Summer Black Book
Summer Black Book
Summer Black Book
ON
at
Sharekhan, Ulhasnagar
Submitted By
Roll No. 93
MMS (Finance)
Batch: 2017-2019
Industry Guide:
Mr. Ganesh.M. Funde
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DECLARATION
At Sharekhan, Ulhasnagar during the academic year 2017 - 2019. The information submitted
is true and original to the best of my knowledge.
Roll No. – 93
MMS (FINANCE)
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ACKNOWLEGEMENT
The completion of this project required the co-operation and guidance of many people and I
am extremely fortunate to have got all this throughout the completion of my project.
I would like to thank Mr. Ganesh Funde for the opportunity given to me to pursue an
internship at his esteemed organization without which I would not have been able to garner
such a valued experience at my internship.
I am also very grateful to Dr.Laxmi Goritiyal my guiding mentor who has guided me
throughout my three months internship. Without her assistance my project would not have been
a successful completion.
Roll No : 93
MMS (Finance)
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CERTIFICATE
This is to certify that Mr. Saish Sandeep Sawant Dessai student of Vivekananda Education
Society’s Institute of Management Studies & Research, Mumbai specializing in Finance
has completed his Summer Internship Project on” TRADING DECISIONS THROUGH
TECHNICAL ANALYSIS” at “Sharekhan Ltd” during the academic year 2017 – 19.
For VESIM,
Dr. Laxmi Goritiyal
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Table of content
1 Executive Summary 8
2 Industry Analysis 9
5 About project 16
5.1 Objectives 16
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6 What are chart patterns 17
10 Determination of trend 36
11 Range shift 36
13 Classification of divergence 39
14 Conclusion 45
15 References 46
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1. Executive Summary
Share market is fluctuating very quickly and the real worth of the shares also is unstable. The
investors need to know the trend of the share value fluctuations and the stability of share price
movements. To minimize risk and to gain profit in the market we use derivatives instruments.
Many associate the financial market mostly with the equity market. The financial
market is, of course, far broader, encompassing bonds, foreign exchange, real estate,
commodities, and numerous other asset classes and financial instruments. A segment of the
market has fast become its most important one: derivatives. The derivatives market has seen
the highest growth of all financial market segments in recent years. It has become a central
contributor to the stability of the financial system and an important factor in the functioning.
The turnover of derivatives in NSE is growing consistently but the BSE derivatives turnover is
relatively low. Finding the reasons for decline in BSE derivatives is necessary for further
progress of this market on the BSE. There are various factors responsible for the derivatives
turnover difference in both the exchanges. Such as promotion, annual charges of exchanges,
liquidity, and convenience are some of the factors. Data representation technique used by NSE
is convenient to the investors. Competition prevailing in the market is healthy for the investors
and for this reason, BSE needs to take immediate and significant steps towards increasing its
market share in this segment.
The Study is based on “Analysis before taking trading decisions” with special
reference to the Indian context and the Inter-Connected Stock Exchange have been taken as
are presentable sample for the study. The study can’t be said as totally perfect. Any alteration
may come. The study has only made a humble attempt at decision making in derivatives market
only in India context. The study is not based on the international perspective of derivatives
markets, which exists in NASDAQ, CBOT etc.
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2. Industry Analysis
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2.2 Challenges based on the industry
a. Investor Education and Participation
Moderate Investor participation
Mindset Issues (erroneous approach/ enter during thelast leg of bull run)
Long-term and portfolio approach missing
Missing Tax efficient capital creation opportunity
b. Poor DIIs participation
Subdued AUM of MFs/ insurance companies
Compelled participation in disinvestments
Negligible participation by Pensions Funds
c. Change in Revenue Mix
Decline in cash market volume
Traders moving to Commodities and Currency
Investors moving to Mutual Funds
d. Pressure on Profitability
Lower yield
Competitive pressure
Moderate non-broking/ distribution revenue
Higher employee and operating cost
e. Operational Issues
Stringent Penal provisions and rising compliance cost
State-level Stamp Duty
Frivolous Investor Grievances and Criminal Actions
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3. About the company
Sharekhan Ltd.
Website – www.sharekhan.com
Vision – To be the best retail broking brand in the retail business of the stock market
Mission – To educate and empower the individual investor to make better investment
decision through quality advice and superior services
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About BNP Paribas
BNP Paribas is the largest Bank of the EURO Zone. It has a presence in 75 countries with 1,
90,480 employees. It ranks highly in its two core activities: Retail Banking & Services
(comprised of Domestic Markets and International Financial Services) and Corporate &
Institutional Banking. In Europe, the Group has four domestic markets (Belgium, France, Italy
and Luxembourg) and BNP Paribas Personal Finance is the leader in consumer lending. BNP
Paribas is rolling out its integrated retail banking model across Mediterranean basin countries,
in Turkey, in Eastern Europe and a large network in the western part of the United States.
BNP Paribas has been present in India for over 150 years and offers solutions to its clients
through its Corporate and Institutional Banking and International Financial Services activities.
BNP Paribas was one of the first foreign banks to establish a presence in India in 1860. Today,
it is among the leading corporate banks in the country, with branches in eight major cities. BNP
Paribas offers a wide range of financial services covering corporate and institutional banking,
transaction banking and wealth management. In addition, BNP Paribas has subsidiaries and
strategic partnerships that offer solutions from International Financial Services businesses.
BNP Paribas successfully acquired Sharekhan on 24 November, 2016. Sharekhan joined BNP
Paribas’ Personal Investors division, which is a key player in retail brokerage and digital
banking services with 1.7 million clients in Europe.
1. Equities
2. Derivatives
3. Currency
4. Commodity
5. Online IPO
6. Bonds and Government Securities
7. Mutual Funds
8. Portfolio Management Service
9. Investment Advisory Service
10. Professional Training for Traders
11. Fundamental Research
12. Technical Research
13. Internet-based online trading
14. Software based trading : TradeTiger
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3.3 Position in the Industry
Sharekhan, The India’s 2nd most searched stock broker after ICICI direct. Sharekhan is
amongst top 3 in terms of customers. Sharekhan is one of the most visible brands since
inception. It has 1.4 million clients and out of this 83 %is online.
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Provide competitive brokerage
Focus on Institutional Investors
An indirect opportunity arise as market goes bullish
d. Threats
Decreasing rate of brokerage in the market
Aggressive Promotional strategies by close competitors
More and more players are entering into this domain
Stock Market is very Volatile, risk involved is very high
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4. On the Job Training
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5. About Project
5.1 Objectives
To take decisions in the market using Divergences and Chart patterns.
To decide whether to take a buy/sell position in futures and equities.
To study about various chart patterns and divergences.
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6. WHAT ARE CHART 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.
The theory behind chart patterns is based on this assumption. The idea is that certain patterns
are seen many times, and that these patterns signal a certain high probability move in a stock.
Based on the historic trend of a chart pattern setting up a certain price movement, chartists
look for these patterns to identify trading opportunities.
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EXAMPLE:-
EXPLANATION-
The above chart is of INDIABULLS HOUSING FINANCE. We can clearly see a symmetrical
triangle formation in the chart, which gave an idea that there will soon be a breakout.
The white circle indicates that there has been a downside breakout.
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6.2 CUP AND HANDLE :-
A cup and handle chart is a bullish continuation pattern in which the upward trend has
paused but will continue in an upward direction once the pattern is confirmed
The handle follows the cup formation and is formed by a generally
downward/sideways movement in the security's price.
Once the price movement pushes above the resistance lines formed in the handle, the
upward trend can continue.
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EXAMPLE:-
EXPLANATION-
The above chart is of BANK NIFTY INDEX. We see the bullish trend coming to a pause,
and forming a Cup and Handle pattern. The price after completing the cup is forming a
handle. If one has to take a trade decision, he should think of a sell position.
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The below image is of a paper trade-
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The following image is of a live trade
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6.3 RISING WEDGE-
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EXAMPLE-
EXPLANATION-
The chart is of NIFTY INDEX. We see the two trend line F1 and F2
are converging towards each other, and we see that the price is moving in upwards trend
channel, we can say that nifty is forming a rising wedge pattern.
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7. WHAT ARE CANDLESTICKS?
Way of communicating information about how price is moving
These charts are made of bars that have little lines stemming from the top and bottom
Candles convey 4 pieces of information:-
1. Open price
2. Close price
3. High price
4. Low price
These candles refer the information for a specific unit of time
CANDLE DEFINITION:-
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Traders use the candlesticks to make trading decisions based on regularly occurring
patterns that help forecast the short-term direction of the price
We will see a few candlestick pattern formation
THEY ARE USED TO TAKE MEDIUM TO LONG TERM TRADING
DECISIONS.
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It a very bullish reversal pattern
The price trades above the body of the 2nd candle
EXAMPLE-
EXPLANATION-
The above chart is of CONCOR (CONTAINER
CORPORATION OF INDIA LTD). As we can see that there is a downward trend. The
marking shows that a big green candle has engulfed the previous candle and hence there is a
change in trend.
TRADE DECISION-
One can enter in trade as soon as they see such candlestick
formation. They can take a buy position after there is a change in the trend.
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7.2 BEARISH HARAMI PATTERN-
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EXAMPLE-
EXPLANATION-
The above chart is of INFOSYS LTD. As the marked area shows that there is a reversal
pattern, the prior uptrend comes to end.
The 1st green candle signals that the uptrend will continue, but then a red candle which
contained within the 1st green candle, and hence a BEARISH HARAMI PATTERN is been
observed.
TRADE DECISION-
As soon as the 2nd candle is formed and confirms the pattern, one can take a sell position.
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7.3 TWEEZER TOP:-
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EXAMPLE:-
EXPLANATION-
The above chart is of BANK NIFTY INDEX. The highlighted part shows us that
the shadow of both the candles are facing resistence level. And hence the trend reversal
happened.
TRADE DECISION-
One can enter in the trade when the other candle confirms that it faces
resistance, then the trader shall take a sell position.
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8. HEIKEN-ASHI CHART-
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EXAMPLE
EXPLANATION-
As we can see the white line indicating that the heikin ashi candles are going in an uptrend
and it is not showing any lower shadow, which means the price is going in uptrend.
TRADE DECISION-
One can enter in the trade when, the trader sees the green heikin ashi candles forming, and
can get a confirmation when the 2nd green candle is above the half of the 1st green candle and
can take a buy position.
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9. RELATIVE STRENGTH INDEX (RSI)
The relative strength index (RSI) is a technical indicator used in the analysis
of financial markets.
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COMPARING PRICE AND RSI FOR A BETTER TRADING
DECISION
NOTE:- Here the price and indicator are agreeing with each other.
NOTE:- Here the price and indicator does not agree, hence the trader should not take any
decision.
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10. DETERMINATION OF TREND
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EXAMPLE OF RANGE SHIFT
EXPLANATION-
The above image is a monthly chart is of TATA CONSULTANCY SERVICES (TCS).
The two lines H1 and H2 are the resistance lines. As soon as the RSI went above 80, we
could see the first resistance was broken, and soon it went past the second resistance i.e. H2.
We can clearly see that the price is now trading in a new range.
Also the later half of the chart, the RSI is falling down to the 50 level, the price also has
fallen down, but did not fall to the previous level, that is because the price has shifted its
range, and will not come to that level anytime soon.
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12. TAKING LONG TERM DECISIONS USING DIVERGENCE
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13. CLASSIFICATION OF DIVERGENCE
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13.1 SIMPLE OR CLASSIC BEARISH DIVERGENCE-
Whenever price makes a higher high n RSI makes lower high then it is said to be Simple
Bearish Divergence.
EXAMPLE-
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EXPLANATION-
The above chart is of BANK NIFTY FUTURES, the above line shows us that the
price is making new highs, i.e. higher high and the bottom line is making new lows, i.e. lower
high, a simple bearish divergence is been seen.
Simple Bullish Divergence occur in bear market, commonly known as short covering.
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HIGH- 26438
LOW- 26068
370+26438= 26808
After finding the Simple bullish divergence, take the difference between the high and low,
which comes to 370, from there onwards there has to be a rally of twice the difference.
Whenever RSI makes a lower low & price makes a higher low then it is said to be
Bullish Hidden Divergence.
EXAMPLE
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EXPLANATION-
The above chart is of BANK NIFTY FUTURE. As the above line depicts that price is making
higher low and the lower line shows that RSI is making lower low, hence we can see a hidden
bullish divergence.
EXAMPLE-
EXPLANATION-
The above chart if of BANK NIFTY INDEX, the first line above shows us that the price is
making lower high, and the line below shows that RSI is making higher high. Also later in
the day we could see a significant decline, so there was a hidden bearish divergence present.
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13.5 MULTIPLE DIVERGENCE-
Whenever price makes a series of lower low n RSI makes a series of higher low it
known to be Multiple Simple Bullish Divergence.
Whenever price makers a series of higher high n RSI makes a series of lower high it is
known to be Multiple Simple Bearish Divergence.
Whenever RSI makes a series of lower low n Price makes a series of higher low it is
known to be Multiple Hidden Bullish Divergence.
Whenever RSI makes a series of Higher high n Price makes a series of lower high it is
known to be Multiple Hidden Bearish Divergence.
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14. CONCLUSION
For one to take a decision while trading should do his analysis first with the help of
Divergences, Chart patterns and Candlestick patterns.
For a long term, one can forecast the future movement using divergence.
For a medium to short term, one can track the future moment, with the help of
candlestick patterns, but it is for a specific amount of time.
For a short term and quick trading, one can trade using the chart patterns, which are for
a limited period of time.
Many traders take their position accordingly looking at the charts.
The one who can track the movement, can easily earn higher profits.
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15. REFERENCES
BOOKS
21 Candlesticks every trader should know
WEBSITES
https://www.sharekhan.com/
http://www.moneycontrol.com/indian-indices
APPLICATION
Sharekhan trade tiger
Sharekan mobile
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