market 2) Measure the strength of the trend 3) Look for the low risk entry into that trend 4) Use Money Management to determine the size of any position 5) Use an appropriate stop loss 6) Keep following trend till market proves it has reversed 7) Keep out of the market when the market is not showing significant trend one way or the other STEPS IN ANALYSING First step is to understand whether market is trending or trading by using ADX (average directional indicator) and DI (directional indicator). ADX tells the strength of move that the market may be in. in other words ADX tells degree or strength of directional movement and not its direction. A) A high ADX value defines strong trend- either up or down. B) A low ADX shows consolidation or sideways movement. Such market are generally difficult to trade so try to have patience and stay away. ADX INTERPRETATION WHICH INDICATOR TO USE 1.) ADX less than 20 is interpreted as weak trend Use Oscillators( RSI or Stochastic) or consolidation 2.) ADX rising from 15 to 25 from lower levels Use trend following system like (moving average, means the trend is strengthening MACD, accumulation distribution.) 3.) ADX above 30 is interpreted is strong trend Use trend following system 4.) ADX at an extremely high level of 45 or above start booking profits if ADX makes top or flattens out is interpreted as a market in strong trend with a consolidation expected any time. 5.) ADX declining below 30 is interpreted as Use oscillators( RSI or Stochastic) or credit spread consolidation after a trending move and trade these consolidations. 17
  18. 18. Technical Analysis of Indian stock market BSE Sensex Index The BSE SENSEX is not only scientifically designed but also based on globally accepted construction and review methodology. First compiled in 1986, SENSEX is a basket of 30 constituent stocks representing a sample of large, liquid and representative companies. The base year of SENSEX is 1978-79 and the base value is 100. The index is widely reported in both domestic and international markets through print as well as electronic media. Technical Analysis of Indian stock market BSE Sensex Index The Index was initially calculated based on the "Full Market Capitalization" methodology but was shifted to the free-float methodology with effect from September 1, 2003. The "Free-float Market Capitalization" methodology of index construction is regarded as an industry best practice globally. All major index providers like MSCI, FTSE, STOXX, S&P and Dow Jones use the Free-float methodology. Due to is wide acceptance amongst the Indian investors; SENSEX is regarded to be the pulse of the Indian stock market. As the oldest index in the country, it provides the time series data over a fairly long period of time (From 1979 onwards). Small wonder, the SENSEX has over the years become one of the most prominent brands in the country. Objectives of SENSEX The SENSEX is the benchmark index of the Indian Capital Markets with wide acceptance among individual investors, institutional investors, foreign investors and fund managers. The objectives of the index are: 1) To measure market movements Given its long history and its wide acceptance, no other index matches the SENSEX in reflecting market movements and sentiments. SENSEX is widely used to describe the mood in the Indian Stock markets. 2) Benchmark for funds performance the inclusion of blue chip companies and the wide and balanced industry representation in the 18
  19. 19. SENSEX makes it the ideal benchmark for fund managers to compare the performance of their funds. 3) For index based derivative products Institutional investors, money managers and small investors all refer to the SENSEX for their specific purposes The SENSEX is in effect the proxy for the Indian stock markets. The country's first derivative product i.e. Index-Futures was launched on SENSEX. Beta of SENSEX scrip Beta measures the sensitivity of a scrip movement relative to movement in the benchmark index i.e. SENSEX. A Beta of one means that for every change of 1% in index, the scrip moves by 1%. Statistically Beta is defined as: Covariance (SENSEX, Stock)/ Variance(SENSEX) Note: Covariance and variance are calculated from the Daily Returns data of the SENSEX and SENSEX scrip. Beta value near or more than 1 means the scrip is high on volatility and beta value near 0 means the scrip is low on volatility. High volatility involves high risk but gives higher return and visa versa. 19
  20. 20. Beta, R2 ,Volatility and Returns of SENSEX scrips for one year period (April 2006 - March 2007) Free-float Avg. Weightage Co-efficient of Returns Adj. Beta Daily (%) in Code Name determination (1 Year) Factor as Values Volatility SENSEX as (R2) (%) on (%) on 30/03/07 30/03/07 500410 A.C.C. 1.03 0.48 2.61 -6.07 1.08 0.65 500490 BAJAJ AUTO 0.97 0.51 2.38 -11.70 2.07 0.70 532454 BHARTI TELEVENTURES 0.90 0.51 2.20 84.86 6.09 0.35 500103 BHEL 1.10 0.61 2.48 0.61 2.33 0.35 500087 CIPLA LTD. 0.81 0.43 2.18 -10.98 1.43 0.65 500124 DR.REDDY'S 0.71 0.31 2.25 2.44 1.10 0.75 500300 GRASIM IND. 1.16 0.54 2.75 1.62 1.73 0.75 500425 GUJARAT AMBUJA CEMENT 0.99 0.45 2.59 3.34 1.36 0.70 500010 HDFC 0.91 0.44 2.41 13.79 4.13 0.90 500180 HDFC BANK 0.86 0.43 2.30 22.74 2.89 0.80 500182 HERO HONDA 0.63 0.28 2.09 -22.87 0.82 0.50 500440 HINDALCO 1.18 0.51 2.91 -28.58 1.36 0.75 500696 HINDUSTAN LEVER 1.01 0.57 2.35 -24.62 2.73 0.50 532174 ICICI BANK 0.95 0.50 2.35 44.78 9.18 1.00 500209 INFOSYS TECHNOLOGIES 0.92 0.63 2.03 35.04 11.48 0.85 500875 ITC LTD. 0.96 0.58 2.22 -22.85 4.76 0.70 500510 LARSEN & TOUBRO 1.15 0.62 2.56 33.12 4.92 0.90 532500 MARUTI UDYOG 1.13 0.62 2.52 -6.25 1.14 0.40 532555 NATIONAL THERMAL POWER 0.71 0.38 2.02 11.75 2.23 0.15 500312 ONGC 0.84 0.45 2.19 0.54 4.52 0.20 500359 RANBAXY LAB. 0.79 0.35 2.34 -18.30 1.11 0.70 500325 RELIANCE 1.01 0.66 2.18 71.85 11.47 0.50 500390 RELIANCE ENERGY 0.90 0.45 2.37 -19.07 1.02 0.75 500376 SATYAM COMPUTER 1.09 0.56 2.56 10.72 3.54 0.95 500112 STATE BANK OF INDIA 0.91 0.50 2.28 2.57 2.83 0.45 532540 TATA CONSULTANCY 0.97 0.61 2.17 28.64 2.90 0.20 500570 TATA MOTORS 1.13 0.60 2.56 -21.97 2.02 0.60 532712 RELIANCE COMMUNICATIONS 1.29 0.50 3.20 35.97 3.62 0.35 500470 TATA STEEL 1.35 0.59 3.09 -16.18 2.20 0.70 507685 WIPRO LTD. 1.16 0.62 2.59 -0.04 1.94 0.20 SENSEX 1.00 1.75 15.89 Beta = Co-variance(SENSEX, Stock)/ Variance(SENSEX) R2 = (Correlation)2 Avg. Daily Volatility = One standard deviation of daily returns of individual stock price for last one year Returns = % variation in the stock price over last one year WIPRO LIMITED 20
  21. 21. Following is the weekly chart of WIPRO LTD starting from last week of June 2004 till 1st week of may 2007. The price has increased from Rupee value 364.85 to 567.25. in a time span of nearly three years price rise by rupee value 202.30, which is more than 50% of the initial price. The price has gone through various trends in this time span. The price was on a strong uptrend till the 3rd week of May 2006 and reached 549.56 but then gradually showed consolidation. The optimist traders in the good memories of previous high tried to achieve that price level and prices toll up again and made a new high in last weak of February 2007 at 624.24. The price then started to undergo correction but some good declaration of quarterly returns help to keep the interest of investors in the stock providing some support. During the uptrend I have used the trend following indicators like MACD, moving average 9 and 18 day and volume indicator i.e accumulation distribution. When the uptrend gained strength as reflected by ADX in the chart it is expected that the market should move higher. Maintain logical stops for buy positions. Any open short positions should be closed. The buying or investment positions are shown in the chart through MACD and accumulation and distribution indicator with upward arrow. After reaching peak the ADX reflected a weakening of trend the distribution became higher than accumulation showing the bearish move and the price consolidated i.e Sideways Market. After a downswing, the market underwent a rally. Such moves should be traded using overbought/oversold indicators. Thus I have used RSI and Stochastic oscillator. (1) This rally may be followed by another down move. One may consider selling below the 2 period low (2) . (2) This rally may be the beginning of an uptrend. One should consider buying above the 2nd period high .One should carefully examine chart patterns and other indicators before coming to a conclusion. At the price level 624.24 reached in February 2007 the stochastic signal overbought scrip indicating that uptrend may be coming to an end. A strong reaction is possible. Long positions should be closed if price trades below two Period low. 21
  22. 22. Figure 1: weekly chart of WIPRO LTD source: expert investor . This may also be an opportunity to go short, if chart patterns support a short sell. In the chart downward arrow indicates selling. In the near future the market should move higher therefore one must maintain logical stops for buy positions. Any open short positions should be closed. 22
  23. 23. TATA CONSULTANCY SERVICES LIMITED The following is the weekly chart of TCS LTD starting from last week of august 2004 till 1st week of may 2007. The price has increased from Rupee value 489.27 to 1273.5. In a time span of nearly three years price rise by rupee value 783.23, which is more than 150% of the initial price. The price has gone through various trends in this time span. The ADX indicate an initial weak trend involving sudden spurts of strong uptrend forcing price to rise gradually but then followed by timely correction till last weak of September. The sideways Market after spurts of upswing, the market underwent a reaction. Such moves should traded using overbought/oversold indicators. This reaction may be followed by another up move. One may consider buying above the 2 period high. Then from last weak of September the ADX started to indicate a strengthening of uptrend where price shoot up above 1300 mark. The market then moved higher. One should have kept stops wide enough to avoid getting shaken out of a false reaction. If possible, move stops to breakeven. This is not the time to consider short positions. After an upswing, the market is now undergoing a reaction. Such moves should traded using overbought/oversold indicators (1) This reaction may be followed by another up move. One may consider buying above the 2 period high. Buying is reflected through upward arrow and is signaled when accumulation becomes more than distribution reflecting bullishness. (2) This reaction may be the beginning of a downtrend. One should consider selling below the 2 period low. You should carefully examine chart patterns and other indicators before coming to a conclusion. 23
  24. 24. Figure 2: weekly chart of TCS source: expert investor 24
  25. 25. TATA STEEL The following is weekly chart of TATA STEEL starting from last week of January 2005 till 1st week of May 2007. The price has increased from Rupee value 383.41 to 554.63. In a time span of nearly two years price rise by rupee value 171.22, which is nearly 50% of the initial price. The price has gone through various trends in this time span. Beginning with a weakening trend as indicated by ADX there was a sideways movement for nearly a year, which ended in last week of February 2006 when a strong uptrend developed in first week of March 2006 as indicated by ADX the price took a huge toll and increased manifolds from 425 to 644 in almost two months time. The market reached a point where buy positions should be protected with close stops. The market can remain overbought for many days. Long positions should be closed if price trades below two period low. This may also be an opportunity to go short, if chart patterns support a short sell. After an upswing, the market underwent a reaction. Such moves should traded using overbought/ oversold indicators (1) This reaction may be followed by another up move. One may consider buying above the 2 period high. (2) This reaction may be the beginning of a downtrend. One should consider selling below the 2 period low. You should carefully examine chart patterns and other indicators before coming to a conclusion. Then the strong trend came to an end and weakened. The prices started to move sideways till first week of April 2006 and then from there it increase from 464.3 to 554.34 in a months time. Thus providing the investor’s and trader’s a great opportunity to make money. The ideal investor would have bought when the MACD crossed above its signal line and accumulation becomes more than distribution thus signifying a bullish force being in action. In the near future the market should move higher. Keep one’s stops wide enough to avoid getting shaken out of a false reaction. If possible, move stops to breakeven. This is not the time to consider short positions. The market is now reaching a point where buy positions should be protected with close stops. If there is a strong uptrend, the market can remain overbought for many days. Do not go short now. In the following chart the upward arrows signify the point where one should buy and downward show when to become short. 25
  26. 26. Figure 3: weekly chart of TATA STEEL source: expert investor 26
  27. 27. TATA MOTORS The following is the weekly chart of TATA MOTORS starting from last week of January 2005 till 1st week of may 2007. The price has increased from Rupee value 476.34 to 732.44. In a time span of nearly two years price rise by rupee value 256.10, which is more than 50% of the initial price. The price has gone through various trends in this time span. Since 2nd week of July 2005 the ADX indicate a strong trend. The market was expected to move higher. Logical stops should have been maintained for buy positions. Any open short positions should be closed. The right time to buy the stock would have been, as indicated in the chart with upward arrows, when the accumulation became greater than distribution giving a clear indication of strengthening of bullish forces. The MACD also gave indication to buy when MACD moved above its moving average. The trend started to weaken in 3rd week of May 2006 and price consolidated and the market moved lower. Logical stops should have been maintained for short positions. Any open long positions should have been closed. The prices started to move sideways. It is advisable to stay out of such market but in such a trading range stochastic oscillator and RSI can be useful to determine whether to go long or short. After a downswing, the market underwent a rally. Such moves should have been traded using overbought/oversold indicators. (1) This rally may be followed by another down move. You may consider selling below the 2 period low. (2) This rally may be the beginning of an uptrend. You should consider buying above the 2 period high. One should carefully examine chart patterns and other indicators before coming to a conclusion. 27
  28. 28. Figure 4: weekly chart of TATA MOTORS source: expert investor 28
  29. 29. STATE BANK OF INDIA The following is the weekly chart of STATE BANK OF INDIA starting from last week of Jan 2005 till 1st week of May 2007. The price has increased from Rupee value 583.41 to 1130.20. In a time span of nearly two years price rise by rupee value 546.79, which is nearly 100% of the initial price. The price has gone through various trends in this time span. With an initial sideways movement the price gained momentum and the trend strengthened as indicated by ADX. A strong uptrend was noticed. The market moved higher. An ideal investor would have kept stops wide enough to avoid getting shaken out of a false reaction. If possible, move stops to breakeven. This was not the time to consider short positions. The trend started to weaken during the later months of 2005 and the price moved sideways for nearly next eight months and then again in September 2006 the trend strengthened and prices started to move upward. But before the ADX indicated the strengthening of an uptrend the MACD and accumulation distribution indicated the activeness of bullish forces overshadowing the bears. A good investor would have bought the share at the price level, as reflected in the chart through upward arrows, where the MACD cuts above its moving average and the signal line and the accumulation becoming more than distribution. Within a short time span of four months starting from September 2006 the price tolled up from 980.2 to 1351.9, which means an increase of 371.7. Then in January 2007 the trend weakened and prices take correction. The MACD moved below its moving average and the distribution became more than accumulation indicating the end of bulls and bears coming in action. The market moved lower. An ideal investor would have kept logical stops for short positions. Any open long positions should have been closed. If somebody wanted to buy the share he must have waited till march where once again a buying position id signaled as the MACD move up its moving average as well as signal line, also the accumulation become more than distribution indicating bullishness in investor psychology. This might be because the investors still having the good memories of previous high. Thus it is expected that the price will still move higher and will take a top near the previous high and then will take correction as market is becoming overbought. 29
  30. 30. Figure 5: weekly chart of SBI source: expert investor 30
  31. 31. SATYAM COMPUTERS The following is the weekly chart of SATYAM COMPUTERS starting from last week of Jan 2005 till first week of may 2007. The price has moved from Rupee value 401.46 to 474.39. In a time span of nearly two years price rise by rupee value 63, which is nearly the same level. The price has gone through various trends in this time span. Though there has not been much growth in the share price but there were investment opportunities available. There was a strong initial uptrend starting from May 2005 as reflected by ADX. The prices tolled up till the 1st week of April 2006. Touched a high of 847.55 and then started to take correction. Uptrend came to an end. A strong reaction was possible. Long positions should have been closed if price trades below two period low. This may also had been an opportunity to go short, if chart patterns support a short sell. After some correction the price again moved up and reached the previous high. Then in second week of October 2006 some news broke out and the price fall created a huge gap. This gap was created due to some negative news resulting in excessive selling. The price then began to move sideways a weak trend is indicated by ADX but traders had opportunities to make money by using Stochastic and RSI indicating oversold and overbought market. The market should move lower now. An ideal investor should maintain logical stops for short positions. Any open long positions should be closed. 31
  32. 32. Figure 6: weekly chart of SATYAM COMPUTERS source: expert investor 32
  33. 33. RELIANCE ENERGY The following is the weekly chart of RELIANCE ENERGY starting from last week of Jan 2005 till 1st week of May 2007. The price has moved from Rupee value 519.51 to 517.32. In a time span of nearly two years price decreased by rupee value 2, which is nearly the same level. The share has not grown in these two years and had not been a good investment proposition. No long position had been kept. The price moved sideways till the end of May 2006 with a weak trend as indicated by ADX. Though it is advisable to stay out of such situation but depending on the risk bearing ability of the investor, there had been some buying positions reflected through upward arrows. Then before the 1st weak of June 2006 the downward arrow shows the selling signal Then in 1st weak of June a strong trend is reflected by ADX and the price trend downward. The market moved lower. Ideal investors would have kept their stops wide enough to avoid getting shaken out of a false reaction. If possible, moved stops to breakeven. This was not the time to consider long positions. After a minor upswing, the market is now undergoing a reaction. Such moves should traded using overbought/oversold indicators (1) This reaction may be followed by another up move. You may consider buying above the 2 period high. (2) This reaction may be the beginning of a downtrend. You should consider selling below the 2 period low. You should carefully examine chart patterns and other indicators before coming to a conclusion. 33
  34. 34. Figure 7: weekly chart of RELIANCE ENERGY source: expert investor 34
  35. 35. RELIANCE LIMITED The following is the weekly chart of RELIANCE LTD starting from last week of January 2005 till 1st week of may 2007. The price has increased from Rupee value 411.46 to 1579.2. In a time span of nearly two years price rise by rupee value 1168, which is 300% increase in the initial price. The price has gone through various trends in this time span. This blue chip company has been one of the best investment propositions in past two years. From the last week of June 2005 till the 2nd week of May 2006 the ADX reflects a strong trend. Then in June 2006 the trend started to weaken and price consolidated. The price moved sideways but gradually increased. In the year 2007 the prices have tolled up and prices reached its all lifetime high of 1651. 1st week of May 2007 the market seems to be reaching a point where buy positions should be protected with close stops. If there is a strong uptrend, the market can remain overbought for many days. Do not go short now. 35
  36. 36. Figure 8: weekly chart of RELIANCE LIMITED source: expert investor 36
  37. 37. RANBAXY LABS The following is the weekly chart of RANBAXY LABS starting from last week of Jan 2005 to 1st week May 2007. The price has increased from Rupee value 536.83 to 394.39. In a time span of nearly two years price decreased by rupee value 142. The price has gone through various trends in this time span. This blue chip company has not been a good investment proposition but there were few trading opportunities available. A weak trend prevailed till the 2nd week of October 2005 as indicated by ADX in the chart. Then in 3rd week of October 2005 the ADX reflect strengthening of trend. The prices move downward. The market moved lower. Ideal investor should have kept his/her stops wide enough to avoid getting shaken out of a false reaction. If possible, move stops to breakeven. This was not the time to consider long positions. The downward arrow in the chart signals selling when the distribution exceeds accumulation reflecting the bears being more active than the bulls. Then in Jan 2006 the trend weakened and prices gained momentum and started to increase. The price failed to break its resistance level. It tried to reach its previous high but falls short and the bearish forces made the price to move down. The price moved sideways making most of investor to stay away from investing into it. There were couple of trading opportunities available reflected in the chart indicated by Stochastic and RSI on the basis of oversold overbought indication. In May 2007 the market should move higher. Maintain logical stops for buy positions. Any open short positions should be closed. But since the stochastic indicates an overbought market therefore the price will revert back after certain period. 37
  38. 38. Figure9: weekly chart of RANBAXY LABS source: expert investor 38
  39. 39. OIL AND NATURAL GAS CORPORATION The following is the weekly chart of ONGC starting from 1st week of September 2004 till 1st week of may 2007. The price has increased from Rupee value 468.29 to 925.85. In a time span of nearly more than two years price rise by rupee value 457.56, which is nearly 100% increase in the initial price. The price has gone through various trends in this time span. This blue chip company has been a good investment propositions in past two years. Though the ADX indicate a weak trend but one can notice a gradual increase in price overtime. From the 2nd week of Dec 2005 till the 2nd week of May 2006 the ADX reflects a strong trend. It is in this period when it reaches its lifetime high of 1008.1. Then in June 2006 the trend started to weaken and price consolidated. The price moved sideways but gradually increased. In May 2007 after an upswing, the market is now undergoing a reaction. Such moves should traded using overbought/oversold indicators (1) This reaction may be followed by another up move. You may consider buying above the 2 period high. (2) This reaction may be the beginning of a downtrend. You should consider selling below the 2 period low. You should carefully examine chart patterns and other indicators before coming to a conclusion. 39
  40. 40. Figure 10: weekly chart of ONGC CORP source: expert investor 40
  41. 41. MARUTI UDYOG LIMITED The following is the weekly chart of MARUTI UDYOG starting from last of June 2004 till 1st week of may 2007. The price has increased from Rupee value 409.76 to 808.54. In a time span of nearly more than two years price rise by rupee value 400, which is nearly 100% increase in the initial price. The price has gone through various trends in this time span. This company has been a good investment propositions in past two years. In the last week of June 2005 the ADX reflects a strong trend and the price started to toll up. The market moved higher. An ideal investor should have kept his/her stops wide enough to avoid getting shaken out of a false reaction. If possible, move stops to breakeven. This was not the time to consider short positions. The uptrend continued till the 2nd week of may 2006. Then the trend started to get weakened and price took correction and consolidated. Once it started to decline the market was expected to move lower. Ideal investor would have maintained logical stops for short positions. Any open long positions should be closed. After small correction the price again started to toll up. The investors, having good memories of previous high, showed optimism and tried to once again touch the previous high. This made the prices to reach its lifetime high of 981.52 in the last week of September 2006. The prices after reaching lifetime high moved sideways showing certain support which is protecting prices to move down a certain level. In May 2007 after a downswing, the market is now undergoing a rally. Such moves should be traded using overbought/oversold indicators. (1) This rally may be followed by another down move. You may consider selling below the 2 period low. (2) This rally may be the beginning of an uptrend. You should consider buying above the 2 period high. You should carefully examine chart patterns and other indicators before coming to a conclusion. 41
  42. 42. Figure 11: weekly chart of MARUTI UDYOG LIMITED source: expert investor 42
  43. 43. LARSON AND TOURBO The following is the weekly chart of LARSON AND TOURBO starting from last week of Jan 2005 till 1st week of may 2007. The price has increased from Rupee value 981.71 to 1706.1. In a time span of nearly more than two years price rise by rupee value 725, which is more than 75% increase in the initial price. The price has gone through various trends in this time span. This company has been a good investment propositions in past two years. In the 1st week of july 2005 the ADX reflects a strong trend and the price started to toll up. The market moved higher. An ideal investor should have kept his/her stops wide enough to avoid getting shaken out of a false reaction. If possible, move stops to breakeven. This was not the time to consider short positions. The uptrend continued till the 2nd week of may 2006 where it reached its life time high of 2830.9. The price after reaching the lifetime high started to consolidate and the trend weakened as reflected through ADX in the chart. The market moved lower. Ideal investor should have maintained logical stops for short positions. Any open long positions should be closed. After little consolidation price again tolled up as investor being optimist of previous high looking to sell at that price level. Then in 1st week of October 2006 due to sudden spurt of events the price underwent a sudden decline where it opened at 2672 and closed at 1290.2. this reflect a sudden bearish event or information. In may 2007 market is expected to move up as the MACD is moving above signal line. 43
  44. 44. Figure 12: weekly chart of L & T source: expert investor 44
  45. 45. ITC The following is the weekly chart of ITC starting from last week of Jan 2005 till 1st week of may 2007. The price has increased from Rupee value 94.02 to 161.34. In a time span of nearly more than two years price rise by rupee value 67, which is nearly 75% increase in the initial price. The price has gone through various trends in this time span. This company has been a good investment propositions in past two years. In the 1st week of May 2005 the ADX reflects a strong trend and the price started to toll up. The market moved higher. An ideal investor should have kept his/her stops wide enough to avoid getting shaken out of a false reaction. If possible, move stops to breakeven. This was not the time to consider short positions. The uptrend continued till the 1st week of may 2006 where it reached its life time high of 207.88. The price after reaching the lifetime high started to consolidate and the trend weakened as reflected through ADX in the chart. The market moved lower. Ideal investor should have maintained logical stops for short positions. Any open long positions should be closed. After an upswing, the market is now undergoing a reaction. Such moves should traded using overbought/oversold indicators (1) This reaction may be followed by another up move. You may consider buying above the 2 period high. (2) This reaction may be the beginning of a downtrend. You should consider selling below the 2 period low. You should carefully examine chart patterns and other indicators before coming to a conclusion. 45
  46. 46. Figure13: weekly chart of ITC source: expert investor 46
  47. 47. INFOSYS The following is the weekly chart of INFOSYS starting from last week of Jan 2005 till 1st week of may 2007. The price has increased from Rupee value 1000 to 2069.1. In a time span of nearly more than two years price rise by rupee value 1069.1, which is more than 100% increase in the initial price. The price has gone through various trends in this time span. Starting with an initial weak trend as reflected by ADX in the chart the market was moving sideways. The prices were gradually increasing even in the sideways movement. Then in 3rd week of June 2006 market started to gain momentum though ADX reflect a weak trend but the accumulation distribution indicator reflects bullishness taking over in the market. The price moved up and in 2nd week of February 2007 reached lifetime high of 2371.7. The price after reaching the lifetime high started to consolidate and the trend weakened as reflected through ADX in the chart. The market moved lower. Ideal investor should have maintained logical stops for short positions. Any open long positions should be closed. After an upswing, the market is now undergoing a reaction. Such moves should traded using overbought/oversold indicators (1) This reaction may be followed by another up move. You may consider buying above the 2 period high. (2) This reaction may be the beginning of a downtrend. You should consider selling below the 2 period low. You should carefully examine chart patterns and other indicators before coming to a conclusion. 47
  48. 48. Figure 14: weekly chart of INFOSYS source: expert investor 48
  49. 49. ICICI The following is the weekly chart of ICICI starting from last week of Jan 2005 till 1st week of may 2007. The price has increased from Rupee value 352.93 to 855.73. In a time span of nearly more than two years price rise by rupee value 503.2, which is more than 125% increase in the initial price. The price has gone through various trends in this time span. In the third week of June 2005 the ADX reflect the strengthening of the trend. The price moved higher. Ideal investor should have maintained logical stops for buy positions. Any open short positions should be close. In the last week of September 2005 market became Overbought Market. The market reached a point where buy positions should have been protected with close stops. In case of a strong uptrend, the market could have remained overbought for many days. One should not go short at that time. In October 1st week, uptrend came to an end. A strong reaction was possible. Long positions should have been closed if price would have traded below two period low. This may also be an opportunity to go short, if chart patterns support a short sell. The market then moved sideways till 2nd week of September 2006 when the ADX indicate strengthening of the trend in the chart. The market tolled up and in 2nd week of February 2007 reached it lifetime high of 990.76. After reaching the lifetime high price took correction and moved sideways but taking certain support which have kept the price remain high. 49
  50. 50. Figure 15: weekly chart of ICICI BANK source: expert investor 50
  51. 51. HINDALCO The following is the weekly chart of HINDALCO starting from last week of Jan 2005 till 1st week of may 2007. The price has increased from Rupee value 129.88 to 148.66. In a time span of nearly more than two years price rise by rupee value 19, which is near about 15% increase in the initial price. The price has gone through various trends in this time span. This stock has not been very impressive and not been a good investment proposition. With initial weak trend as reflected by ADX in the chart the market moved sideways. In the last week of March 2006 the price broke resistance level with significant volume. The market gained momentum and the trend strengthen. Price tolled up till 2nd week of May 2006 where it reached a lifetime high of 242.56. After reaching the lifetime high uptrend came to an end. A strong reaction was expected. Long positions should have been closed if price trades below two period low. This may also be an opportunity to go short, if chart patterns support a short sell. The price consolidated and the market moved sideways. In the year 2007 the price has moved in a downtrend. In 3rd week of February 2007 the price broke its support level confirmed by significant volumes. The market should have moved lower. One should maintain logical stops for short positions. Any open long positions should be closed. 51
  52. 52. Figure 16: weekly chart of HINDALCO source: expert investor 52
  53. 53. HINDUSTAN LEVER The following is the weekly chart of HINDUSTAN LEVER starting from last week of Jan 2005 till 1st week of may 2007. The price has increased from Rupee value 154.88 to 196.34. In a time span of nearly more than two years price rise by rupee value 41.46, which is near about 30% increase in the initial price. The price has gone through various trends in this time span. This stock has not been very impressive and not been a good investment proposition. With initial weak trend as reflected by ADX in the chart the market moved sideways. In the 3rd week of February 2006 the price broke resistance level with significant volume. The market gained momentum and the trend strengthen. Price tolled up till 1st week of May 2006 where it equaled its lifetime high of 290. After reaching the lifetime high uptrend came to an end. A strong reaction was expected. Long positions should have been closed if price trades below two period low. This may also be an opportunity to go short, if chart patterns support a short sell. The price consolidated and the market moved sideways. In the year 2007 the price has moved in a downtrend. In last week of February 2007 the price broke its support level confirmed by significant volumes. The previous support is now acting as a resistance and the prices have started to move in a trading range. One should wait to buy when the price either break the resistance or move back from support. 53
  54. 54. Figure 17: weekly chart of HINDUSTAN LEVER source: expert investor 54
  55. 55. HERO HONDA The following is the weekly chart of HERO HONDA starting from last week of Jan 2005 till 1st week of may 2007. The price has increased from Rupee value 533.17 to 699.51. In a time span of nearly more than two years price rise by rupee value 166.34, which is nearly 30% increase in the initial price. The price has gone through various trends in this time span. This company has not been a good investment propositions in past two years. In the 3rd week of June 2005 the ADX reflects a strong trend and the price started to toll up. The market moved higher. An ideal investor should have kept his/her stops wide enough to avoid getting shaken out of a false reaction. If possible, move stops to breakeven. This was not the time to consider short positions. The uptrend continued till the 2nd week of February 2006 where it reached its life time high of 922.2. The price after reaching the lifetime high started to consolidate and the trend weakened as reflected through ADX in the chart. The market moved lower. Ideal investor should have maintained logical stops for short positions. Any open long positions should be closed. After an upswing, the market is now undergoing a reaction. Such moves should traded using overbought/oversold indicators (1) This reaction may be followed by another up move. You may consider buying above the 2 period high. (2) This reaction may be the beginning of a downtrend. You should consider selling below the 2 period low. You should carefully examine chart patterns and other indicators before coming to a conclusion. 55
  56. 56. Figure 18: weekly chart of HERO HONDA source: expert investor 56
  57. 57. HDFC BANK The following is the daily chart of HDFC BANK starting from 22nd November 2006 to 1st week May 2007. The price has increased from Rupee value 1079 to 1026. In a time span of nearly 6 months price decreased by rupee value 53. The price has gone through various trends in this time span. This company has not been a good investment proposition but there were few trading opportunities available. A weak trend prevailed till the 16th February 2007 as a strong trend is indicated by ADX in the chart. There is a downward trend. The price broke the support line with significant value. The price moved downward. The market moved lower. Ideal investor should have kept his/her stops wide enough to avoid getting shaken out of a false reaction. If possible, move stops to breakeven. This was not the time to consider long positions. The downward arrow in the chart signals selling when the distribution exceeds accumulation reflecting the bears being more active than the bulls. Then in March 2007 the trend weakened and prices gained momentum and started to increase. The price failed to break its resistance level. It tried to reach its previous high but falls short and the bearish forces made the price to move down. The price moved sideways making most of investor to stay away from investing into it. There were couple of trading opportunities available reflected in the chart indicated by Stochastic and RSI on the basis of oversold overbought indication. 57
  58. 58. Figure 19: daily chart of HDFC BANK source: expert investor 58
  59. 59. HDFC The following is the weekly chart of HDFC starting from last week of Jan 2005 till 1st week of may 2007. The price has increased from Rupee value 764.51 to 1633.2. In a time span of nearly more than two years price rise by rupee value 869, which is more than 100% increase in the initial price. The price has gone through various trends in this time span. In the third week of June 2005 the ADX reflect the strengthening of the trend. The price moved higher. Ideal investor should have maintained logical stops for buy positions. Any open short positions should be close. In the last week of February 2006 market became Overbought Market. The market reached a point where buy positions should have been protected with close stops. In case of a strong uptrend, the market could have remained overbought for many days. One should not go short at that time. In February last week, uptrend came to an end. A strong reaction was possible. Long positions should have been closed if price would have traded below two period low. This may also be an opportunity to go short, if chart patterns support a short sell. The market then moved sideways till 2nd week of September 2006 when the ADX indicate strengthening of the trend in the chart. The market tolled up and in 2nd week of February 2007 reached it lifetime high of 1817.2. After reaching the lifetime high price took correction and moved sideways but taking certain support which have kept the price remain high. 59
  60. 60. Figure 20: weekly chart of HDFC source: expert investor 60
  61. 61. GUJARAT AMBUJA CEMENT The following is the weekly chart of GUJARAT AMBUJA starting from last week of Jan 2005 till 1st week of may 2007. The price has increased from Rupee value 60.12 to 120.85. In a time span of nearly more than two years price rise by rupee value 60.73, which is 100% increase in the initial price. The price has gone through various trends in this time span. This stock has been very impressive and has been a good investment proposition. With initial weak trend as reflected by ADX in the chart the market moved sideways. In the 4th week of December 2005, the price broke resistance level with significant volume. The market gained momentum and the trend strengthen. Price tolled up till 3rd week of January 2007 where it equaled its lifetime high of 148.66. After reaching the lifetime high uptrend came to an end. A strong reaction was expected. Long positions should have been closed if price trades below two period low. This may also be an opportunity to go short, if chart patterns support a short sell. The price consolidated and the market moved sideways. 61
  62. 62. Figure 21: weekly chart of GUJARAT AMBUJA CEMENT source: expert investor 62
  63. 63. GRASIM INDIA The following is the weekly chart of GRASIM INDIA starting from last week of Jan 2005 till 1st week of may 2007. The price has increased from Rupee value 1327 to 2470.7. In a time span of nearly more than two years price rise by rupee value 1143.7, which is nearly 90% increase in the initial price. The price has gone through various trends in this time span. This stock has been very impressive and has been a good investment proposition. With initial weak trend as reflected by ADX in the chart the market moved sideways. In the 4th week of December 2005, the trend strengthened as reflected by ADX in the chart. In the first week of March 2006 the price broke resistance level with significant volume. The previous resistance became the new support. The market gained momentum and the trend strengthen. The uptrend continued till 2nd week of May 2006 and then reaching a high reverts back. The price fall but once when it reached its support turned back towards its previous high. Investors with optimism about the previous high bought shares which made the price move up. Price tolled up till 3rd week of January 2007 where it equaled its lifetime high of 2890.2. After reaching the lifetime high uptrend came to an end. A strong reaction was expected. Long positions should have been closed if price trades below two period low. This may also be an opportunity to go short, if chart patterns support a short sell. The price consolidated and the market moved sideways. 63
  64. 64. Figure 22: weekly chart of GRASIM INDIA source: expert investor 64
  65. 65. DR.REDDY’S The following is the weekly chart of DR.REDDY’S starting from last week of Jan 2005 till 1st week of May 2007. The price has increased from Rupee value 749.15 to 718.05. In a time span of nearly more than two years price decreased by rupee value 31.1. The price has gone through various trends in this time span. This stock has not been very impressive and has not been a good investment proposition. With initial weak trend as reflected by ADX in the chart the market moved sideways. In the 1st week of October 2005, the trend strengthened as reflected by ADX in the chart. In the first week of October 2005 the price broke resistance level with significant volume. The previous resistance became the new support. The market gained momentum and the trend strengthen. The uptrend continued till 2nd week of May 2006 and then reaching a high reverts back. Price tolled up till 2nd week of May 2006 where it reached its lifetime high of 1675.8. After reaching the lifetime high uptrend came to an end. A strong reaction was expected. Long positions should have been closed if price trades below two period low. This may have also be an opportunity to go short, if chart patterns support a short sell. The price consolidated and the market moved sideways. The prices moved down but took support and revert back to reach the previous high but on 1st week of September 2006 a due to sudden spurt of event or news the market opened next week with extreme selling and the bearish forces made price fall from 1439 to 749.15. The market then began to move sideways with some trading opportunities available on the basis of oversold overbought indicator like Stochastic and RSI. 65
  66. 66. Figure 23: weekly chart of DR.REDDY’S source: expert investor 66
  67. 67. CIPLA LTD The following is the weekly chart of CIPLA LTD starting from last week of Jan 2005 till 1st week of may 2007. The price has increased from Rupee value 111.46 to 218.29. In a time span of nearly more than two years price rise by rupee value 107, which is nearly 100% increase in the initial price. The price has gone through various trends in this time span. This company has been a good investment propositions in past two years. In the 2nd week of May 2005 the ADX reflects a strong trend and the price started to toll up. The market moved higher. An ideal investor should have kept his/her stops wide enough to avoid getting shaken out of a false reaction. If possible, move stops to breakeven. This was not the time to consider short positions. The uptrend continued till the 1st week of April 2006 where it reached its life time high of 288.54. The price after reaching the lifetime high started to consolidate and the trend weakened as reflected through ADX in the chart. The market moved lower. Ideal investor should have maintained logical stops for short positions. Any open long positions should be closed. After an upswing, the market is now undergoing a reaction. Such moves should traded using overbought/oversold indicators (1) This reaction may be followed by another up move. You may consider buying above the 2 period high. (2) This reaction may be the beginning of a downtrend. You should consider selling below the 2 period low. You should carefully examine chart patterns and other indicators before coming to a conclusion. 67
  68. 68. Figure 24: weekly chart of CIPLA LTD source: expert investor 68
  69. 69. BHEL The following is the weekly chart of BHEL starting from last week of Jan 2005 till 1st week of may 2007. The price has increased from Rupee value 742.68 to 2498.7. In a time span of nearly more than two years price rise by rupee value 1756.02, which is nearly 250% increase in the initial price. The price has gone through various trends in this time span. This company has been a one of the best propositions in past two years. In the 2nd week of May 2005 the ADX reflects a strong trend and the price started to toll up. The market moved higher. An ideal investor should have kept his/her stops wide enough to avoid getting shaken out of a false reaction. If possible, move stops to breakeven. This was not the time to consider short positions. The uptrend continued till the 1st week of April 2006. Then in 2nd week of May 2006 price started to take correction and consolidated. The investor had good memories of the previous high which keep the bullish forces active and made price to rise once again to touch the previous high. The price increased till 2nd week of December 2006 till it reached its lifetime high of 2630.4. The price after reaching the lifetime high started to consolidate and the trend weakened as reflected through ADX in the chart. The market moved lower. Ideal investor should have maintained logical stops for short positions. Any open long positions should be closed. After an upswing, the market is now undergoing a reaction. Such moves should traded using overbought/oversold indicators (1) This reaction may be followed by another up move. You may consider buying above the 2 period high. (2) This reaction may be the beginning of a downtrend. You should consider selling below the 2 period low. You should carefully examine chart patterns and other indicators before coming to a conclusion. 69
  70. 70. Figure 25: weekly chart of BHEL source: expert investor 70
  71. 71. BHARTI TELE VENTURE The following is the daily chart of BHARTI TELEVENTURE starting from 3rd November 2006 till 1st week of May 2007. The price has increased from Rupee value 546.07 to 816.81. In a time span of nearly 7 months price rise by rupee value 270, which is nearly 50% increase in the initial price. The price has gone through various trends in this time span. This stock has really been a good pick as only in 7 months an investor would have gained 50% return. A strong uptrend ended on 4th December 2006 and price started to consolidate. Price moved sideways for few weeks then the investor’s optimism and faith in the company and its share to toll up again on 12th January 2007. ADX in the chart reflects a strengthening trend and upswing in the prices. The uptrend continued till 19th February 2007 and then took some correction and started to move sideways. From the beginning of first week of April this share has shown a great potential and tolled up to reach its life time high on 22nd April 2007 when price closed at rupee value 873.58. After an upswing, the market is now undergoing a reaction. Such moves should traded using overbought/oversold indicators (1) This reaction may be followed by another up move. You may consider buying above the 2 period high. (2) This reaction may be the beginning of a downtrend. You should consider selling below the 2 period low. You should carefully examine chart patterns and other indicators before coming to a conclusion. 71
  72. 72. Figure 26: daily chart of BHARTI TELE VENT source: expert investor 72
  73. 73. BAJAJ AUTO The following is the weekly chart of BAJAJ AUTO starting from last week of Jan 2005 till 1st week of may 2007. The price has increased from Rupee value 1064.8 to 2574.4. In a time span of nearly more than two years price rise by rupee value 1510, which is nearly 150% increase in the initial price. The price has gone through various trends in this time span. This company has been a good investment propositions in past two years. In the 2nd week of May 2005 the ADX reflects a strong trend and the price started to toll up. The market moved higher. An ideal investor should have kept his/her stops wide enough to avoid getting shaken out of a false reaction. If possible, move stops to breakeven. This was not the time to consider short positions. The uptrend continued till the 1st week of May 2006 where it reached its life time high of 3157.5. The price after reaching the lifetime high started to consolidate and the trend weakened as reflected through ADX in the chart. The market moved lower. Ideal investor should have maintained logical stops for short positions. Any open long positions should be closed. After an upswing, the market is now undergoing a reaction. Such moves should traded using overbought/oversold indicators (1) This reaction may be followed by another up move. You may consider buying above the 2 period high. (2) This reaction may be the beginning of a downtrend. You should consider selling below the 2 period low. You should carefully examine chart patterns and other indicators before coming to a conclusion. 73
  74. 74. Figure 27: weekly chart of BAJAJ LTD source: expert investor 74
  75. 75. ACC The following is the weekly chart of ACC starting from last week of Jan 2005 till 1st week of may 2007. The price has increased from Rupee value 357.93 to 860.37. In a time span of nearly more than two years price rise by rupee value 503, which is nearly 150% increase in the initial price. The price has gone through various trends in this time span. This company has been a good investment propositions in past two years. Company has been on a gradual rise in price. In the 1st week of March 2006 the ADX reflects a strong trend and the price started to toll up. The market moved higher. An ideal investor should have kept his/her stops wide enough to avoid getting shaken out of a false reaction. If possible, move stops to breakeven. This was not the time to consider short positions. The uptrend continued till 1st week of May 2006 and then reaching a high reverts back. The price fall but once when it reached its support turned back towards its previous high. Investors with optimism about the previous high bought shares which made the price move up. Price tolled up till 2nd week of December 2006 where it reached its lifetime high of 1135.5. After reaching the lifetime high uptrend came to an end. A strong reaction was expected. Long positions should have been closed if price trades below two period low. This may also be an opportunity to go short, if chart patterns support a short sell. The price consolidated and the market moved sideways. 75
  76. 76. Figure 28: weekly chart of ACC source: expert investor 76
  77. 77. MAHANAGAR TELEPHONE NIGAM LIMITED The following is the weekly chart of MTNL starting from last week of Jan 2005 till 1st week of may 2007. The price has increased from Rupee value 149.76 to 152.68. In a time span of nearly more than two years price rise by rupee value 3. The price has gone through various trends in this time span. This stock has been not very impressive and has not been a good investment proposition. With initial weak trend as reflected by ADX in the chart the market moved sideways. In the 4th week of March 2006, the price broke resistance level with significant volume. The market gained momentum and the trend strengthen. Price tolled up till 2nd week of May 2006 where it made a top li of 148.66. After reaching the top uptrend came to an end. A strong reaction was expected. Long positions should have been closed if price trades below two period low. This may also be an opportunity to go short, if chart patterns support a short sell. The price consolidated and the market moved sideways. The price then started to move sideways. Though it is advisable to stay out of sideways market but there were some trading opportunities available for the traders to cash on. The investors could have made money on the basis of how oversold or overbought the security is using Stochastic or RSI indicators. 77
  78. 78. Figure 29: weekly chart of MTNL source: expert investor 78
  79. 79. References Internet: www.Investopedia.com www.stockcharts.com www.traderji.com Books: 1) Technical Analysis from A-to-Z(by Steven B Achelis) 2) Using technical analysis: The Basics(Clifford Pistolese) 3) How to make money Trading Derivative (by Ashwani Gujaral) Software: expert investor 2000(Ei2000) 79

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