Technical Analysis

T
ECHNICAL
NALYSIS
NTRODUCTION
Two major types of analysis
for predicting the
performance of a companys
stock
Technical Analysis
Fundamental Analysis
T
F
ECHNICAL
UNDAMENTAL
Vs
NALYSIS
Using prices and volume information to

predict future prices.
Historical Trends
Market Supply and Demand
Statistical Analysis
Short-Term Oriented
Using economic and accounting

information to predict stock prices.
Company and Industry Specific
Specific Company Valuation
Long-Term Oriented
H ISTORY &
BACKGROUND
Technical analysis is perhaps the oldest

form of security analysis. It is believed
that the first technical analysis occurred
in 17th century Japan, where analyst
used charts to plot price & changes in
price.
Indeed many present day Japanese
analyst still rely on the technical
analysis to forecast prices in their stock
exchange, which is the 2nd largest in the
world.
Whereas in Asia:
Technical analysis is said to be developed by
HOMMA MUNEHISA known as father of
candlesticks during 18th century which
evolved into the use of candlesticks
techniques and is today a technical analysis
charting tool
Later in 20th century, many technical
analyzing tools were developed and many
books were written by several technical
analysts to forecast the direction of prices of a
EFINITION
Technical analysis focuses
on past price movements
to determine the possible
future short term or long
term moves to come
OW
HEORY
The market does not move on

random basis but is always
considered as having three
movements.
THREE DISTINCT CYCLICAL
TRENDS
PRIMARY TREND
SECONDARY REACTIONS
MINOR MOMENTS
HREE
HASES OF
BULL MARKRT
HREE
HASES OF
BEAR MARKRT
ABONDONM
ENT OF
HOPES LOWER
PROFITS &
DIVIDENDS
DISTRESS
SELLING
P
R
I
C
E
S
DAYS
The field SSUMPTIONS

of technical analysis is
based on three assumptions:
The market discounts everything.
Price moves in trends.
History tends to repeat itself.
BASIC T
ECHNICAL
OOLS
Price charts
Trend & Trend
reversals
indicators
HART
A Chart is simply a graphical

representation of a series of
prices or volume plotted over
time
T YPES OF C
HARTS
BAR CHART
B AR C
HARTS
In this chat, the highest price, the lowest

price and closing price of each day are
plotted on a day-to-day basis
INE C
HART
The closing prices of shares are plotted
on XY graph on a day to day basis.
ANDLESTICK C
HART The highest price for the
day
Open or closing price

Body is red if stock closed
lower & is green if it is
closed higher
Open or the closing price
The lowest price for the day
REND &
REND
A trend is reallyEVERSALS
nothing more than the
general direction.
trend represents a consistent change

in prices
TYPES OF
TREND
DOWNTRE
ND
UPTREN
D
SIDEWAY
S
PTREND
When prices move upward it is a

rising trend/Uptrend
OWNTREND
When prices move downwads it is a

falling trend/downtrend
IDEWAYS
When there is little movement up or down

in the peaks and troughs, it's a sideways
or horizontal trend
HART P
Patterns are ATTERNS
used by the technical analyst
to identify trend reversal and predict the
Resistance
Reversal
Continuation
Patterns
patterns
patterns
future
movement
of
prices.
UPPORT P
isATTERNS
a price level where
Support level
the price tend to find support as it is
going down
ESISTANCE P
ATTERNS
Resistance level
is a price level where
the price tends to find the resistance
as it is going up
LLIOT W AVE
HEORY
A wave is a movement of market price from

one change in the direction to the next
change in the same direction.
The waves are the result of buying and
selling impulses emerging from the demand
and supply pressures on the market
Depending on the demand and supply
pressures, waves are generated in the prices.
According to this
theory:
Market
moves in waves
A movement in the particular direction
represented by the five distinct waves
can
be
Three waves are in the direction of the movement and

are termed as IMPULSE waves
Two waves are against the direction of the movement
and are termed as CORRECTIVE waves or REACTION
Waves
NDICATORS
A mathematical tool that can be applied

on securities price giving a result that
can be used to anticipate the trend,
volatility and price
YPES OF I
NDICATORS
Simple Moving Average

Exponential Moving
Average
ROC
RSI
DAYS
SIMPLE MOVING
CLOSING
AVERAGES
TOTAL OF
5 DAYS MA
PRICES
PRICES OF
5 DAYS
33
35
37.5
36
39
180.5
36.1
40
187.5
37.5
40.5
193
38.6
38.5
194
38.8
41
198
39.6
10
42
202
40.4
11
44
206
41.2
Exponential Moving
Average
DAYS
CLOSING
PRICE
EMA
33
33
35
33.66
37.5
34.93
36
35.28
39
36.51
40
37.66
40.5
38.6
38.5
38.57
41
39.37
10
42
40.24
SCILLATOR
RATE OF CHANGE
S
INDICATOR:
Current Price
-1
Price n period ago
RELATIVE STRENGTH INDEX
100-[100/(1+RS)]
Where;
RS = Average gain per day/
Average loss per day
MARKET I
NDICATORS
Breadth of the
Market
DAY
ADVANC DECLIN DAILY BREAD

ES
ES
DIFFE
TH
RENC (C.D)
E
Monday
620
350
+270
+270
Tuesday
470
510
-40
+230
Wednesda
y
360
610
-250
-20
Thursday
585
380
+250
+185
Friday
705
270
+435
+620
MARKET I
NDICATORS
SHORT INTEREST
A speculator often resorts to short
selling which is selling a share that
is not owned by the person
ODD-LOT INDEX
Small investors are presumed to
buy smaller number of shares than
the normal trading lot of 100
shares.

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T

Using prices and volume information to

Using economic and accounting

Technical analysis is perhaps the oldest

The market does not move on

The field SSUMPTIONS

A Chart is simply a graphical

In this chat, the highest price, the lowest

Open or closing price

trend represents a consistent change

When prices move upward it is a

When prices move downwads it is a

When there is little movement up or down

A wave is a movement of market price from

Three waves are in the direction of the movement and

A mathematical tool that can be applied

Simple Moving Average

ADVANC DECLIN DAILY BREAD

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