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TECHNICAL ANALYSIS
AN OVERVIEW
PRESENTED BY
CA MANISH R. CHOKSHI
INTRODUCTION TO TECHNICAL ANALYSIS - BASIC
PRINCIPLES, PHILOSOPHY , SCOPE & OBJECTIVE
WHAT IS TECHNICAL ANALYSIS ?
Technical analysis is basically studying the price
action or behavior only.
There is a Chinese proverb which says : A single
picture speaks more than a 1000 words.
Technical analysis is an organized and systematic
study of market action through use of charts, of a
particular scrip or index for the purpose of
identifying trend changes at an early stage with
the help of price and volume data of any scrip,
index, commodities, currencies….
INTRODUCTION TO TECHNICAL ANALYSIS - BASIC
PRINCIPLES, PHILOSOPHY , SCOPE & OBJECTIVE
 We would like to answer the billion
dollar question –
 What to Buy/sell
AND
 When to Buy/sell
BASIC PRINCIPLES OF TECHNICAL ANALYSIS
1.Price discounts everything.
Price is supreme.
 The price which of any scrip is the result of all the
factors affecting it , which are far reaching and to
narrate a few it may be -
 MICRO FACTORS :-the industry prospects to which
the company belongs or the performance of the
company or the management of the company, brand
image of the company, monopolistic element,
competitors strength, financial strength and in
country like India political strength may too play an
important role in determining the price of particular
scrip.
BASIC PRINCIPLES OF TECHNICAL ANALYSIS
 MACRO FACTORS:- Global Economical
and Political conditions, economic health
of the country like – GDP growth, Fiscal
Deficit, Current Account Deficit, Trade
Balance, Inflation, Industrial Production,
Business and Consumer Sentiments,
climatic conditions, Political Condition
etc.
MACRO FACTORS
 They are also reflection of hopes , fears,
knowledge, optimism and greed of the
investing public.
 The sum total of these emotions are
expressed in the price level.
 KEYNES:“ We are not concerned with what
an investment is really worth but what the
market will value it under the influence of
mass psychology “
BASIC PRINCIPLES OF TECHNICAL ANALYSIS
 Market has Rhythm and it does not move in
random hence it is possible to interpret the
market.
 Once the trend is set it continues in that
direction and before reversing its direction it
will give proper signals indicating change of
trend .
 History repeats. What has happened in the past
will happen in future. This is because human
nature tends to react to similar situations in
consistent ways. Human nature does not
change .
 The market moves are cyclical and repetitive.
BASIC PRINCIPLES OF TECHNICAL ANALYSIS
MARKET HAS RYTHM
June July August September October November December 1998 February
3050
3100
3150
3200
3250
3300
3350
3400
3450
3500
3550
3600
3650
3700
3750
3800
3850
3900
3950
4000
4050
4100
4150
4200
4250
4300
4350
4400
4450
4500
4550
4600
4650
4700
4548
3209
1- MARKET MOVES IN RYTHM
00BSE Sensex 30 C (5,487, 5,556, 5,487, 5,541)
BASIC PRINCIPLES OF TECHNICAL ANALYSIS
 Once the trend is set it continues in that
direction and before reversing its direction it
will give proper signals indicating change of
trend .
 History repeats. What has happened in the past
will happen in future. This is because human
nature tends to react to similar situations in
consistent ways. Human nature does not
change .
 The market moves are cyclical and repetitive.
BASIC PRINCIPLES OF
TECHNICAL ANALYSIS
 Market discounts future. Market is usually
ahead of news.The reason is , market has
collective intelligence , which is supreme
 Only market can foresee not any single
individual
 Teji starts when there is no hope and all is
bad around you.
 So Teji starts in gloom and Mandi starts in
Boom.
BASIC PRINCIPLES OF TECHNICAL
ANALYSIS
 Technical Analysis is an Empirical Study. It
is based on past observation.
 Technical analysis is workable in any free
market economy
 Technical Analysis is complete tool in itself
and can be used for Trading and
Investments in financial instruments.
BASIC
DEFINITIONS/TERMINOLOGY:-
 Line Chart :- Chart drawn on the basis of daily
closing prices of each script.
 Bar Chart :- Open High Low Close Bar for each day
 Volume :- The number of shares traded during a
trading session .
 Stop Loss: When a trader enters into any long /short
position it is necessary for him to determine the stop
loss level and to book loss if the market moves
against him
 A price chart is a pictorial presentation of price
movement by plotting price on Y axis and date on X-
axis ..
 Speculation and Gambling : - Speculation is generally
a dirty word in stock market and usually
misunderstood. Speculation is intelligent reasoning of
mind. Speculation is not equal to gambling .
LINE CHART – Connects the closing
prices of a scrip.
BAR CHART – OPEN HIGH LOW
CLOSE
DAILY, WEEKLY, MONTHLY OR
YEARLY CHARTS
 Daily Charts considers daily Open, High, Low
and Close
 Weekly Charts considers Open price of Monday
morning, High or Low throughout the week and
close of Friday evening.
 Monthly – Open of 1 st calendar day of the
month and close of last calender day of the
month.
 Yearly = Open of 1st
January and Close of 31 st
December. High or Low – one price throught
the year.
 Intra Day = x mins, hourly etc charts
THANKYOU VERY MUCH

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Technical analysis

  • 2. INTRODUCTION TO TECHNICAL ANALYSIS - BASIC PRINCIPLES, PHILOSOPHY , SCOPE & OBJECTIVE WHAT IS TECHNICAL ANALYSIS ? Technical analysis is basically studying the price action or behavior only. There is a Chinese proverb which says : A single picture speaks more than a 1000 words. Technical analysis is an organized and systematic study of market action through use of charts, of a particular scrip or index for the purpose of identifying trend changes at an early stage with the help of price and volume data of any scrip, index, commodities, currencies….
  • 3. INTRODUCTION TO TECHNICAL ANALYSIS - BASIC PRINCIPLES, PHILOSOPHY , SCOPE & OBJECTIVE  We would like to answer the billion dollar question –  What to Buy/sell AND  When to Buy/sell
  • 4. BASIC PRINCIPLES OF TECHNICAL ANALYSIS 1.Price discounts everything. Price is supreme.  The price which of any scrip is the result of all the factors affecting it , which are far reaching and to narrate a few it may be -  MICRO FACTORS :-the industry prospects to which the company belongs or the performance of the company or the management of the company, brand image of the company, monopolistic element, competitors strength, financial strength and in country like India political strength may too play an important role in determining the price of particular scrip.
  • 5. BASIC PRINCIPLES OF TECHNICAL ANALYSIS  MACRO FACTORS:- Global Economical and Political conditions, economic health of the country like – GDP growth, Fiscal Deficit, Current Account Deficit, Trade Balance, Inflation, Industrial Production, Business and Consumer Sentiments, climatic conditions, Political Condition etc.
  • 6. MACRO FACTORS  They are also reflection of hopes , fears, knowledge, optimism and greed of the investing public.  The sum total of these emotions are expressed in the price level.  KEYNES:“ We are not concerned with what an investment is really worth but what the market will value it under the influence of mass psychology “
  • 7. BASIC PRINCIPLES OF TECHNICAL ANALYSIS  Market has Rhythm and it does not move in random hence it is possible to interpret the market.  Once the trend is set it continues in that direction and before reversing its direction it will give proper signals indicating change of trend .  History repeats. What has happened in the past will happen in future. This is because human nature tends to react to similar situations in consistent ways. Human nature does not change .  The market moves are cyclical and repetitive.
  • 8. BASIC PRINCIPLES OF TECHNICAL ANALYSIS MARKET HAS RYTHM June July August September October November December 1998 February 3050 3100 3150 3200 3250 3300 3350 3400 3450 3500 3550 3600 3650 3700 3750 3800 3850 3900 3950 4000 4050 4100 4150 4200 4250 4300 4350 4400 4450 4500 4550 4600 4650 4700 4548 3209 1- MARKET MOVES IN RYTHM 00BSE Sensex 30 C (5,487, 5,556, 5,487, 5,541)
  • 9. BASIC PRINCIPLES OF TECHNICAL ANALYSIS  Once the trend is set it continues in that direction and before reversing its direction it will give proper signals indicating change of trend .  History repeats. What has happened in the past will happen in future. This is because human nature tends to react to similar situations in consistent ways. Human nature does not change .  The market moves are cyclical and repetitive.
  • 10. BASIC PRINCIPLES OF TECHNICAL ANALYSIS  Market discounts future. Market is usually ahead of news.The reason is , market has collective intelligence , which is supreme  Only market can foresee not any single individual  Teji starts when there is no hope and all is bad around you.  So Teji starts in gloom and Mandi starts in Boom.
  • 11. BASIC PRINCIPLES OF TECHNICAL ANALYSIS  Technical Analysis is an Empirical Study. It is based on past observation.  Technical analysis is workable in any free market economy  Technical Analysis is complete tool in itself and can be used for Trading and Investments in financial instruments.
  • 12. BASIC DEFINITIONS/TERMINOLOGY:-  Line Chart :- Chart drawn on the basis of daily closing prices of each script.  Bar Chart :- Open High Low Close Bar for each day  Volume :- The number of shares traded during a trading session .  Stop Loss: When a trader enters into any long /short position it is necessary for him to determine the stop loss level and to book loss if the market moves against him  A price chart is a pictorial presentation of price movement by plotting price on Y axis and date on X- axis ..  Speculation and Gambling : - Speculation is generally a dirty word in stock market and usually misunderstood. Speculation is intelligent reasoning of mind. Speculation is not equal to gambling .
  • 13. LINE CHART – Connects the closing prices of a scrip.
  • 14. BAR CHART – OPEN HIGH LOW CLOSE
  • 15. DAILY, WEEKLY, MONTHLY OR YEARLY CHARTS  Daily Charts considers daily Open, High, Low and Close  Weekly Charts considers Open price of Monday morning, High or Low throughout the week and close of Friday evening.  Monthly – Open of 1 st calendar day of the month and close of last calender day of the month.  Yearly = Open of 1st January and Close of 31 st December. High or Low – one price throught the year.  Intra Day = x mins, hourly etc charts