Technical analysis is a method of evaluating securities by analyzing statistics generated by market activity, such as past prices and volume. Charts are used to identify patterns in price movements and predict future trends. The basic premise is that prices tend to move in trends or waves that are upward or downward over time. Dow theory from the early 1900s laid the foundations for technical analysis and looked at primary, secondary and minor movements in stock prices. Common chart types used are line charts, bar charts, and pattern charts. Mathematical indicators like simple and exponential moving averages are also used to identify trends in price data.

1. Charting And Technical
Analysis
FINDING FUTURE IN THE PAST

2. What is Technical analysis?
 The technical analysis concentrates on the
movement of share prices.
 Also the analysis believes by examine past price
movements future share prices can be can be
accurately predicted.
 The basic premise of technical analysis is that price
moves in trends or waves which may be upward or
downward.

3. Dow Theory
 Dow theory has the roots of present Technical
analysis
 It believes the movies of stock market are influenced
by three critical trends
1) Primary movements
Long range cycle that carries entire market up & down.
2) Secondary reactions
These are Barriers & move opposite direction to primary movements.
3) Minor movements
These are day today fluctuations in the market.

4. Dow theory
 According to Dow theory The Price movements in
the market can be derived by a line chart

5. Basic principles of Technical Analysis
 The market value of a security is related to demand
and supply factors in the market.
 Security prices move same direction for some length
of time.
 Stock prices have been seen to change when there is
a change in demand and supply factors.
 Shifts of demand and supply can be detected through
charts

6. Types of charts using in Technical analysis
1) Line charts
Closing price of each period is plotted as a point,
These points are joined by a line to form a chart.

7. Types of charts using in Technical analysis
2) Bar charts
A vertical line represents the lowest price, highest prices and
closing price of each day..

8. Types of charts using in Technical analysis
3) Chart Patterns
When price bar charts of several days drawn together
certain patterns emerge. These patterns are used to
identify trends to predict future movements of prices.
Eg:
 Support and resistant patterns
 Reversal patterns
 Continuation patterns

9. Mathematical indicators
 Moving Average
Trends of price movements can be identified by
moving average. There are 2 types.
1) Simple moving average
Sum of prices of a share for certain number of days
divided by the number of dates.

10. Example for SMA
Days
Closing price
Total of price of
5 days
Five day MA
1
33
----
----
2
35
----
----
3
37.5
----
----
4
36
----
----
5
39
180.5
36.1
6
40
187.5
37.5
7
8
40.5
193
38.6

11. 2) Exponential moving average (EMA)
Calculation
EMA = (Current Closing price – Previous EMA) * Factor +previous EMA
2
Factor =
𝑛+1

12. Example for EMA
Days
Closing Price
EMA
1
33
33
2
35
33.66
3
37.5
34.93
4
36
35.28
5
39
36.51