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SAPM-33.pptx
- 2. MEANING OF TECHNICAL ANALYSIS: Technical an analysis is applied to find out the future direction of the market by analyzing the past and current price as well as volume movements. Market activity Past Prices Volume
- 3. ASSUMTION OF TECHNICAL ANALYSIS: The Market Discounts Everything Price Moves in Trends History Tends to Repeat Itself
- 4. Fundamental Analysis Technical Analysis It is basedon the information regarding the Economy, Industry and Company. It is based on analysis of Price movements and the volume. It helps the investor to find out the Intrinsic value of the Stock. It helps to predict the trend of Price movements.
- 5. Fundamental Analysis TechnicalAnalysis It uses the accounting tools like ratio and fund flow analysis. It uses the tools like technical indications and Charting methods. Mainly focus the long term Investment prospects, looks at data over a number of years. Mainly focus the short term investments, timeframe of weeks, days or even minutes. The Fundamental analysis is used by long term investors. Technical analysis used by Speculators.
- 6. CHARTING METHOD Technicalanalysis uses charts as important tool to predict the future trend of share price movement. A chart is simply a graphical representation of a series of prices over a set time frame.
- 7. CHART PROPERTIES TheTime Scale The Price Scale and Price Point Properties
- 9. VARIOUS CHARTING METHOD Barchart Line chart Point and figure chart Japanese candlestick
- 10. BAR CHART Thebar chart shows the complete price movements of a stock. It reveals the day’s opening price, low price, high price, closing price and the volume of a stock. The closing price and opening price are marked in between the high price and low price by marking a tick on the vertical bar. The volume of transactions is shown as separate vertical bars in the bottom portion
- 13. LINE CHART Itis the simple presentation of price movement of a stock over a specified period. The period is represented by “X” axis and the price movement is represented by “Y” axis. The closing price of the stock for various period are plotted in the chart with dots and then all the dots are joined by a line.
- 14. CONT… Line chartscan be prepared by considering daily closing price, weekly closing price or monthly closing price. To predict short term movements’, daily closing price can be used to prepare line charts. To predict medium term and long term movements the weekly and monthly closing price can be considered. Traders in the stock market prepare intra –
- 16. POINT AND FIGURECHART It is useful to predict the change of price direction. The price interval of the stock is entered on the left side of the chart. When the price of the scrip moves up to the next price interval then it is marked up with “X” symbol and as long as the share price increases the "X" symbols are plotted in the vertical column.
- 17. CONT… When theshare price declines by the price intervals then the chart is plotted with “O” symbols in the next column. The price movements are analyzed and interpreted by reading the ‘X” and “O” symbols on the chart. The point and figure chart shows the support and resistance levels and also indicates the buy and sells signals.
- 19. JAPANESE CANDLESTICK CHART Itshows the price movements of the stock in vertical form. The top and bottom points of the stock passes through the candle. A clear candle without any shading indicates increase in price and a shaded candle indicate decrease in price. When the day’s closing price is higher than the opening price then it is considered as increase in price.
- 20. CONT… When theday’s closing price is less than the opening price it is considered as decrease in price and the candle is shaded. It shows the day’s opening price, low price, high price and closing price and the price movements. It can be prepared for weekly or monthly.
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- 24. What is meanby Patterns? A chart pattern is a distinct formation on a stock chart that creates a trading signal, or a sign of future price movements. Chartists use these patterns to identify current trends and trend reversals and to trigger buy and sell signals.
- 25. Types Double Top Double Bottom Head and Shoulder Inverted Head and Shoulder Pattern Symmetrical Triangle Ascending Triangle Descending Triangle Flag and Pennant Support and Resistance
- 26. Double Top Adouble top consists of two well-defined, sharp peaks at approximately the same price level. A double top occurs when prices are in an uptrend. The pattern is complete when prices decline below the lowest low in the formation. The lowest low is called the confirmation point. In this the prices are expected to fall i.e., this is the signal to sell.
- 28. Double Bottom Ina double bottom, the price of the stock falls to a certain level and increasing with diminishing activity. Then it falls again to the same or to a lower and turns up to a higher level. The double bottom resembles the letter ‘W’. Technical analysis view double bottom as a sign for the Bull market i.e., it is a signal to buy.
- 30. Head and Shoulder It is generally regarded as up trends. It is also most reliable when found in an uptrend as well. Sellers come in at the highs (left shoulder) and the downside is probed (beginning neckline). Buyers soon return to the market and ultimately push through to new highs (head).
- 31. Inverted Head andShoulder Pattern The head and shoulders pattern can sometimes be inverted. The inverted head and shoulders are typically seen in downtrends. The inverted head and shoulders is the volume aspect. The inverted left shoulder should be accompanied by an increase in volume. The inverted head should be made on lighter volume.
- 33. Symmetrical Triangle Thesymmetrical triangle, which can also be referred to as a coil, usually forms during a trend as a continuation pattern. The pattern contains at least two lower highs and two higher lows. When these points are connected, the lines converge as they are extended and the symmetrical triangle takes shape.
- 34. Ascending Triangle Ascendingtriangle patterns are bullish and often form within uptrend’s in stocks as continuation patterns. The ascending triangle pattern resembles a narrowing triangle with a horizontal line of overhead resistance for the stock and an ascending trend line or rising trend line beneath the stock.
- 35. Descending Triangle Descendingtriangle patterns are bearish and often form within downtrends in stocks as continuation patterns. The descending triangle pattern resembles a narrowing triangle with a horizontal line of support beneath the stock and a descending trend line or downtrend line above the stock.
- 37. Flag and Pennant These two short-term chart patterns are continuation patterns that are formed when there is a sharp price movement followed by a generally sideways price movement. This pattern is then completed upon another sharp price movement in the same direction as the move that started the trend. The patterns are generally thought to last from one to three weeks.
- 39. Support and Resistance Technical analysts often talk about the ongoing battle between the bulls and the bears, or the struggle between buyers (demand) and sellers (supply). This is revealed by the prices a security seldom moves above (resistance) or below (support). Support and resistance levels are the levels at which a lot of traders are willing to buy the stock (in the case of a support) or sell it (in the case of resistance).
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- 42. Introduction Efficient MarketTheory states that the share prices fluctuations are random and do not follow any regular pattern. Meanwhile technical analysts see meaningful patterns in their charts.
- 43. Meaning In 1970,Fama stated that efficient market fully reflect the available information. If markets are efficient, securities price reflect normal returns for their level of risk. Fama suggested that efficient market hypothesis can be divided into three categories.
- 44. Cont… Weak Formof EM Which absorbs only market’s past price information. Semi strong Form Which absorbs past price information and also all other public information and Strong Form Which absorbs all types of information including insider information.
- 46. Weak form ofEMH The type of information used in the weak form of EMH is the Historical prices. According to it, current prices reflect all information found in the past prices and traded volumes.
- 47. Semi – StrongForm It states that the security price adjusts rapidly to all publicly available information. The prices not only reflect the past price data, but also the available information regarding the Earnings of the Corporate, Dividend, Bonus issue, Right Issue, mergers, Acquisitions and so on. In this market a few insiders can earn Profit on a short run price changes rather than the investors who adopt the Buy and hold Policy.
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- 49. Introduction Dow Theorywas formulated from a series of Wall Street Journal editorials authored by Charles H. Dow from 1900 until the time of his death in 1902. These editorials reflected Dow’s beliefs on how the stock market behaved and how the market could be used to measure the health of the business environment.
- 50. Cont…. Dow firstused his theory to create the Dow Jones Industrial Index and the Dow Jones Rail Index (now Transportation Index), which were originally compiled by Dow for The Wall Street Journal. Dow created these indexes because he felt they were an accurate reflection of the business conditions within the economy because they covered two major economic segments: industrial and rail. While these indexes have changed over the last 100 years, the theory still applies to current market indexes.
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- 53. Theory Random walktheory gained popularity in 1973 when Burton Malkiel wrote "A Random Walk down Wall Street", a book that is now regarded as an investment classic. Random walk is a stock market theory that states that the past movement or direction of the price of a stock or overall market cannot be used to predict its future movement.
- 54. Cont… In hisbook, Malkiel preaches that both technical analysis and fundamental analysis are largely a waste of time and are still unproven in outperforming the markets. Malkiel constantly states that a long-term buy-and-hold strategy is the best. Attempts based on technical, fundamental, or any other analysis are futile. It's hard to say how much truth there is to this theory;