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The methods used to analyze securities and make investment decisions fall into two very broad categories, fundamental analysis and technical analysis. Fundamental analysis involves analyzing the characteristics of a company in order to estimate its value. Technical analysis takes a completely different approach, it doesn't care about the "value" of a company or a commodity. Technicians (sometimes called chartists) are only interested in the price movements in the market. Despite all the fancy and exotic tools it employs, technical analysis really just studies supply and demand in a market in an attempt to determine what direction, or trend, will continue in the future. In other words, technical analysis attempts to understand the emotions in the market by studying the market itself, as opposed to its components. If you understand the benefits and limitations of technical analysis, it can give you a new set of tools or skills that will enable you to be a better trader or investor.

The field of technical analysis is based on three assumptions: 1. 2. 3. The market discounts everything. Price moves in trends. History tends to repeat itself. 1. The Market Discounts Everything: A major criticism of technical analysis is that it only considers price movement, ignoring the fundamental factors of the company. However, technical analysis assumes that, at any given time, a stock's price reflects everything that has or could affect the company - including fundamental factors. Technical analysts believe that

the company's fundamentals, along with broader economic factors and market psychology, are all priced into the stock, removing the need to actually consider these factors separately. This only leaves the analysis of price movement, which technical theory views as a product of the supply and demand for a particular stock in the market. 2. Price Moves in Trends: In technical analysis, price movements are believed to follow trends. This means that after a trend has been established, the future price movement is more likely to be in the same direction as the trend than to be against it. Most technical trading strategies are based on this assumption. 3. History Tends To Repeat Itself: Another important idea in technical analysis is that history tends to repeat itself, mainly in terms of price movement. The repetitive nature of price movements is attributed to market psychology; in other words, market participants tend to provide a consistent reaction to similar market stimuli over time. Technical analysis uses chart patterns to analyze market movements and understand trends. Although many of these charts have been used for more than 100 years, they are still believed to be relevant because they illustrate patterns in price movements that often repeat themselves.


Need for Study

The share price movement is analyzed broadly with two approaches, namely, fundamental approach and the technical approach. Fundamental approach analyses the share price on the basis of economic, industry and company statistics. If the price of the share is lower than its intrinsic value, investor buys the share. But, if he finds the price of the share higher than the intrinsic value, he sells and gets profit. The technical analyst mainly studies the stock price movements of the security market. If there is an uptrend in the price movement investor may purchase the scrip. With the onset of fall in price he may sell it and move from the scrip. Basically, technical analyst and the fundamental analyst aim at good return on investment.

Scope of the Study It is the process of identifying trend reversals at an earlier stage to formulate the buying and selling strategy. With the help of several technical indicators they analyze the relationship between price volume and supply demand for overall market and the individual stocks.


y y y y

To understand the concept of Technical analysis. To know about various indicators and tools used in technical analysis. To study how the indicators help to predict the future of a stock. To identify various factors that influences the behavior of global market, Indian market and the behavior of the stocks. To generate long and short positions using the indicators.

y To offer suggestions based on my findings.


Research Design For the present study the research design is drafted as giving buy and sell calls for the intraday traders and short term investors. The period for short term investors is 15 to 30 days.

The intraday calls and positional calls are generated by using some of the technical indicators like Candle Sticks, Relative Strength Index, Moving Average Convergence Divergence, Volumes, Simple Moving Averages, and Crossovers.

Data Collection The various sources for data collection include websites and stock exchange. Primary data and secondary data is collected for this research. The graphs for intraday calls are obtained by online trading application Power Indiabulls (PIB) and graphs for positional calls are collected from websites. Websites y y y y

1. An alternative test for weak form efficiency based on technical analysis. Elaine Y. L. Loh

This study suggests a test for weak form efficiency based on the analysts approach to technical analysis. In the previous days those studies make implications on weak form efficiency based on the empirical results of testing only one class of trend indicators. On the other hand the analysts typically involve the use of trend indicators simultaneously with the other confirming indicators because trend indicators do not sufficiently capture the information content in past prices. By combining trend indicators with confirming other technical indicators and are also based on the past practices. The patterns and rules suggested by the analysts using technical indicators are applied on five of the Asian-Pacific markets, the result obtained suggests that a test for weak form efficiency based solely on trend indicators is ineffective than the alternative test proposed in this study. An examination of weak form efficiency based on this alternative test suggests that weak form efficiency is determined by factors other than technological progress.

2. Emerging Markets and Stock Market Bubbles: Nonlinear Speculation? Ehsan Ahmed, J. Barkley Rosser Jr., and Jamshed Y. Uppal

The article displays different methods are used to test the absence of excessively rapid movements of price movements in daily stock market indices in 27 emerging market

economies from the early 1990s through 2006. The absences of nonlinearities beyond autoregressive conditional heteroskedasticity (ARCH) effects are also tested. Daily returns of stock markets in emerging markets in Asia, Africa, South America, and Eastern Europe from the early 1990s through 2006 are analyzed for the possible presence of nonlinear speculative bubbles. The absence of these is tested for by studying residuals of vector autoregressivebased fundamentals, using the Hamilton regime switching model and the rescaled range analysis of Hurst. For the first test, absence of bubbles is rejected for twenty-four countries (except Mexico, Sri Lanka, and Taiwan), for the second test, it is rejected for 26 countries (except Malaysia). BDS testing on these residuals after autoregressive conditional heteroskedasticity (ARCH) effects are removed fails to reject further nonlinearity (except for Israel). Policy issues are discussed, noting that what is appropriate varies from country to country and time period to time period. Theoretical Problems of Speculative bubbles has been to identify it as a price of an asset staying away from the fundamental value of the asset for some extended period of time.

3. Frequency of Corporate Announcements via Stock Exchange Web Sites and Market Efficiency Asheq Rahman, Roger Debreceny

The Online trading softwares setup by the brokerages and the platform set up by their online trading applications of the brokerages have been creating a well organized environment for the clients to trade and invest.

Continuous corporate reporting is gaining prominence in the current real-time reporting environment. This has added a new dimension to corporate reporting, the frequency with which firms report their material information. This article tells about the impact of frequency of online material information disclosures on market efficiency. The measure of frequency of online material information disclosures is the monthly frequency of corporate announcements via stock exchange Web sites. It is found that the frequency of announcements is positively associated with returns and volume metrics and negatively associated with bid-ask spread. We infer from the results that the frequency of material online disclosures has a beneficial impact on market efficiency.

4. Product Market Competition, Insider Trading and Stock Market Efficiency Joel Peress

The competition of products of different firms in the stock market is influencing the behavior of equity markets, the situation examined shows that the product market imperfections may spread to equity markets. The author explains these concepts in the article saying, How does competition in firms product markets influence their behavior in equity markets? Do product market imperfections spread to equity markets? These questions are increasingly of interest as product markets are becoming more competitive in many countries. Firms use their monopoly power to pass on shocks to customers, thereby insulating their profits. This encourages stock trading, expedites the capitalization of private information into stock prices and improves the allocation of capital. Several implications are derived and tested.

In this paper, the author analyzed that these questions using a noisy rational expectations model in which firms operate under monopolistic competition while their shares trade in perfectly competitive markets. The model is guided by recent empirical work showing that stock returns are affected by the intensity of product market competition. Gaspar and Massa (2005) and Irvine and Pontiff (2009) document that more competitive firms have more volatile idiosyncratic returns, and Hou and Robinson (2006) show that such firms earn higher risk-adjusted returns. The model is also guided by a direct examination of the data. Our starting point is the finding in Gaspar and Massa (2005) that analysts earnings forecasts about firms operating in more competitive industries are more dispersed. Since differences in opinions.

5. Stock Market Declines and Liquidity. Hameed, Allaudeen Kang, Wenjin Viswanathan

The different trends of stock markets the declining trend, the rising trend, the reversal trend and the trends some cause effect of illiquidity are considered to be important. Liquidity dryups are argued to occur because market participants engage in panic selling (a demand effect), financial intermediaries withdraw from providing liquidity (a supply effect), or both. In this paper, the work done is on what happens to market liquidity after large market declines and whether supply effects exist in equity markets. Consistent with recent theoretical models where binding capital constraints lead to sudden liquidity dry-ups, we find that negative market returns decrease stock liquidity, especially during times of tightness in the funding market. The asymmetric effect of

changes in aggregate asset values on liquidity and commonality in liquidity cannot be fully explained by changes in demand for liquidity or volatility effects. The research brought up the economically significant returns to supplying liquidity following periods of large drops in market valuations.

6. Stock Market Mispricing: Money Illusion or Resale Option? Carl R. Chen, Peter P. Lung, and F. Albert Wang

The Stock Market mispricing the very happening thing in the stock market, the reason for this cannot be assumed as one particular one the money illusion or resale option or any other. In this article these two reasons are focused and made clear to understand. Here in the article two hypothesis are used to explain stock mispricing: i) ii) the money illusion hypothesis (Modigliani and Cohn (1979)) and ii) the resale option hypothesis (Scheinkman and Xiong (2003)).

We find that the money illusion hypothesis may explain the level, but not the Volatility of mispricing in the U.S. market. In contrast, the stock resale option hypothesis, which stems from heterogeneous beliefs about future dividend growth rates and short-sale constraints, can explain both the level and the volatility of mispricing. The evidence suggests that while the two hypotheses complement each other in explaining the level of mispricing, the resale option hypothesis provides a more coherent explanation for asset price bubbles, in which extraordinarily high price levels are often accompanied by excessive volatility and frenzied trading.


7. Tests of Technical Analysis In India Sanjay Sehgal and Meenakshi Gupta

The study evaluates the economic feasibility of technical analysis in the Indian stock market. It discusses that technical indicators do not outperform simple Buy and Hold strategy on net return basis for individual stocks. Technical indicators seem to do better during market upturns compared to market downturns. However, technical based trading strategies are not feasible vis--vis passive strategy irrespective of market cycle conditions. Technical indicators also do not provide economically significant profit for industry as well as economy based data. Combining fundamentals with technical information, we find, that technical indicators are more profitable for small stocks compared to big stocks and for high value stocks compared to low value stocks. However, the economic feasibility of fundamentals based technical strategies is still questionable. Our results seem to confirm with the efficient market hypothesis.

8. The Role of the Media in the Internet IPO Bubble. Bhattacharya, Utpal1 Galpin, Neal , Ray, Rina, Yu, Xiaoyun

Internet has brought greater improvement in the concept of online trading, the introducing of IPO has become much easier by online trading platform by the brokerage companies. People are aware of the news items that came out between 1996 and 2000 on 458 Internet initial public offerings (IPOs) and a matching sample of 458 non-Internet IPOs (a total of 171,488 news items) and classify each news item as good news, neutral news, or


bad news. The information is first documented that the media were more positive for Internet IPOs in the period of the dramatic rise in share prices and more negative for Internet IPOs in the period of the dramatic fall in share prices. Then media hype is unable to explain the Internet bubble was documented. A 1,646% difference exists in returns between Internet stocks and non-Internet stocks from January 1, 1997, through March 24, 2000 (the market peak), and the media can explain only 2.9% of that.

9. Technical indicators: A statistical approach Michael Gutmann

The article discusses trading techniques to improve the performance of the futures industry. It mentions that in order to manage one's financial assets, analyzing price and volume data should be practiced. It notes that in trading securities market, relying on time frame indicator and making technical indicators robust are important factors in financial management. The technical analyst seeks tools that are independent of any particular market or time frame. We need to modify your indicators to work with other markets. We just need to make them robust. Some of the best known technical indicators are asset-specific and may not be robust. For example, the well-known and widely used moving average convergence divergence (MACD) indicator outputs the difference between two exponential moving averages, and the moving averages are based on the price of the underlying asset. The most common method of estimating the spread, or dispersion, of a data set is Standard Deviation. The data set's mean, or average, is first calculated. The Greek letter


]i ("mu") stands for the data set's mean value. The data set's standard deviation is then calculated as the average distance of the data points from their mean.

10. Getting technical with economic data. McCurtain, Robert

The article discusses the application of technical analysis to analyze the data in the financial market and the economy. It stresses the distinct role of the technical and the fundamental analysts. It explains how the stock market can be analyzed with a top-down approach with four coincident indicators. Moreover, the exceptions to the rule in looking for linkage between data as well as the importance of considering two separate markets in combining with second fundamental data are expounded. Because of the nature and historical relationship of technical analysis indicators with financial markets data and the tenuous traditional relationship of technicians with fundamental analysts, the latter who study earnings, economic data, and other "non-priceoriented" statistical information, there has always been an intellectual gulf between the two. Technical analysts have tended to assume that fundamental data have already been discounted by the time the numbers become known. Thus, fundamentals have limited value as market timing tools. On the other hand, fundamental analysts claim that fundamental factors drive all prices in the financial markets. The question remains: "Can fundamental data be used to help with market timing decisions?"



3.1.1 INDUSTRY OVERVIEW The securities market achieves one of the most important functions of channeling idle resources to productive resources or from less productive resources to more productive resources. Hence in the broader context the people who save and investors who invest focus more towards the economys abilities to invest and save respectively. This enhances savings and investments in the economy, the two pillars for economic growth. The Indian Capital Market has come a long way in this process and with a strong regulator it has been able to usher an era of a modern capital market regime. The past decade in many ways has been remarkable for securities market in India. It has grown exponentially as measured in terms of amount raised from the market, the number of listed stocks, market capitalization, trading volumes and turnover on stock exchanges, and investor population. The market has witnessed fundamental institutional changes resulting in drastic reduction in transaction costs and significant improvements in efficiency, transparency and safety.

3.1.2 STOCK EXCHANGE A stock exchange, share market or bourse is a corporation or mutual organization which provides facilities for stock brokers and traders, to trade company stocks and other securities. Stock exchanges also provide facilities for the issue and redemption of securities, as well as, other financial instruments and capital events including the payment of income and dividends. The securities traded on a stock exchange include shares issued by

companies, unit trusts and other pooled investment products and bonds. To be able to trade a security on a certain stock exchange, it has to be listed there. Usually there is a central location at least for recordkeeping, but trade is less and less linked to such a physical place, as modern markets are electronic networks, which gives them advantages of speed and cost of transactions. Trade on an exchange is by members only. The initial offering of stocks and bonds to investors is by definition done in the primary market and subsequent trading is done in the secondary market. A stock exchange is often the most important component of a stock market. Supply and demand in stock a market is driven by various factors which, as in all free markets, affect the price of stocks. There is usually no compulsion to issue stock via the stock exchange itself, nor must stock be subsequently traded on the exchange. Such trading is said to be off exchange or over-the-counter. This is the usual way that bonds are traded. Increasingly, stock exchanges are part of a global market for securities. History of Stock Exchanges In 12th century France courtier de change were concerned with managing and regulating the debts of agricultural communities on behalf of the banks. As these men also traded in debts, they could be called the first brokers. Some stories suggest that the origins of the term "bourse" come from the Latin bursa meaning a bag because, in 13th century Bruges, the sign of a purse (or perhaps three purses), hung on the front of the house where merchants met. However, it is more likely that in the late 13th century commodity traders in Bruges gathered inside the house of a man called Van der Burse, and in 1309 they institutionalized


this until now informal meeting and became the "Bruges Bourse". The idea spread quickly around Flanders and neighboring counties and "Bourses" soon opened in Ghent and Amsterdam. In the middle of the 13th century, Venetian bankers began to trade in government securities. In 1351, the Venetian Government outlawed spreading rumors intended to lower the price of government funds. There were people in Pisa, Verona, Genoa and Florence who also began trading in government securities during the 14th century. This was only possible because these were independent city states ruled by a council of Influential citizens, not by a duke. The Dutch later started joint stock companies, which let shareholders invest in business ventures and get a share of their profits - or losses. In 1602, the Dutch East India Company issued the first shares on the Amsterdam Stock Exchange. It was the first company to issue stocks and bonds. In 1688, the trading of stocks began on a stock exchange in London Stock Exchange. The role of Stock Exchanges: Stock exchanges have multiple roles in the economy, this may include the following: Raising capital for businesses The Stock Exchange provides companies with the facility to raise capital for expansion through selling shares to the investing public. Mobilizing savings for investment When people draw their savings and invest in shares, it leads to a more rational allocation of resources because funds, which could have been consumed, or kept in idle deposits with banks, are mobilized and redirected to promote business activity with benefits for several

economic sectors such as agriculture, commerce and industry, resulting in a stronger economic growth and higher productivity levels. Facilitating company growth Companies view acquisitions as an opportunity to expand product lines, increase distribution channels, hedge against volatility, increase its market share, or acquire other necessary business assets. A takeover bid or a merger agreement through the stock exchange is one of the simplest and most common ways for a company to grow by acquisition or fusion. Redistribution of wealth Stocks exchanges do not exist to redistribute wealth although casual and professional stock investors through stock prices increases (that may result in capital gains for the Investor) and dividends get a chance to share in the wealth of profitable businesses. Corporate governance By having a wide and varied scope of owners, companies generally tend to improve on their management standards and efficiency in order to satisfy the demands of these shareholders and the more stringent rules for public corporations imposed by public stock exchanges and the government. Consequently, it is alleged that public companies (companies that are owned by shareholders who are members of the general public and trade shares on public exchanges) tend to have better management records than privately held companies (those companies where shares are not publicly traded, often owned by the company founders and/or their families and heirs, or otherwise by a small group of investors). However, some well-documented cases are known where it is alleged that there has been considerable


slippage in corporate governance on the part of some public companies ( (2000), Enron corporation (2001), (2001), Sunbeam (2001), Webvan (2001), Adelphia (2002), Mci world com (2002), or paramalat(2003), are among the most widely scrutinized by the media). Creating investment opportunities for small investors As opposed to other businesses that require huge capital outlay, investing in shares is open to both the large and small stock investors because a person buys the number of shares they can afford. Therefore the Stock Exchange provides the opportunity for small investors to own shares of the same companies as large investors. Government capital-raising for development projects Governments at various levels may decide to borrow money in order to finance infrastructure projects such as sewage and water treatment works or housing estates by selling another category of securities known as bonds. These bonds can be raised through the Stock Exchange whereby members of the public buy them, thus loaning money to the government. The issuance of such municipal bonds can obviate the need to directly tax the citizens in order to finance development, although by securing such bonds with the full faith and credit of the government instead of with collateral, the result is that the Government must tax the citizens or otherwise raise additional funds to make any regular coupon payments and refund the principal when the bonds mature. Barometer of the economy At the stock exchange, share prices rise and fall depending, largely, on market forces. Share prices tend to rise or remain stable when companies and the economy in general show signs


of stability and growth. An economic recession, depression, or financial crisis could eventually lead to a stock market crash. Therefore the movement of share prices and in general of the stock indexes can be an indicator of the general trend in the economy.

Major Stock Exchanges Twenty Largest Stock Exchanges by Market Capitalization as of July 12, 2008 (in trillions of US dollars) y y y y y y y y y y y y y NYSE Euro next Tokyo Stock Exchange NASDAQ London Stock Exchange Hong Kong Stock Exchange Toronto Stock Exchange Frankfurt Stock Exchange (Deutsche Brose) Shanghai Stock Exchange Madrid Stock Exchange (BME Spanish Exchanges) Australian Securities Exchange Swiss Exchange Nordic Stock Exchange Group OMX (Copenhagen, Helsinki, Iceland, Stockholm, Tallinn, Riga and Vilnius Stock Exchanges)


y y y y y y y y

Milan Stock Exchange (Boras Italian) Bombay Stock Exchange Korea Exchange Sao Paulo Stock Exchange Bovespa National Stock Exchange of India Moscow Interbank Currency Exchange Johannesburg Securities Exchange Taiwan Stock Exchange

Stock Exchange & Shares The market or place, where securities, viz. shares are exchanged/traded or simply where buying and selling takes place, is called stock exchange or stock market. Presently, the stock market in India consists of twenty three regional stock exchanges and two national exchanges, namely, the National Stock Exchange of India (NSE) and Bombay Stock Exchange (BSE). The Bombay Stock Exchange (BSE) is the largest Stock Exchange, in the country, where maximum transactions, in terms of money and shares take place. The other major stock exchanges are Calcutta, Madras and Delhi Stock Exchanges. Other one at Ahmedabad, Jaipura, Bangalore, Kanpur, Rajkot, Hyderabad, Cochin, Pune, Bhubaneshwar, Guwahti, Indore, Mangalore, Ludhiana, Patna, Saurashtra, Vadodara, Coimbatore, Meerut, and Surat.


Functioning of Stock Exchange Listing: Listing of shares, on a stock exchange, means, such shares can be bought and sold, in stock exchange. A Company, which intends to issue shares, through prospectus, shall have to apply to one or more stock exchanges, for getting its shares listed. The detailed and elaborate procedure of getting the shares listed on a stock exchange is monitored by SEBI. The SEBI, issues guidelines and notifications, from time to time, with regard to listing of securities Once the shares are listed, they are divided into two categories: 1. GROUP A SHARES 2. GROUP "B" SHARES Group "A" Shares are referred to as Cleaned Securities or specified shares". The facility for carrying forward a transaction from one account period to another is available for these shares. Group "A" shares represent companies, with huge amount of capital, and equally a large scope for investment. These shares are frequently traded and command higher price earnings multiples. Group "B" Shares are referred to as none cleaned securities or non-specified shares. For these groups facility of carrying forward is not available. Whenever a share is moved from Group "B" to Group "A" its market price rises, likewise, when a share is shifted from Group "A" to Group "B", its market price declines. There are some criteria and guide lines, laid down by stock exchange, for shifting stocks from the non-specified list to the specified list.


3.1.3 PRIMARY MARKET Since 1991/92, the primary market has grown fast as a result of the removal of investment restrictions in the overall economy and a repeal of the restrictions imposed by the Capital Issues Control Act. In 1991/92, Rs62.15 billion was raised in the primary market. This figure rose to Rs276.21 billion in 1994/95. Since 1995/1996, however, smaller amounts have been raised due to the overall downtrend in the market and tighter entry barriers introduced by SEBI for investor protection .SEBI has taken several measures to improve the integrity of the secondary market. Legislative and regulatory changes have facilitated the corporatization of stockbrokers. Capital adequacy norms have been prescribed and are being enforced. A mark-to-market margin and intraday trading limit have also been imposed. Further, the stock exchanges have put in place circuit breakers, which are applied in times of excessive volatility. The disclosure of short sales and long purchases is now required at the end of the day to reduce price volatility and further enhance the integrity of the secondary market. The primary is that part of the capital markets that deals with the issuance of new securities. Companies, governments or public sector institutions can obtain funding through the sale of a new stock or bond issue. This is typically done through a syndicate of securities dealers. The process of selling new issues to investors is called underwriting. In the case of a new stock issue, this sale is an initial public offering (IPO). Dealers earn a commission that is built into the price of the security offering, though it can be found in the prospectus.


Features of Primary Market 1. This is the market for new long term capital. The primary market is the market where the securities are sold for the first time. Therefore it is also called New Issue Market (NIM). 2. In a primary issue, the securities are issued by the company directly to investors. 3. The company receives the money and issue new security certificates to the investors 4. Primary issues are used by companies for the purpose of setting up new business or for expanding or modernizing the existing business. 5. The primary market performs the crucial function of facilitating capital formation in the economy. 6. The new issue market does not include certain other sources of new long term external finance, such as loans from financial institutions. Borrowers in the new issue market may be raising capital for converting private capital into public capital; this is known as going public. Methods of issuing securities in the Primary Market 1. Initial Public Offer, 2. Rights Issue (For existing Companies) and 3. Preferential Issue

3.1.4 SECONDARY MARKET The secondary market is the financial market for trading of securities that have already been issued in an initial private or public offering. Alternatively, secondary market can refer to the market for any kind of used goods. The market that exists in a new security just after the new issue is often referred to as the aftermarket. Once a newly issued stock is listed on a


stock exchange, investors and speculators can easily trade on the exchange, as market makers provide bids and offers in the new stock. Function In the secondary market, securities are sold by and transferred from one investor or speculator to another. It is therefore important that the secondary market be highly liquid (Originally, the only way to create this liquidity was for investors and speculators to meet at a fixed place regularly. This is how stock exchanges originated; see History of the Stock Exchange). Secondary marketing is vital to an efficient and modern capital market. Fundamentally, secondary markets mesh the investor's preference for liquidity (i.e., the investor's desire not to tie up his or her money for a long period of time, in case the investor needs it to deal with unforeseen circumstances) with the capital user's preference to be able to use the capital for an extended period of time. For example, a traditional loan allows the borrower to pay back the loan, with interest, over a certain period. For the length of that period of time, the bulk of the lender's investment is inaccessible to the lender, even in cases of emergencies. Likewise, in an emergency, a partner in a traditional partnership is only able to access his or her original investment if he or she finds another investor willing to buy out his or her interest in the partnership. With a securitized loan or equity interest (such as bonds) or tradable stocks, the investor can sell, relatively easily, his or her interest in the investment, particularly if the loan or ownership equity has been broken into relatively small parts. This selling and buying of small parts of a larger loan or ownership interest in a venture is called secondary market trading.


Under traditional lending and partnership arrangements, investors may be less likely to put their money into long-term investments, and more likely to charge a higher interest rate if they do. Private equity secondary market In finance, the private equity secondary market (also often called private equity secondary or secondary) refers to the buying and selling of pre-existing investor commitments to private equity and other alternative investment funds. Sellers of private equity investments sell not only the investments in the fund but also their remaining unfunded commitments to the funds. By its nature, the private equity asset class is illiquid, intended to be a long-term investment for buy-and-hold investors. For the vast majority of private equity investments, there is no listed public market; however there is a robust and maturing secondary market available for sellers of private equity assets. Driven by strong demand for private equity exposure, a significant amount of capital has been committed to dedicated secondary market funds from investors looking to increase and diversify their private equity exposure Laws Governing Capital Market: The four main legislations governing the securities market are: (a) The SEBI Act, 1992 which establishes SEBI to protect investors and develop and Regulate the Markets. (b) The Companies Act, 1956, which sets out the code of conduct for the corporate sector in relation to issue, allotment and transfer of securities, and disclosures to be made in public issues.


(c) The Securities Contracts (Regulation) Act, 1956, read with the Securities Contracts (Regulation) Rules, 1957 which provide for regulation of transactions in securities through control over stock exchanges; and (d) The Depositories Act, 1996 which provides for electronic maintenance and transfer of ownership of demat securities.

Regulators SEBI is the primary regulator of the Securities Market and the entities operating therein. The SEBI Act and the Depositories Act are mostly administered by SEBI. The rules under the securities laws are framed by government and regulations by SEBI. All these are administered by SEBI. The powers under the Companies Act relating to issue and transfer of securities and non-payment of dividend are administered by SEBI in case of listed public companies and public companies proposing to get their securities listed Market Value The current quoted price at which investors buy or sell a share of common stock or a bond at a given time. Also known as "market price The market capitalization plus the market value of debt. Sometimes referred to as "total market value". In the context of securities, market value is often different from book value because the market takes into account future growth potential. Most investors who use fundamental analysis to pick stocks look at a company's market value and then determine whether or not the market value is adequate or if it's undervalued in comparison to its book value, net assets or some other measure.


Stock A type of security that signifies ownership in a corporation and represents a claim on part of the corporations assets and earnings. There are two main types of stock common and preferred. Common stock usually entitles the owner to vote at shareholders' meetings and to receive dividends. Preferred stock generally does not have voting rights, but has a higher claim on assets and earnings than the common shares. For example, owners of preferred stock receive dividends before common shareholders and have priority in the event that a company goes bankrupt or when liquidated, also known as "shares" or "equity". A holder of stock (a shareholder) has a claim to a part of the corporation's assets and earnings, in other words, a shareholder is an owner of a company. Ownership is determined by the number of shares a person owns relative to the number of outstanding shares. For example, if a company has 1,000 shares of stock outstanding and one person owns 100 shares, that person would own and have claim to 10% of the companys assets stocks are the foundation of nearly every portfolio. Historically, they have outperformed most other investments over the long run. Shareholder Any person, company, or other institution that has own at least 1 share in a company. A shareholder may also be referred to as a stockholder. Shareholders are the owners of a company. They have the potential to profit if the company does well, but that comes with the potential to lose if the company does poorly.


Share A unit of ownership interest in a corporation or financial asset. While owning shares in a business does not mean that the shareholder has direct control over the business's day-today operations, being a shareholder does entitle the possessor to an equal distribution in any profits, if any are declared in the form of dividends. The two main types of shares are common shares and preferred shares. In the past, shareholders received a physical paper stock certificate that indicated that they owned "x" shares in a company. Today, brokerages have electronic records that show ownership details. Owning a paperless share makes conducting trades a simpler and more streamlined process, which is a far cry from the days were stock certificates needed to be taken to a. Brokerage before a trade could be conducted. While shares are often used to refer to the stock of a corporation, shares can also represent ownership of other classes of financial assets, such as mutual funds. 3.1.5 INDEX An Index is used to summarize the price movements of a unique set of goods in the financial, commodity, forex or any other market place. Financial indices are created to measure price movements of stocks, bonds, T-bills and other type of financial securities. More specifically, a stock index is created to provide investors with the information regarding the average share price in the stock market. Broad indices are expected to capture the overall behavior of equity market and need to represent the return obtained by typical portfolios in the country. BSE SENSEX and NSE NIFTY are major indices in India.


SENSEX is India's first Index compiled in 1986. It is a basket of 30 constituent stocks representing a sample of large, liquid and representative companies. The base year of BSE-SENSEX is 1978-79 and the base value is 100. The index is widely reported in both domestic and international markets through print as well as electronic media. Due to its wide acceptance amongst the investors, SENSEX is regarded to be the pulse of the Indian stock market. All leading business newspapers and the business channels report SENSEX, as it is the language that all investors understand. As the oldest index in the country, it provides the time series data over a fairly long period of time (from 1979 onwards) to be used for various research purposes. The Index Cell of the exchange is responsible for the day-to-day maintenance of the index within the broad index policy set by the Index Committee. The Index Cell ensures that the SENSEX and all other BSE indices maintain their benchmark properties by striking a delicate balance between frequent replacements in index and maintaining its historical continuity. SENSEX is calculated using a market capitalization weighted method. As per this methodology, the level of the index reflects the total market value of all 30- component stocks from different industries related to particular base period. The total market value of a company is determined by multiplying the price of the stock by the number of shares outstanding Statisticians call the index of a set of combined variables (such as price and No. of shares) a composite index. An indexed number is used to represent the results of this calculation in order to make the value easier to work with and track over a time. It is much easier to graph a chart based on indexed values than one used on actual values. World over


majority of the well known indices are constructed using Market Capitalization Weighted Method. In practice, the daily calculation of SENSEX is done by dividing the aggregate market value of the 30 Companies in the index by a number called the Index Divisor. The Divisor is the only link to the original based period value of the SENSEX. The Divisor keeps the Index comparable over a period of time and the reference point for the entire index maintenance adjustments. SENSEX is widely used to describe the mood in the Indian Stock Markets.


The National Stock Exchange of India was promoted by leading Financial institutions at the behest of the Government of India, and was incorporated in November 1992 as a tax-paying company. In April 1993, it was recognized as a stock exchange under the Securities Contracts (Regulation) Act, 1956. NSE is mutually-owned by a set of leading financial institutions, banks, insurance companies and The National Stock Exchange of India Limited (NSE), is a Mumbai-based stock exchange. It is the largest stock exchange in India in terms of daily turnover and number of trades, for both equities and derivative trading.[1]. Though a number of other exchanges exist, NSE and the Bombay Stock Exchange are the two most significant stock exchanges in India, and between them are responsible for the vast majority of share transactions. The NSE's key index is the S&P CNX Nifty, known as the Nifty, an index of fifty major stocks weighted by market capitalization.




Indiabulls Group is one of the top business houses in the country with business interests in Real Estate, Infrastructure, and Financial Services, Retail, Multiplex and Power sectors. Indiabulls Group companies are listed in Indian and overseas financial markets. The Net worth of the Group exceeds USD 3 billion. Indiabulls has been conferred the status of a Business Superbrand by The Brand Council, Super brands India. Indiabulls Financial Services is an integrated financial services powerhouse providing Consumer Finance, Housing Finance, Commercial Loans, Life Insurance, Asset Management and Advisory services. Indiabulls Financial Services Ltd is amongst 68 companies constituting MSCI Morgan Stanley India Index. Indiabulls Financial is also part of CLSAs model portfolio of 30 Best Companies in Asia. Indiabulls Financial Services in partnership with MMTC Limited, the largest commodity trading company in India, has set up Indias 4th Multi-Commodities Exchange. Indiabulls Real Estate Limited is Indias third largest property company with development projects spread across residential projects, commercial offices, hotels, malls, and Special Economic Zones (SEZs) infrastructure development. Indiabulls Real Estate partnered with Farallon Capital Management LLC of USA to bring the first FDI into real estate. Indiabulls Real Estate is transforming 14 million sqft in 16 cities into premium quality, high-end commercial, residential and retail spaces. Indiabulls Real Estate has diversified significantly in the following business verticals within the Real Estate Space: Real Estate Development, Project Advisory & Facilities Management: Residential,


Commercial (Office and Malls) and SEZ Development. Power: Thermal and Hydropower Generation. Indiabulls Securities Limited is Indias leading capital markets company with AllIndia Presence and an extensive client base. Indiabulls Securities possesses state-of-the-art trading platform, best broking practices and is the pioneer in trading product innovations. Power Indiabulls, in-house trading platform, is one of the fastest and most efficient trading platforms in the country. Indiabulls Securities Limited is the first brokerage house to be assigned the highest rating BQ 1 by CRISIL.

Promoters for Indiabulls Sameer Gehlaut, Rajiv Rattan and Saurabh Mittal are the promoters of Indiabulls Financial Services Limited. While Sameer Gehlaut will have a 23.0% stake in the company post the IPO, Rajiv Rattan and Saurabh Mittal will have a post issue holding of 11.5% and 10.1% respectively. All the three promoters of the company are engineering graduates while Saurabh Mittal is a management graduate as well.

Indiabulls Group Structure

Financial services


Real Estate



Figure 3.1: Block diagram of Indiabulls group


About Indiabulls group The Indiabulls Group is one of the top fifteen conglomerates in the country with businesses in several significant sectors. The group companies have a market capitalization of over Rs. 25,000 crores (US$ 6.25 billion) while group revenues have grown at a cumulative annual rate of over 100% to now reach Rs. 3100 crores (US$ 775 million) and the group profit has surged to over Rs. 1200 crores (US$ 300 million). Its companies, listed in important Indian and overseas markets, have distributed over Rs. 700 crores (US$ 175 million) as dividend in the year 2008. Indiabulls Financial Services Limited was accorded the highest rating P1+ for short term debt and the highest rating of AAA (SO) by CRISIL for loan receivables securitization while Indiabulls Securities Limited is the only broker in India to be assigned CRISILs highest broker quality grading of BQ1. In December 2007, Indiabulls acquired Pyramid Retail including Pyramid Megastores and Trumart, their chain of lifestyle and convenience outlets. Indiabulls growth has been nothing short of stupendous. In less than eight years since the company was first registered, it has grown from just five employees to 21,000 and from one office to 600 across the country.The Indiabulls Financial Services stock is the best performing stock in the MSCI Index the global benchmark for equity investments. A person who bought Indiabulls shares in the IPO at Rs. 19 (US$ 0.48) in September 2004 has been rewarded almost 100 times in three and a half years a feat unparalleled in the history of Indian capital markets


Indiabulls Real Estate Limited partnered Farallon Capital Management LLC of the US to bring the first Foreign Direct Investment into real estate.

BOARD OF DIRECTORS OF INDIABULLS GROUP Mr Rajiv Rattan Mr Saurabh Mittal Mr Gagan Banga Mr Ashok Kacker Mr Saket Bahuguna Mr Ashok Sharma Mr Ajit Mittal Mr Gurbans Singh Mr Tejinderpal Singh Miglani Vice Chairman Vice Chairman Group Spokesperson Group President Group CLO Group CFO Group Director Group Director Group CIO

3.2.2 SECTOR Since Indiabulls derives most of its revenues from the brokerage business, its fortunes are very much dependent on the Performance of the capital markets, i.e. debt, derivative and equity markets. The Indian equity markets have grown from strength to strength in the last decade with combined daily volumes of all segments on the BSE and the NSE touching Rs 232 bn in April 2004, from Rs 5 bn in FY96. Total shareholders in the country are over 20 m (2% of population) and this is the third largest after the US and Japan, in absolute terms.


However, if one were to compare the percentage of all households in India that are invested in the stock markets, it is only about 1.9% as compared to an estimated 52%(including indirect ownership by way of mutual funds) of all households in the US. This highlights the long-term potential for the sector. Apply

Indiabulls Securities Ltd main strength lies in its formidable team. This team comprising highly qualified and experienced personnel has been responsible for the overall management of the company and has provided direction in diverse areas of business strategy, operating management, regulatory reporting, human resources development and product development.

Indiabulls Securities Ltd is listed on the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE) and its global depository shares are listed on the Luxembourg Stock Exchange.

Indiabulls Securities Limited Mr Divyesh Shah CEO Mr Vijay Babbar DMD


Senior Vice President Yuv Raj Singh

Regional Manager Dashmeet Singh

Branch Manager Senior Sales Manager Sujeet Roy Chowdary Support System Vishal Sales Function Subrot

Back Office Executive Ifran Khan

Local Compliance Officer Chary

AVP Satish Kumar

Dealer Badri Nath

AVP Raja

Figure 3.2: Organizational structure of ISL 3.2.3 PRODUCTS India bulls Securities Limited (ISL) is the pioneer in Retail Broking Industry having a pan India presence and providing services to a customer base exceeding half a million. ISL is in the business of providing securities broking and advisory services and is a corporate member of capital market and derivative segment of NSE, BSE & member of wholesale


debt market of NSE . ISL is the first and only brokerage house to be assigned the highest rating BQ-1 by CRISIL. The company through various types of brokerage accounts provides product and services related to purchase and sale of securities listed in NSE and BSE. It also provides depository services, equity research services, mutual fund, and IPO distribution to its clients. The company provides these services through on-line and off-line distribution channel.

IPO Online You can quickly and seamlessly apply to the latest public offerings with just a few clicks.

Currency Derivatives Indiabulls offers trading in the Currency Derivatives Segment in National Stock Exchange.

NRI Trading Non-Resident Indians (NRIs) can also enjoy the state-of-the-art online trading Platforms of Indiabulls to trade in Indian Capital

Indiabulls Equity Analysis Indiabulls Equity Analysis complements its equity broking and advisory services with high quality comprehensive report which can be accessed online. Power Indiabulls (PIB) is the advanced online trading platform from Indiabulls Securities Limited. PIB provides the best in the class internet trading features and delivers a seamless and rich online trading experience for its users. PIB comes with a whole host of online features for the internet trading users ranging from real-time stock prices, to live trading reports, charting, News Room. PIB provides an integrated online trading platform


for the internet trading community to invest in equity, F&O, Online IPO and base their decision on sound fundamental research and technical analysis. It also provides various kinds of trading reports, each developed to cater to internet trading users distinct needs.

Why (PIB) PIB is the internet based stock trading application, which provides you an unparalleled edge to trade in Indian stock markets. Here are some of the compelling reasons, why you should subscribe for Power Indiabulls (PIB) Integrated market watch for Equities and Derivatives y y y y y y y y y Live Streaming Quotes & Market News Fast Order Entry Tic by Tic Live Intraday Charts Technical Analysis Customizable Alerts Extensive Reports Real Time Market Statistics World Market Summary Introducing Intraday Futures

Indiabulls Signature Account helps to remain on top of your investments. It provides you the platform to trade in Equity and Derivatives. With an unmatched service and nationwide presence, the Indiabulls Signature account comes bundled with a variety of exclusive features.


Ease of Trading with Indiabulls Signature account you have the flexibility to place your orders either by logging on the website, calling at the branch or walking in the branch. Dedicated Service Branch and Relationship Manager You can get in touch with your Relationship Manager and Service Branch for all your trading related requirements.

Online payment Gateways Use our online payment gateways facility and get instant credit in your Trading Account. We currently provide online gateway payment facility with four major banks HDFC, ICICI, AXIS and IDBI.

IPOS Indiabulls provides you the flexibility to apply in ongoing IPOs through online & offline channels. For applying online, you do not need to fill tedious forms and write cheques. You can apply conveniently in IPOs from the comfort of your home / office through our Website/PIB. For applying offline, you can contact your Relationship Manager/ Service Branch.

Portfolio Tracker You can track your investments online through our portfolio tracker functionality. You can conveniently track the daily movement, notional / booked profits and losses in your portfolio.

Equity Analysis Reports A qualified and dedicated team of equity analysts at Indiabulls publishes various research reports. You can view these reports to gain insight into the companies of your interest.


News Room The News Room provides real-time news from stock-markets, corporate sector, economy and other segments that have a bearing on the market sentiment.

Market Statistics This functionality facilitates tracking the market trend by providing you real time data on top gainers, top losers, volume toppers and most volatile stocks.

Mobile Power Indiabulls (MPIB) MPIB is a mobile-phone based application, developed exclusively for Indiabulls customers. Using MPIB, you can view the live market rates of your favorite stocks and futures contracts on your mobile device. Thus with MPIB, you can always remain connected with the market, even on the move.

Electronic contract notes on Email This facility enables you to get digitally signed Electronic Contract Notes on email within 24 hours of executing trades in your Trading Account.

Introducing intraday Futures Intraday Futures Product enables you to take intraday positions in various future contracts at lower margins. These positions have to be necessarily squared-off at the day end.

Security Token the new age security tool to make your trading experience totally secure by using two factors authentication mechanisms.


Comprehensive Reports Track your financials and portfolio efficiently through various reports like Ledger Statements, Account Summary, Net Portfolio Report, Daily Transaction Report, Daily Transaction report etc.

Currency Derivatives Trade in Currency Derivatives which are similar in nature to Stock or Index Futures contracts. Currency Future Contracts, with INR: USD exchange rate as the underlying, are available with a monthly expiry.

Depository Services Indiabulls is a depository participant with the National Securities Depository Limited and Central Depository Services (India) Limited for trading and settlement of dematerialized shares. Indiabulls performs clearing services for all securities transactions through its accounts. We offer depository services to create a seamless transaction platform execute trades through Indiabulls Securities and settle these transactions through the Indiabulls Depository Services. Indiabulls Depository Services is part of our value added services for our clients that create multiple interfaces with the client and provide for a solution that takes care of all your needs.



4.1 TECHNICAL ANALYSIS Technical analysis is a method of evaluating securities by analyzing the statistics generated by market activity, such as past prices and volume. Technical analysts do not attempt to measure a security's intrinsic value, but instead use charts and other tools to identify patterns that can suggest future activity. Just as there are many investment styles on the fundamental side, there are also many different types of technical traders. Some rely on chart patterns, others use technical indicators and oscillators, and most use some combination of the two. In any case, technical analysts' exclusive use of historical price and volume data is what separates them from their fundamental counterparts.

Origin and Development of Technical Analysis The principles of technical analysis derive from the observation of financial markets over hundreds of years. The oldest known hints of technical analysis appear in Joseph de la Vega's accounts of the Dutch markets in the 17th century. In Asia, the oldest example of technical analysis is thought to be a method developed by Homma Munehisa during early 18th century which evolved into the use of candlestick techniques, and is today a main charting tool.


4.1.1 TECHNICAL VS FUNDAMENTAL ANALYSIS Technical analysis and fundamental analysis are the two main schools of thought in the financial markets. As we have mentioned, technical analysis looks at the price movement of a security and uses this data to predict its future price movements. Fundamental analysis, on the other hand, looks at economic factors, known as fundamentals. Charts Vs Financial Statements At the most basic level, a technical analyst approaches a security from the charts, while a fundamental analyst starts with the financial statements. By looking at the balance sheet, cash flow statement and income statement, a fundamental analyst tries to determine a company's value. In financial terms, an analyst attempts to measure a company's intrinsic value. In this approach, investment decisions are fairly easy to make, if the price of a stock trades below its intrinsic value, its a good investment. Technical traders, on the other hand, believe there is no reason to analyze a company's fundamentals because these are all accounted for in the stock's price. Technicians believe that all the information they need about a stock can be found in its charts. Time Horizon Fundamental analysis takes a relatively long-term approach to analyzing the market compared to technical analysis. While technical analysis can be used on a timeframe of weeks, days or even minutes, fundamental analysis often looks at data over a number of years.


The different time frame that these two approaches use is a result of the nature of the investing style to which they each adhere. It can take a long time for a company's value to be reflected in the market, so when a fundamental analyst estimates intrinsic value, a gain is not realized until the stock's market price rises to its "correct" value. This type of investing is called value investing and assumes that the short-term market is wrong, but that the price of a particular stock will correct itself over the long run. This "long run" can represent a timeframe of as long as several years, in some cases. Trading Vs Investing Not only is technical analysis more short term in nature that fundamental analysis, but the goals of a purchase (or sale) of a stock are usually different for each approach. In general, technical analysis is used for a trade, whereas fundamental analysis is used to make an investment. Investors buy assets they believe can increase in value, while traders buy assets they believe they can sell to somebody else at a greater price. Intraday Traders Intra-Day trading is generally called day trading too. Day trading is a trading activity which involves buying and selling stocks, commodities, etc., with in the same trading day. For example, one could buy 100 stocks of ABC. If he or she sells it off on the same day (sale of 100 of ABC), you have no stocks to carry home. This is basically day trading. Short Term Investors Investors comprised of low-risk investments with the goal of protecting capital and

providing are turn that beats a bench mark rate, such as treasuries. Short-term investments can include cash, notes and other short-term debt. These people form the biggest clientele base of both the Brokers and the Technical Analysts.


Hedgers These are generally big investors, who have lot of money at stake and hence they look to have some hedging of their risk. The strategy followed by this section of investors is that they compare the stock in consideration with the index and on the basis of the result of this comparison they take their position in the stock. Technical Analysis is done by identifying the trend from past movements and then using it as a tool to predict future price movements of the stock. It can be done by using any of the following methods: 4.2 CHARTS: In technical analysis, charts are similar to the charts that you see in any business setting. A chart is simply a graphical representation of a series of prices over a set time frame. For example, a chart may show a stock's price movement over a one-year period, where each point on the graph represents the closing price for each day the stock is traded

Figure 4.1: Chart representation of SBI


It is a representation of the price movements of a stock over a 3month period. The bottom of the graph shows horizontally (x-axis) is the date or time or month scale. On the right hand side, running vertically (y-axis), the price of the security is shown. By looking at the graph we see that in 28/04/ 2011, the price of this stock was around Rs.2933, whereas on 26/05/2011 the stock's price is around Rs 2176. This tells us that the stock has fell Rs.757 between the given days. Chart Properties There are several things that we should be aware of when looking at a chart, as these factors can affect the information that is provided. They include the y y y Time Scale Price Scale Price Point Properties

The Time Scale The time scale refers to the range of dates at the bottom of the chart, which can vary from decades to minutes. The most frequently used time scales are Intraday, Daily, Weekly, Monthly, Quarterly & Annually and in Intraday we have five minutes, 10 minutes, 15 minutes, 20 minutes, 30 minutes and one hour. The shorter the time frame, the more detailed the chart. Each data point can represent the closing price of the period or show the open, the high, the low and the close depending on the chart used. Intraday charts plot price movement within the period of one day. This means that the time scale could be as short as five minutes or could cover the whole trading day from the opening bell to the closing bell.


Weekly, monthly, quarterly and yearly charts are used to analyze longer term trends in the movement of a stock's price. Each data point in these graphs will be a condensed version of what happened over the specified period. So for a weekly chart, each data point will be a representation of the price movement of the week. The Price Scale and Price Point Properties The price scale is on the right-hand side of the chart. It shows a stock's current price and compares it to past data points. This may seem like a simple concept in that the price scale goes from lower prices to higher prices as you move along the scale from the bottom to the top. The problem, however, is in the structure of the scale itself. A scale can either be constructed in a linear (arithmetic) or logarithmic way, and both of these options are available on most charting services. 4.2.1 TYPES OF CHARTS There are six types of charts, though there are six types of charts only four out of them are commonly used by investors and traders on the information that they are seeking and their individual skill levels. Important chart types are: 1. Line Chart 2. Bar Chart 3. Candlestick Chart 4. Point and Figure 5. Kagi 6. Renko


1. Line Chart: The basic of the four charts is the line chart because it represents only the closing prices over a set period of time. The line is formed by connecting the closing prices over the time frame. Line charts do not provide visual information of the trading range for the individual points such as the high, low and opening prices. However, the closing price is often considered to be the most important price in stock data compared to the high and low for the day and this is why it is the only value used in line charts.

Figure 4.2: Line chart of SBI 2. Bar Charts: The bar chart expands on the line chart by adding several more key pieces of information to each data point. The chart is made up of a series of vertical lines that represent each data point. This vertical line represents the high and low for the trading period, along with the closing price. The close and open are represented on the vertical line by a horizontal dash. The opening price on a bar chart is illustrated by the dash that is


located on the left side of the vertical bar. Conversely, the close is represented by the dash on the right. Generally, if the left dash (open) is lower than the right dash (close) then the bar will be shaded black, representing an up period for the stock, which means it has gained value. A bar that is colored red signals that the stock has gone down in value over that period. When this is the case, the dash on the right (close) is lower than the dash on the left (open). The highest price for the day Closing price

Opening price The lowest price for the day

Figure 4.3: Bar Chart of SBI


3. Candlestick Charts: History Candlestick charting can be traced back to the 1700's as a tool used for rice trading. One of the great rice traders of the 1800's, Homma is widely credited for developing the candlestick charting basics used today. In the west, Candlestick Charting has grown in popularity and use, thanks to the efforts of Steve Nisson and Greg Morris. Candlestick charts are visually appealing and can be a valuable tool in the technicians toolbox as it gives insight into current investor sentiment, allowing for the determination of short term tops and bottoms. The candlestick chart is similar to a bar chart, but it differs in the way that it is visually constructed. Similar to the bar chart, the candlestick also has a thin vertical line showing the period's trading range. The difference comes in the formation of a wide bar on the vertical line, which illustrates the difference between the open and close. And, like bar charts, candlesticks also rely heavily on the use of colors to explain what has happened during the trading period. A major problem with the candlestick color configuration, however, is that different sites use different standards; therefore, it is important to understand the candlestick configuration used at the chart site you are working with. There are two color constructs for days up and one for days that the price falls. When the price of the stock is up and closes above the opening trade, the candlestick will usually be white or clear. If the stock has traded down for the period, then the candlestick will usually be red or black, depending on the site. If the stock's price has closed above the previous days close but below the day's open, the candlestick will be black or filled with the color that is used to indicate an up


Figure 4.4: Images representing candle sticks with shadows The candle is comprised of two parts, the body and the shadows. The body encompasses the open and closing price for the period. The candle body is either filled with red or blue color then the security closed below the open, when the candle is transparent irrespective of color then the security is closed above the open price. The candlestick shadow encompasses the intra period high and low. Long shadows, show that the trading extended well beyond the opening and/or closing price, while short shadows, show that trading was confined closely to the open and/or closing price.

Figure 4.5: Candle stick chart of SBI


4.2.2 CANDLESTICK TERMS Long, and Short Bodies, Marubozo and Spinning Tops

Figure 4.6: Candle stick terms image

A long body is a candlestick with a very long body when compared with other recent candles. White bodies show intense buying pressure, where as black bodies show intense selling pressures. Long white candles are generally bullish, but are also found at blowout tops, so they must be interpreted with surrounding candles. Similar long black candles are generally bearish, but are also found at capitulation bottoms. Long bodies with no upper and lower shadows are called Marubozo's. Marubozo's are more powerful than long candles as they show a steady advance (or decline if black) throughout the trading period. A short candle is the opposite of a long candle and usually implies consolidation, as the stock traded in a narrow range during the period. Short candles with long upper and lower shadows are called spinning tops, and are potential reversal signs, as it shows that despite trading in a wide range, the security closed close to the open. A spinning top becomes a doji as the closing price approaches the open price.



Figure 4.7: Image representing Dojis

Doji's are powerful reversal indicating candlesticks and are formed when the security opens and closes at the same level, implying indecision in the stock price. Depending on the location and length of the shadows doji's can be categorized into the following formations, doji, long legged-doji, butterfly doji, gravestone doji, 4 price doji, etc. Doji's become more significant when seen after an extended rally of long bodied candles (bullish or bearish) and are confirmed with an engulfing (a long candlestick formed over the next period which engulfs the doji body). A long legged-doji is formed when the stock opens at a level trades in a considerable trading range only to close at the same level as it opened. Long legged-doji's become more powerful when preceded by small candles, as a sudden burst of volatility in a relative nonvolatile stock, can imply a trend change is expected. Dragonfly Doji's are doji's that opened at the high of a session, had a considerable interperiod decline, then find support to rally back to close at the same level as the open. Dragonfly Doji's are often seen after a moderate decline, and are bottom reversal indicators when confirmed with a bullish engulfing.

Gravestone Doji's are the opposite of the Dragonfly Doji and are top reversal indicators when confirmed with bearish engulfings. As the name implies, gravestone doji's look like a gravestone, and could signal impending doom for a stock. 4 price doji's occur when the stock opens, trades and closes at virtually the same level for the period. These are very rare, except with thinly traded securities.


Figure 4.8: Images representing Engulfings

An engulfing occurs when the candle body engulfs the previous candles body. White engulfing candles are bullish engulfing, whereas black engulfing candles are bearish engulfings. Bullish engulfings are commonly found at short term bottoms, where as bearish engulfings at tops. Many candlesticks, such as dojis, hammers, hanging mans need confirmation of a trend change with an engulfing (bullish engulfing at bottoms, bearish engulfings at tops).


Hammers/ Hanging Man

Figure 4.9: Images representing Hammers hanging man

Hammers and hanging man's are short body candles with little or no upper shadow, and a lower shadow at least twice as long as the candle body. Hammers are formed after declines, and hanging man's after advances. When confirmed they become powerful reversal signals, especially the hammer. The expression "hammers out a bottom" refers to when after the open, the downtrend in a stock continues, until at some point, enough buying interest is generated, to bring prices close to where they open. Confirmation comes from a bullish engulfing, showing the trader that the uptrend is established. The color of the hanging man/hammer is unimportant, but some consider white hammers and black hanging man's more potent reversal signals. Gaps

Figure 4.10: Image representing Gaps


A gap occurs when a candlestick body doesn't fall within the range of the previous candlestick body, a more loosely interpreted definition of a gap, requires no overlap between the shadows, making it obvious on a bar chart as well. You will often hear "All Gaps Get Filled", which is untrue. While the vast majority of gaps do get filled, you can find some charts, where a gap has never filled. Depending on how you define a gap, should base your definition of a gap fill. For instance I consider a gap when 2 bodies don't overlap, so I wait for a body fill to call the gap close. If one was using the criteria of shadow overlap, a gap fill would occur with a shadow fill. Gaps are typically continuation patterns, and sometimes mark the 50% point of a move. They become more significant as the stock approaches the level of the gap as it often acts as a magnet. During a gap fill, it is considered bearish closing below the bottom of the gap and bullish closing above it. Once formed gap's will often serve as strong support/resistance levels even after being closed for some time. Exhaustion gaps signify the end of market bottoms and tops, where initially overwhelming buying pressure, is soon consumed by selling pressure (and vice versa for bottoms). Exhaustion gaps have significant volume associated with them, and are often closed within 3 trading days.

Figure 4.11: Image representing different types of gaps


Three gap play occurs when a stock gaps in the direction of the trend for close to 3 consecutive periods; with the final gap is an exhaustion gap that is larger then the previous gaps with respect to size and volume. After the exhaustion gap, the trend changes all of the gaps immediately get filled. After the final gap is filled, the stock turns and continues well beyond the initial exhaustion gap. Although pretty rare, they can be very profitable if recognized early and swing traded. 4.2.3 Chart Analysis Chart analysis is a technical study whose objective is to determine market trends by analyzing charts based on share price evolutions and traded volumes. The charts can be analyzed based upon few parameters and they are: 1. Overall Trend The first step is to identify the overall trend. This can be accomplished with trend lines, moving averages or peak/trough analysis. As long as the price remains above its uptrend line, selected moving averages or previous lows, the trend will be considered bullish. 2. Support Areas of congestion or previous lows below the current price mark

support levels. A break below support would be considered bearish. 3. Resistance Areas of congestion and previous highs above the current price mark the resistance levels. A break above resistance would be considered bullish. 4. Momentum is usually measured with an oscillator such as MACD. If MACD is above its 9-day EMA (exponential moving average) or positive, then momentum will be considered bullish, or at least improving. 5. Buying/Selling Pressure For stocks and indices with volume figures available, an indicator that uses volume is used to measure buying or selling pressure.


6. Relative Strength: The price relative is a line formed by dividing the security by a benchmark. For stocks it is usually the price of the stock divided by the S&P 500. The plot of this line over a period of time will tell us if the stock is outperforming (rising) or underperforming (falling) the major index. The final step is to synthesize the above analysis to ascertain the following: o Strength of the current trend. o Maturity or stage of current trend. o Reward to risk ratio of a new position. o Potential entry levels for new long position.

4.3 TECHNICAL INDICATORS & OSCILLATORS Indicators are calculations based on the price and the volume of a security that measure such things as money flow, trends, volatility and momentum. Indicators are used as a secondary measure to the actual price movements and add additional information to the analysis of securities. Indicators are used in two main ways: to confirm price movement and the quality of chart patterns, and to form buy and sell signals. 4.3.1 MOVING AVERAGES Moving averages are one of the most popular and easy to use tools available to the technical analyst. They smooth a data series and make it easier to spot trends, something that is especially helpful in volatile markets. They also form the building blocks for many other technical indicators and overlays. The 2 most popular types of moving averages are: i. ii. Simple Moving Average (SMA) Exponential Moving Average (EMA)


Simple Moving Average (SMA) A simple moving average is formed by computing the average (mean) price of a security over a specified number of periods. While it is possible to create moving averages from the Open, the High, and the Low data points, most moving averages are created using the closing price. For example: a 10-day simple moving average is calculated by adding the closing prices for the last 10 days and dividing the total by 10. S.No 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 Symbol Date Series Close Price TCS 9-May-11 EQ 1135.55 TCS 10-May-11 EQ 1139.9 TCS 11-May-11 EQ 1140.25 TCS 12-May-11 EQ 1111.75 TCS 13-May-11 EQ 1127.1 TCS 16-May-11 EQ 1131.1 TCS 17-May-11 EQ 1141.7 TCS 18-May-11 EQ 1155.05 TCS 19-May-11 EQ 1164.85 TCS 20-May-11 EQ 1175 TCS 23-May-11 EQ 1166.55 TCS 24-May-11 EQ 1149.9 TCS 25-May-11 EQ 1128.6 TCS 26-May-11 EQ 1135.75 TCS 27-May-11 EQ 1144.55 TCS 30-May-11 EQ 1151.95 TCS 31-May-11 EQ 1157.15 TCS 1-Jun-11 EQ 1175.4 TCS 2-Jun-11 EQ 1167.75 TCS 3-Jun-11 EQ 1152.1 TCS 6-Jun-11 EQ 1164.35 TCS 7-Jun-11 EQ 1179.3 TCS 8-Jun-11 EQ 1181.4 TCS 9-Jun-11 EQ 1186.35 TCS 10-Jun-11 EQ 1189.2 TCS 13-Jun-11 EQ 1175.3 TCS 14-Jun-11 EQ 1191.05 TCS 15-Jun-11 EQ 1184.25 TCS 16-Jun-11 EQ 1151.15 TCS 17-Jnu-11 EQ 1117.20 Table 4.1: Representing SMA of TCS SMA

1142.225 1145.325 1146.325 1145.16 1147.56 1149.305 1151.39 1152.935 1154.97 1155.26 1152.97 1152.75 1155.69 1160.97 1166.03 1170.495 1172.83 1176.22 1177.105 1175.445 1171.95


Figure 4.12: Chart representing SMA of TCS Exponential Moving Average (EMA): In order to reduce the lag in simple moving averages, technicians often use exponential moving averages (also called exponentially weighted moving averages). EMA's reduce the lag by applying more weight to recent prices relative to older prices. The weighting applied to the most recent price depends on the specified period of the moving average. The shorter the EMA's period, the more weight that will be applied to the most recent price. For example: a 10-period exponential moving average weighs the most recent price 18.18% while a 20-period EMA weighs the most recent price 9.52%. As we'll see, the calculating and EMA is much harder than calculating an SMA. The important thing to remember is that the exponential moving average puts more weight on recent prices. As such, it will react quicker to recent price changes than a simple moving average. Here's the calculation formula. The Formula for Exponential Moving Average EMA (current) = ((Price (current) EMA (prev.) ) x Multiplier) + EMA(prev.)


For a period-based EMA, "Multiplier" is equal to 2 / (1 + N) where N is the specified number of periods. Example: A 10-period EMA's Multiplier is calculated like this: (2 / (Time periods + 1)) = (2 / (10 + 1)) = 0.1818 (18.18%) This means that a 10-period EMA is equivalent to an 18.18% EMA. Symbol TCS TCS TCS TCS TCS TCS TCS TCS TCS TCS TCS TCS TCS TCS TCS TCS TCS TCS TCS TCS TCS TCS TCS TCS TCS TCS TCS TCS TCS TCS Date 9-May-11 10-May-11 11-May-11 12-May-11 13-May-11 16-May-11 17-May-11 18-May-11 19-May-11 20-May-11 23-May-11 24-May-11 25-May-11 26-May-11 27-May-11 30-May-11 31-May-11 1-Jun-11 2-Jun-11 3-Jun-11 6-Jun-11 7-Jun-11 8-Jun-11 9-Jun-11 10-Jun-11 13-Jun-11 14-Jun-11 15-Jun-11 16-Jun-11 17-Jnu-11 Series Close SMA Multiplier Price EQ 1135.55 EQ 1139.9 EQ 1140.25 EQ 1111.75 EQ 1127.1 EQ 1131.1 EQ 1141.7 EQ 1155.05 EQ 1164.85 EQ 1175 1142.225 EQ 1166.55 1145.325 0.1818 EQ 1149.9 1146.325 0.1818 EQ 1128.6 1145.16 0.1818 EQ 1135.75 1147.56 0.1818 EQ 1144.55 1149.305 0.1818 EQ 1151.95 1151.39 0.1818 EQ 1157.15 1152.935 0.1818 EQ 1175.4 1154.97 0.1818 EQ 1167.75 1155.26 0.1818 EQ 1152.1 1152.97 0.1818 EQ 1164.35 1152.75 0.1818 EQ 1179.3 1155.69 0.1818 EQ 1181.4 1160.97 0.1818 EQ 1186.35 1166.03 0.1818 EQ 1189.2 1170.495 0.1818 EQ 1175.3 1172.83 0.1818 EQ 1191.05 1176.22 0.1818 EQ 1184.25 1177.105 0.1818 EQ 1151.15 1175.445 0.1818 EQ 1117.2 1171.955 0.1818 Table 4.2: Representing EMA of TCS EMA

1142.225 1148.183495 1151.522526 1151.22755 1147.113862 1145.047912 1144.957391 1146.228648 1148.214149 1153.156537 1155.809629 1155.135218 1156.810466 1160.899063 1164.626133 1168.575532 1172.32506 1172.865904 1176.171773 1177.640395 1172.824441


Interpretation The Moving Average Technical Indicator shows the mean stock price value for a certain period of time. When one calculates the moving average, one averages out the stock price for this time period. As the price changes, its moving average either increases, or decreases. The most common way to interpreting the price moving average is to compare its dynamics to the price action. When the stock price rises above its moving average, a buy signal appears, if the price falls below its moving average, what we have is a sell signal. This trading system, which is based on the moving average, is not designed to provide entrance into the market right in its lowest point, and its exit right on the peak. It allows acting according to the following trend: to buy soon after the prices reach the bottom, and to sell soon after the prices have reached their peak. Uses for Moving Averages There are many uses for moving averages, but three basic uses stand out: y y y Trend identification/confirmation Support and Resistance level identification/confirmation Trading Systems

Trend Identification/Confirmation There are three ways to identify the direction of the trend with moving averages direction, location and crossovers. The first trend identification technique uses the direction of the moving average to determine the trend. If the moving average is rising, the trend is considered up. If the moving average is declining, the trend is considered down. The direction of a moving average can be determined simply by looking at a plot of the moving average or by


applying an indicator to the moving average. In either case, we would not want to act on every subtle change, but rather look at general directional movement and changes.

Figure 4.13: Chart representing directions of SMA of SBI The second technique for trend identification is price location. The location of the price relative to the moving average can be used to determine the basic trend. If the price is above the moving average, the trend is considered up. If the price is below the moving average, the trend is considered down.

Figure 4.14: Chart representing location of SMA of SBI


The third technique for trend identification is based on the location of the shorter moving average relative to the longer moving average. If the shorter moving average is above the longer moving average, the trend is considered up. If the shorter moving average is below the longer moving average, the trend is considered down.

Figure 4.15: Chart representing crossovers of SMA of SBI 4.3.2 VOLUME: Volume is simply the number of shares or contracts that trade over a given period of time, usually a day. Higher volume means the security has been more active. To determine the movement of the volume (up or down), chartists look at the volume bars that can usually be found at the bottom of any chart. Volume bars illustrate how many shares have traded per period and show trends in the same way that prices do. Importance of Volume Volume is an important aspect of technical analysis because it is used to confirm trends and chart patterns. Any price movement up or down with relatively high volume is seen as a stronger, more relevant move than a similar move with weak volume. Therefore, if we are


looking at a large price movement, we should also examine the volume to see whether it tells the same story Say, for example, that a stock jumps 5% in one trading day after being in a long downtrend. Is this a sign of a trend reversal? This is where volume helps traders. If volume is high during the day relative to the average daily volume, it is a sign that the reversal is probably for real. On the other hand, if the volume is below average, there may not be enough conviction to support a true trend reversal. Volume should move with the trend. If prices are moving in an upward trend, volume should increase (and vice versa). If the previous relationship between volume and price movements starts to deteriorate, it is usually a sign of weakness in the trend. Volume and Chart Patterns The other use of volume is to confirm chart patterns. Patterns such as head and shoulders, triangles, flags and other price patterns can be confirmed with volume. In most chart patterns, there are several pivotal points that are vital to what the chart is able to convey to chartists. Basically, if the volume is not there to confirm the pivotal moments of a chart pattern, the quality of the signal formed by the pattern is weakened. Volume Precedes Price Another important idea in technical analysis is that price is preceded by volume. Volume is closely monitored by technicians and chartists to form ideas on upcoming trend reversals. If volume is starting to decrease in an uptrend, it is usually a sign that the upward run is about to end. Now that we have a better understanding of some of the important factors of technical analysis, we can move on to charts, which help to identify trading opportunities in prices movements.


When volume tells a different story, it is a case of divergence, which refers to a contradiction between two different indicators. The simplest example of divergence is a clear upward trend on declining volume.

Figure 4.16: Chart representing volumes of Shalimar paints From above chart it is clear that the change in price is after volume shocker. On 9th May the stock price of Shalimar Paints is Rs.325 and on 7th June it is Rs.923 . 4.3.3 RELATIVE STRENGTH INDEX (RSI) The Relative Strength Index (RSI) is a trading indicator in the technical analysis of financial markets. It is intended to indicate the current and historical strength or weakness of a market based on the closing prices of completed trading periods. It assumes that prices close higher in strong market periods, and lower in weaker periods and computes this as a ratio of the number of incrementally higher closes to the incrementally lower closes. The Relative Strength Index was developed by J. Welles Wilder and published in a 1978 book, New Concepts in Technical Trading Systems, and in Commodities magazine

(now Futures magazine) in the June 1978 issue. The RSI method may be classified as a momentum oscillator measuring the velocity and magnitude of directional price movements. Momentum is the rate of the rise or fall in price. Calculation 100 RSI = 100 - --------1+RS RS = Average Gain/ Average loss Average Gain = [(previous Average Gain)*13 + Current Gain] /14 First Average Gain = Total of Gains during past 14 periods /14

To simplify our explanation of the formula, the RSI has been broken down into its basic components which are the RS, the Average Gain, and the Average Loss. To calculate RSI values for a given dataset, first find the magnitude of all gains and losses for the 14 periods prior to the time where you wish to start the calculation. (Note: 14 is the standard number of periods used when calculating the RSI.) It is important to understand that the RSI is a "running" calculation and the accuracy of the calculation depends on how long ago the calculations started. The first RSI value is an estimate subsequent values improve on that estimate. We should calculate at least 14 values prior to the start of any values that you will rely on going back 28+ periods is even better. To start the running calculation, the First Average Gain is calculated as the total of all gains during the past 14 periods divided by 14. Similarly, the First Average Loss is calculated as the total magnitude of all losses during the past 14 periods divided by 14. The next values for the "averages" are calculated by taking the previous value, multiplying it by


13, adding in the next Gain (or Loss), and then dividing by 14. This is Wilder's modified "smoothing" technique in action. The RS value is simply the Average Gain divided by the Average Loss for each period. Finally, the RSI is simply the RS converted into an oscillator that goes between zero and 100 using this formula: 100 - (100 / RS + 1). When the Average Gain is greater than the Average Loss, the RSI rises because RS will be greater than 1. Conversely, when the Average Loss is greater than the Average Gain, the RSI declines because RS will be less than 1. The last part of the formula ensures that the indicator oscillates between 0 and 100. Note: If the Average Loss ever becomes zero, RSI becomes 100 by definition. Overbought/Oversold The overbought and oversold level for RSI is determined by 80 and 20 respectively. Generally, if the RSI rises above 20 it is considered bullish for the underlying stock. Conversely, if the RSI falls below 80, it is a bearish signal. Some traders identify the longterm trend and then use extreme readings for entry points. In India we consider 70 & 30 as the limits. If the long-term trend is bullish, then oversold readings could mark potential entry points. Divergences Buy and sell signals can also be generated by looking for positive and negative divergences between the RSI and the underlying stock. For example, consider a falling stock whose RSI rises from a low point of (for example) 15 back up to say, 55. Because of how the RSI is constructed, the underlying stock will often reverse its direction soon after such a


divergence. As in that example, divergences that occur after an overbought or oversold reading usually provide more reliable signals. Centerline Crossover The centerline for RSI is 50. Readings above and below can give the indicator a bullish or bearish tilt. On the whole, a reading above 50 indicates that average gains are higher than average losses and a reading below 50 indicates that losses are winning the battle. Some traders look for a move above 50 to confirm bullish signals or a move below 50 to confirm bearish signals. EXAMPLE

Figure 4.17: Chart representing RSI levels of SBI


Interpretation The RSI is presented in a graph below the price chart of a market. Wilder posited that when price moves up very rapidly, at some point it is considered overbought. Likewise, when price falls very rapidly, at some point it is considered oversold. In either case, Wilder felt a reaction or reversal is imminent. The slope of the RSI is directly proportional to the velocity of the move. The distance traveled by the RSI is proportional to the magnitude of the move. As a result, Wilder believed that tops and bottoms are indicated when RSI goes above 70 or drops below 30. Traditionally, RSI readings greater than the 70 level are considered to be in overbought territory, and RSI readings lower than the 30 level are considered to be in oversold territory. In between the 30 and 70 level is considered neutral. As such traders will look for opportunities to go long when the RSI is below 30 and opportunities to go short when it is above 70. As with all indicators however this is best done when other parts of a traders analysis line up with the indicator. Wilder further believed that divergence between RSI and price action is a very strong indication that a market turning point is imminent. Bearish divergence occurs when price makes a new high but the RSI makes a lower high, thus failing to confirm. Bullish divergence occurs when price makes a new low but RSI makes a higher low. Wilder thought that "failure swings" above 70 and below 30 on the RSI are strong indications of market reversals. For example, assume the RSI hits 76, pulls back to 72, and then rises to 77. If it falls below 72, Wilder would consider this a "failure swing" above 70. Finally, Wilder wrote that chart formations and areas of support and resistance could sometimes be more easily seen on the RSI chart as opposed to the price chart. The center


line for the relative strength index is 50, which is often seen as both the support and resistance line for the indicator. If the relative strength index is below 50, it generally means that the stock's losses are greater than the gains. When the relative strength index is above 50, it generally means that the gains are greater than the losses.


Figure 4.18: Image of MACD of SBI MACD is a technical analysis indicator created by Gerald Appel in the late 1970s.MACD shows the difference between a fast and slow exponential moving average (EMA) of closing prices. Since it is based on moving averages, MACD is inherently a lagging indicator. MACD is a form of Absolute Price Oscillator (APO), meaning that it takes the difference of two price EMAs. An alternate form of price oscillator is the Percentage Price Oscillator (PPO) which is computed by dividing the difference between two moving averages of price by the longer moving average value. The relative values generated by a PPO will differ from an APO (or MACD) in subtle but significant ways, and are preferred when (a) comparing the oscillator values between different securities, especially of widely different prices, or (b) comparing oscillator values for the same security at significantly different times, especially for a security whose value has changed greatly. The APO (and hence the MACD) will show greater oscillator extremes for higher priced securities, unlike

the percentage price oscillator. The final member of the price oscillator family is the Detrended price oscillator. Thomas Aspray added a histogram to the MACD indicator in 1986, as a means to anticipate MACD crossovers, and thereby not miss important moves in a security. The set of periods for the averages can be varied. Appel and others have experimented with different combinations. The usual set of parameters is written as 12,26,9 for the fast EMA, slow EMA and signal line periods respectively. MACD Calculation The standard periods originally published by Gerald Appel are 12 and 26 days: MACD = EMA [12] OF PRICE EMA [26] OF PRICE A signal line (or trigger line) is then formed by smoothing this with a further EMA. The standard period for this is 9 days, SIGNAL = EMA [9] OF MACD The difference between the MACD and the signal line is often calculated and shown not as a line, but a solid block histogram style. was made by Thomas Aspray. HISTOGRAM = MACD SIGNAL Interpretation MACD lines are often regarded as a trend following indicator designed to identify trend changes. The MACD histogram as drawn above is sometimes used as an oscillator. Three types of trading signals are generated: y y y MACD line crossing the signal line. MACD line crossing 0. Divergence between price and histogram, or between MACD line and price.


The signal line crossing is the usual trading rule. The standard interpretation is to buy when the MACD crosses up through the signal line, or sell when it crosses down through the signal line. These crossings may occur too frequently, and other tests may have to be applied. The histogram shows when a crossing occurs. When the MACD line crosses through zero on the histogram it is said that the MACD line has crossed the signal line. The histogram can also help visualizing when the two lines are coming together. Both may still be rising, but coming together, so a falling histogram suggests a crossover may be approaching. A crossing of the MACD line up through zero is interpreted as bullish, or down through zero as bearish. These crossings are of course simply the original EMA(12) line crossing up or down through the slower EMA(26) line. Positive divergence between MACD and price arises when price makes a new sell off low, but the MACD doesn't make a new low (i.e. it remains above where it fell to on that previous price low). This is interpreted as bullish, suggesting the downtrend may be nearly over. Negative divergence is the same thing when rising (i.e. price makes a new rally high, but MACD doesn't rise as high as before), this is interpreted as bearish. The different days oF MACD 20 days - choppy line. It isn't the most accurate, but is probably the most useful for short term traders. 30 day - similar to 20 day but provides a bit more certainty for the trend. 50 day - moving averages provide a much less volatile, smooth line. This can be used to detect somewhat longer term trends.


100 day - similar to the 50 day, it is less volatile, and one of the most widely used for long term trends. 200 day - even less volatile, more of a rolling chart or smooth line. It doesn't react to quick movements in the stock price therefore it is rarely used. MACD Benefits One of the primary benefits of MACD is that it incorporates aspects of both momentum and trend in one indicator. As a trend-following indicator, it will not be wrong for very long. The use of moving averages ensures that the indicator will eventually follow the movements of the underlying security. By using Exponential Moving Averages (EMAs), as opposed to Simple Moving Averages (SMAs), some of the lag has been taken out. As a momentum indicator, MACD has the ability to foreshadow moves in the underlying security. MACD divergences can be key factors in predicting a trend change. A Negative Divergence signals that bullish momentum is waning, and there could be a potential change in trend from bullish to bearish. This can serve as an alert for traders to take some profits in long positions, or for aggressive traders to consider initiating a short position. MACD can be applied to daily, weekly or monthly charts. MACD represents the convergence and divergence of two moving averages. The standard setting for MACD is the difference between the 12 and 26-period EMA. However, any combination of moving averages can be used. The set of moving averages used in MACD can be tailored for each individual security. For weekly charts, a faster set of moving averages may be appropriate. For volatile stocks, slower moving averages may be needed to help smooth the data. Given


that level of flexibility, each individual should adjust the MACD to suit his or her own trading style, objectives and risk tolerance.

4.4 TREND LINES: SUPPORT & RESISTANCE Support and resistance represent key junctures where the forces of supply and demand meet. In the financial markets, prices are driven by excessive supply (down) and demand (up). Supply is synonymous with bearish, bears and selling. Demand is synonymous with bullish, bulls and buying. As demand increases, prices advance and as supply increases, prices decline. When supply and demand are equal, prices move sideways as bulls and bears slug it out for control. 4.4.1 SUPPORT: Support is the price level at which demand is thought to be strong enough to prevent the price from declining further. The logic dictates that as the price declines towards support and gets cheaper, buyers become more inclined to buy and sellers become less inclined to sell. By the time the price reaches the support level, it is believed that demand will overcome supply and prevent the price from falling below support.

Figure 4.19: Image representing support level of a stock


4.4.2 RESISTANCE: Resistance is the price level at which selling is thought to be strong enough to prevent the price from rising further. The logic dictates that as the price advances towards resistance, sellers become more inclined to sell and buyers become less inclined to buy. By the time the price reaches the resistance level, it is believed that supply will overcome demand and prevent the price from rising above resistance.

Figure 4.20: Image representing resistance level of a stock After a resistance level is penetrated, it often becomes a support level; this is because buyers who didn't buy at that price before it went up are now willing to buy at that price.

Figure 4.21: Chart representing support & resistance levels of ACC


Support and resistance come in all varieties and strengths. They most often manifest as horizontal price levels. The length of time that a support or resistance level exists determines the strength or weakness of that level. The strength or weakness determines how much buying or selling interest will be required to break the level. Also, the greater volume traded at any level, the stronger that level will be. Another use of moving averages is to identify support and resistance levels. This is usually accomplished with one moving average and is based on historical precedent. As with trend identification, support and resistance level identification through moving averages works best in trending markets.

4.5 CHART PATTERNS: 4.5.1 HEAD & SHOULDERS This is one of the most popular and reliable chart patterns in technical analysis. Head and shoulders is a reversal chart pattern that when formed, signals that the security is likely to move against the previous trend. In the Figure below, there are two versions of the head and shoulders chart pattern. Head and shoulders top (left) is a chart pattern that is formed at the high of an upward movement and signals that the upward trend is about to end. Head and shoulders bottom, also known as inverse head and shoulders (right) is the lesser known of the two, but is used to signal a reversal in a downtrend. Both of these head and shoulders patterns are similar in that there are four main parts two shoulders, a head and a neckline. In this pattern, the neckline is a level of support or resistance.


Figure 4.22: Image of Head & shoulders top(left) & Head & shoulders bottom(right) 4.5.2 DOUBLE TOPS & DOUBLE BOTTOMS This chart pattern is another well-known pattern that signals a trend reversal, it is considered to be one of the most reliable and is commonly used. These patterns are formed after a sustained trend and signal to chartists that the trend is about to reverse. The pattern is created when a price movement tests support or resistance levels twice and is unable to break through. This pattern is often used to signal intermediate and long-term trend reversals.

Figure 4.23: Image of Double tops(left) and Double bottoms(right)


In the case of the double top pattern in above figure, the price movement has twice tried to move above a certain price level. After two unsuccessful attempts at pushing the price higher, the trend reverses and the price heads lower. In the case of a double bottom (shown on the right), the price movement has tried to go lower twice, but has found support each time. After the second bounce off of the support, the security enters a new trend and heads upward.

Triple Bottom and Triple Top Patterns are extensions to these double patterns.

4.5.3 TRIPLE TOPS & TRIPLE BOTTOMS Triple tops and triple bottoms are another type of reversal chart pattern in chart analysis. These are not as prevalent in charts as head and shoulders and double tops and bottoms, but they act in a similar fashion. These two chart patterns are formed when the price movement tests a level of support or resistance three times and is unable to break through; this signals a reversal of the prior trend.

Figure 4.24: Image of Triple Top(left) & Triple Bottom(right) Confusion can form with triple tops and bottoms during the formation of the pattern because they can look similar to other chart patterns. After the first two support/resistance

tests are formed in the price movement, the pattern will look like a double top or bottom, which could lead a chartist to enter a reversal position too soon. 4.5.4 TRIANGLES Triangles are some of the most well-known chart patterns used in technical analysis. The three types of triangles, which vary in construct and implication, are the symmetrical triangle, ascending and descending triangle. These chart patterns are considered to last anywhere from a couple of weeks to several months.

Figure 4.25: Image of triangle chart patterns The symmetrical triangle in Figure 15 is a pattern in which two trendlines converge toward each other. This pattern is neutral in that a breakout to the upside or downside is a confirmation of a trend in that direction. In an ascending triangle, the upper trendline is flat, while the bottom trendline is upward sloping. This is generally thought of as a bullish


pattern in which chartists look for an upside breakout. In a descending triangle, the lower trendline is flat and the upper trendline is descending. This is generally seen as a bearish pattern where chartists look for a downside breakout. 4.5.5 FLAG AND PENNANT The 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.

Figure 4.26: Image of Flag & Pennant patterns A slight difference is observed between a pennant and a flag. The main difference between these price movements can be seen in the middle section of the chart pattern. In a pennant, the middle section is characterized by converging trendlines, much like what is seen in a symmetrical triangle. The middle section on the flag pattern, on the other hand, shows a channel pattern, with no convergence between the trendlines. In both cases, the trend is expected to continue when the price moves above the upper trendline. 4.5.6 WEDGE The wedge chart pattern can be either a continuation or reversal pattern. It is similar to a symmetrical triangle except that the wedge pattern slants in an upward or downward


direction, while the symmetrical triangle generally shows a sideways movement. The other difference is that wedges tend to form over longer periods, usually between three and six months.

Figure 4.27: Image of Wedge pattern The fact that wedges are classified as both continuation and reversal patterns can make reading signals confusing. However, at the most basic level, a falling wedge is bullish and a rising wedge is bearish. In Figure 17, we have a falling wedge in which two trendlines are converging in a downward direction. If the price was to rise above the upper trendline, it would form a continuation pattern, while a move below the lower trendline would signal a reversal pattern. 4.5.7 ROUNDING BOTTOM A rounding bottom, also referred to as a saucer bottom, is a long-term reversal pattern that signals a shift from a downward trend to an upward trend. This pattern is traditionally thought to last anywhere from several months to several years A rounding bottom chart pattern looks similar to a cup and handle pattern but without the handle. The long-term nature of this pattern and the lack of a confirmation trigger, such as the handle in the cup and handle, make it a difficult pattern to trade.


Figure 4.28: Image of round bottom chart pattern 4.5.8 GAPS Gap in a chart is an empty space between a trading period and the following trading period. This occurs when there is a large difference in prices between 2 sequential trading periods.

Figure 4.29: Image of gap pattern Gap price movements can be found on bar charts and candlestick charts but will not be found on point and figure or basic line charts. Gaps generally show that something of significance has happened in the security, such as a better-than-expected earnings announcement. There are three main types of gaps, breakaway, runaway (measuring) and exhaustion. A breakaway gap forms at the start of a trend, a runaway gap forms during the middle of a trend and an exhaustion gap forms near the end of a trend.



Data analysis is done by considering 16 different securities using positional calls and intraday calls. Positional calls are generated for 8 scrips and intraday calls for the remaining 8scrips.

Positional Calls

The prerequisites taken by me for the positional calls:

The time period considered for all the positional calls is 6 months; the short and long SMAs are taken as 10 & 25 periods for some scirps and 9 & 27 for some scrips. The ideal and most of the analysts follow is 9 & 27 periods for positional calls.

The RSI is 14 periods, each candle present in the below charts represents a single day. The MACD is considered as 26, 12 and the exponential considered is 9 periods.

Intraday Calls

The prerequisites taken by me for the intraday calls:

The tick period here is adjusted minutes and as per the minutes the intradays calls are generated. The candles figured in the intraday charts are represented as 5minutes for each candle; RSI is maintained as 14 periods.




Figure 4.30: Chart for positional call of SBI Moving average cross over Candle stick Volumes RSI Buy -- Sell -- Sell -- Buy MACD SMA Last Price Recommended -- Buy -- Sell -- 2910.45 -- Sell

Table 4.3: Positional recommendation for SBI using technical indicators


The call generated for above State Bank of India Ltd is to sell. The last traded price (LTP) of the share on 28/04/11 is Rs2910.5 and the share price dipped down to Rs2313 as on 07/06/11. A negative difference of Rs597 is observed i.e. decrease of 20%.


As per the technical indicators the short SMA is above the long SMA which means its a good indication for the stock to hold.

The last candle formed failed to create new high than the previous candles formed shows the stocks goes downtrend and the stock price decreases.

The volumes that traded on that day are good in number but when compared to the previous days the volumes are same as the previous days, so if any more volumes are traded then the stock is said to be in bullish. As if now its good to exit.

RSI shows its around 50 and it looks in downward trend, its recommended as to quit this stock.

MACD is positive which means a good indication for the stock.

The short SMA line should be below the candle but here it touches the candle which is not a good indication.

Here half the indicators recommend to sell and half to hold or buy, as candle sticks are observed very well at this time this stock is recommended to sell. This stock is mostly affected by its quarter results which disappointed the investors.



Figure 4.31: Chart for positional call of SAIL

Moving average cross over Sell Candle stick -- Sell Volumes -- Buy RSI -- Buy

MACD SMA Last Price Recommended

-- Buy -- Sell -- 167.20 -- Sell

Table 4.4: Positional recommendation for SAIL using technical indicators


The call generated for above Steel Authority of India Ltd is to sell. The last traded price (LTP) of the share on 28/04/11 is Rs167.2 and the share price dipped down to Rs145.30 as on 07/06/11. A negative difference of Rs21.9 is observed i.e. decrease of 13%.


As per the technical indicators the short SMA is below the long SMA which means its not a good indication for the stock to hold.

The last candle formed failed to create new high than the previous candle and the candles pattern indicates bearish so it is better to exit from this stock and be safe.

The volumes that traded on that day are good in number when compared to the previous days and are expected to be good in future, so recommended good stock.

RSI shows its around 30 and still it looks downward trend, at a level it starts an uptrend and then rises, this might be a positive indication.

MACD is positive which means a good indication for the stock.

The short SMA line should be below the candle but here it touches the candle which is not a good indication.

Here half the indicators recommend to sell and half to hold or buy, as candle sticks are observed very well at this time this stock is recommended to sell.



Figure 4.32: Chart for positional call of Allied Digital Services Ltd.

Moving average cross over -- Buy Candle stick -- Sell Volumes -- Sell RSI -- Sell

MACD SMA Last Price Recommended

-- Buy -- Sell -- 90.75 -- Sell

Table 4.5: Positional recommendation for ADSL using technical indicators


The call generated for above scrip Allied Digital Services Ltd is sell. The last traded price (LTP) of the share on 29/04/11 is Rs90.75 and the share price dipped down to Rs46.65 as on 07/06/11. A negative difference of Rs44.10 is observed i.e. decrease of 48.5%.


As per the technical indicators the short SMA is below the long SMA which means its not a good indication for the stock to hold.

The last candle formed failed to create new high than the previous candle and the stock is recommended not to hold.

The volumes that traded on that day are low and the stock cannot be recommended for a buy call or to hold.

RSI is around 60 and it shows downward trend which tends the price to fall down, and this kind of stock is not recommended to hold.

MACD is positive which means a the stock can be held for a short term.

The short SMA line should be below the candle but here it touches the candle which is not a good indication.

More number of indicators recommends selling this stock.



Figure 4.33: Chart for positional call of Infinite computer solutions ltd

Moving average cross over -- Sell Candle stick -- Sell Volumes -- Sell RSI -- Buy

MACD SMA Last Price Recommended

-- Sell -- Sell -- 165.45 -- Sell

Table 4.6: Positional recommendation for Infinite computer solutions ltd using technical indicators

The call generated for above scrip Infinite Computer Solutions India Ltd is sell. The last traded price (LTP) of the share on 02/05/11 is Rs165.45 and the share price dipped down to Rs134.10 as on 07/06/11. A negative difference of Rs31.35 is observed i.e. decrease of 18.9%.


As per the technical indicators the short SMA is below the long SMA which means its not a good indication for the stock to hold.

The last candle formed failed to create new high than the previous candle and the candle shows long shadow than the body, it is recommended not to hold this stock.

The volumes that traded on that day are very high and that did not happen on the previous days and it might be a false indication. For short term investment it is not good to hold this stock.

RSI shows below 30 i.e. it is at oversold position which means the next day the price of the stock rises, which indicates to hold this stock.

MACD is negative which means a bad indication for the stock.

The short SMA line should be below the candle but here it touches the candle which is not a good indication.

More number of indicators recommends selling this stock.



Figure 4.34: Chart for positional call of Shiva Texyarn Moving average cross over -- Buy Candle stick -- Sell Volumes -- Sell RSI -- Sell MACD SMA Last Price Recommended -- Buy -- Sell -- 53.50 -- Sell

Table 4.7: Positional recommendation for Shiva Texyarn using technical indicators


The call generated for above scrip Shiva Texyarn Ltd is sell. The last traded price (LTP) of the share on 02/05/11 is Rs53.50 and the share price dipped down to Rs34.25 as on 07/06/11. A negative difference of Rs19.25 is observed i.e. decrease of 35%.


As per the technical indicators the short SMA is above the long SMA which means its a good indication for the stock to hold.

The last candle formed failed to create new high than the previous candle and the candle shows long shadow than the body, it is recommended not to hold this stock.

The volumes that traded on that day are very high and that did not happen on the previous days and it might be a false indication. For short term investment it is not good to hold this stock.

RSI shows its around 50 and it looks downward trend, intimates that the investors from this stock should take an exit position.

MACD is positive which means a good indication for the stock.

The short SMA line should be below the candle but here it touches the candle which is not a good indication.

More number of indicators recommends selling this stock.



Figure 4.35: Chart for positional call of Man Industries Ltd.

Moving average cross over -- Buy Candle stick -- Buy Volumes -- Buy RSI -- Sell

MACD SMA Last Price Recommended

-- Buy -- Buy -- 98.50 -- Buy

Table 4.8: Positional recommendation for Man Industries ltd using technical indicators


The call generated for above scrip Man Industries India Ltd. is buy. The last traded price (LTP) of the share on 05/05/11 is Rs98.50 and the LTP on 07/06/11 is 124.15, the difference observed is Rs+25.65 is observed i.e. increase of 26%.


As per the technical indicators the short SMA is above the long SMA which means its a good indication for the stock to hold.

The last candle formed creates new high than the previous candle and the candles obtained looks bullish which yields good result confirms to hold this stock.

The volumes that traded on that day are good in number when compared to the previous days and are expected to be good in future, so recommended good stock.

RSI shows around 90 which mean higher than the oversold region, it means the price tends to fall so it is recommended to get out of this stock.

MACD is positive which means a good indication for the stock.

The short SMA line should be below the candle but here it shows the same and recommended is to hold this stock.

Almost all the indicators recommend the stock to be held except RSI and can earn good returns on this scrip.



Figure 4.36: Chart for positional call of MBL Infrastructures

Moving average cross over Candle stick Volumes RSI

sell -- buy -- neu -- buy

MACD SMA Last Price Recommended

-- sell -- sell --193.6 --sell

Table 4.9: Positional recommendation for MBL Infrastructures using technical indicators


The call generated for above scrip MBL Infrastructures Ltd is sell. The last traded price (LTP) of the share on 10/05/11 is Rs193.6 and the share price dipped down to 154.20 as on 07/06/11. A negative difference of Rs39.4 is observed i.e. decrease of 20.3%.


As per the technical indicators the short SMA is below the long SMA which means its not a good indication for the stock to hold.

The last candle formed created new high than the previous candle which is good indication and the previous candles formed are not good, but we can go for buy by the latest candle formed, it can be recommended to hold this stock.

The volumes that traded on that day are not much high for the stock and can be considered as neutral indication for this stock.

RSI shows below 30 i.e. it is at oversold position which means the next day the price of the stock rises, which indicates to hold this stock.

MACD is negative which means a bad indication for the stock.

The short SMA line should be below the candle but here it touches the candle which is not a good indication.

Here volumes can be considered as neutral and the indicators that recommend the stock to sell are more, so its better to sell this stock.



Figure 4.37: Chart for positional call of Excel crop care ltd

Moving average cross over -- Sell Candle stick -- Sell Volumes -- Sell RSI -- Buy

MACD SMA Last Price Recommended

-- Sell -- Sell -- 210 -- Sell

Table 4.10: Positional recommendation for Excel Crop care using technical indicators


The call generated for above scrip Excel Crop Care Ltd is sell. The last traded price (LTP) of the share on 13/05/11 is Rs210 and the share price dipped down to Rs163.50 as on 07/06/11. A negative difference of Rs46.5 is observed i.e. decrease of 22%.


As per the technical indicators the short SMA is below the long SMA which means its not a good indication for the stock to hold.

The last candle formed failed to create new high than the previous candle and the candle indicates the shares of this security are sold out and this would further dip, this is not good to hold the stock.

The volumes that traded on that day are very high and that did not happen on the previous days and it might be a false indication. For short term investment it is not good to hold this stock.

RSI shows its below 30 and still it looks downward trend, at a level it starts an uptrend and then rises, this might be a positive indication.

MACD is positive which means a good indication for the stock.

The short SMA line should be below the candle but here it touches the candle which is not a good indication.

More number of indicators recommends selling this stock.




Figure 4.38: Chart for intraday call of Hero Honda

RECOMMENDED For the above scrip Hero Honda Motors Ltd. the call generated @ Rs 1785 at 13:40hrs is sell on the day 08/06/11, by the end of the day i.e. at 15:30hrs the price of the stock dipped to Rs 1764, the amount of reduced loss is Rs 21.

INTERPRETATION In the above chart the candles started forming new lows when compared to the previous candles and the action continued to go, which is a symbol to check out the stock for exit.

The down trend RSI shows the shares are in selling position.The volumes show the shares are sold out in huge quantity this confirms to the investor that he should exit from the stock.



Figure 4.39: Chart for intraday call of Hindustan Unilever

RECOMMENDED The call generated for above scrip HUL is buy @ Rs 309 at 09:50hrs & 14:05hrs with a stop loss @ Rs 307 on the day 08/06/11, by the end of market closing time i.e. at 15:30hrs the price of the stock surged to Rs 315, profit yielded by the call is Rs 21.


In the above chart at both the situations the candles formed new highs when compared to the previous candles and after 14:05hrs the candles continued to move up enormously.

RSI is at 40 i.e. nearer to oversold position, it has more chances to rise.

The volumes were not in more number but maintaining the same during the day, there was sudden increase in the quantity of the volumes trading which made the stock move up to day high.



Figure 4.40: Chart for intraday call of Rolta India ltd

RECOMMENDED Rolta India ltd the call generated for above scrip is to buy @ Rs 140.4 at 10:30hrs with a stop loss @ Rs 139 on the day 08/06/11, the profit booked @ Rs 141.9 at 15:00hrs, the profit amount is Rs 1.50.


In the above chart at the candles formed very good highs than the previous ones which indicate a good call to buy these shares.

RSI is at near to 70 and even then the candles were forming new highs it shows the price rises and time to invest in this share.

The volumes trading are good, at 13:00 it looked like good rise in price and RSI shows time to exit with maximum profit for the day.



Figure 4.41: Chart for intraday call of Dr. Reddy Laboratories

RECOMMENDED For the above scrip DrReddy Laboratories Ltd. the call generated @ Rs 1588 at 14:32hrs is sell on 08/06/11, by the end of the day i.e. at 15:28hrs the price of the stock dipped to Rs 1572, the amount of reduced loss is Rs 12.

INTERPRETATION In the above chart the candles started forming new lows when compared to the previous candles and the action continued to go, which is a symbol to check out the stock for exit.

The down trend RSI shows the shares are in selling position.

The volumes show the shares are sold out in huge quantity this confirms to the investor that he should exit from the stock.



Figure 4.42: Chart for intraday call of Adani Enterprise Ltd.


Adani Enterprises ltd the call generated for above scrip is to buy @ Rs 635 at 10:52hrs with a stop loss @ Rs 631 on the day 09/06/11, the profit booked @ Rs 643.4 at 11:30hrs, a profit of Rs 8.40 is carried by the investor.

INTERPRETATION In the above chart at the candles formed very good highs than the previous ones indicating bullish pattern which indicate a good call to buy these shares.

RSI is at more than 80 at 11:30hrs it shows the time to by booking profit that obtained.

The volumes traded around 11:30hrs were the day high volumes, presumed that the volumes quantity traded will not be traded again later so its time to exit from that stock.



Figure 4.43: Chart for intraday call of Axis Bank


Axis Bank the call generated for above scrip is to buy @ Rs 1234 at 12:30hrs with a stop loss @ Rs 1228 on the day 09/06/11, the profit booked @ Rs 1242 at 13:10hrs, a profit of Rs 8 is carried by the investor.

INTERPRETATION In the above chart at the candles formed very good highs than the previous ones indicating bullish pattern which indicate a good call to buy these shares.

RSI is at more than 40 and rising above the level indicating the stock rises.

The volumes werent showing any false trend trading in high quantity, so these volumes trading are good in quantity and presumed by the candle sticks that the stock is worth to buy and sell at good profit.



Figure 4.44: Chart for intraday call of Bhushan steel


For the above scrip Bhushan Steel Ltd. the call generated is sell @ Rs 437 at 10:06hrs on 09/06/11, within 20 minutes at 10:25hrs the price of the stock dipped to Rs 432, the amount of reduced loss is Rs 5.

INTERPRETATION In the above chart the candles started forming new lows when compared to the previous candles and the action continued to go, which is a symbol to check out the stock for exit.

The volumes show the shares are sold out in huge quantity this confirms to the investor that he should exit from the stock as soon as he can. The candles look completely in a bearish form these are mostly recommended to sell as early as possible.



Figure 4.45: Chart for intraday call of HDFC Bank

RECOMMENDED Axis Bank the call generated for above scrip is to buy @ Rs 2355 at 13:02hrs with a stop loss @ Rs 1228 on the day 09/06/11, the profit booked @ Rs 2370 at 13:12hrs, a profit of Rs 8 is carried by the investor within 10minutes of trade.

INTERPRETATION In the above chart at the candles formed very good highs than the previous ones indicating bullish pattern which indicate a good call to buy these shares.

RSI is at more than 40 and rising above the level indicating the stock rises.

The volumes trading are of good quantity and this indicates the price of the share increases and to earn good profits its recommended to invest in this stock.


5.3 FACTORS THAT AFFECT STOCK MARKET Economic factors Political factors Global Markets RBI Policies Inflation Rate Financial Results

Economic Factors influence stock markets a lot, the factors in the country and around the world. For example the bankrupt of Lehman Brothers made the world market to fall down and which affected the Indian markets to follow the world markets, the Satyam computers scandal which made the Indian stock market dip down and the share price of the company dipped down reaching the lowest price of that stock Political Factors also influence the stock market. In the country the ruling party scams are affecting the stock market, the scams like 2G scam, Common Wealth Games scam and freedom fighter Anna Hazares demand to implement Lokpal bill. These factors are influencing stock market. Global Markets are the major factors that affect Indian markets. The situation in the world markets will be a replica in the Indian market. The fluctuations in the US markets like NYSE, NASDAQ, DOWJONES and UK market London Stock Exchange and other markets like Tokyo Stock Exchange, HENG SENG, NIKKEI these etc. markets influence Indian markets a lot.


RBI Policies affect the market and more influenced is the banking sector. When central bank brings changes in the repo rate the rate at which banks borrow from the RBI and the reverse repo the rate at which RBI mops up funds from banks with these changes of the rates the bank stocks shifts according to the rates. Inflation Rate of a country is the rate at which prices of goods and services increase in its economy. It is an indication of the rise in the general level of prices over time. Inflation is the rate at which the cost of living increases. The cost of living is simply what it costs to buy the goods and services you need to live. Inflation causes money to lose value because it will not buy the same amount of a good or a service in the future as it does now or did in the past. Financial Results of that particular company affect the share value of that stock. Customers in the market show interest in the stocks those who show good results i.e. who show good profits in the succeeding quarters and years. For example considering SBI the last quarter results of SBI showed 99% loss when compared to previous quarter, that is the reason the share price of SBI plunged down to Rs.2230 from Rs.2910.




The study is limited for a short period, due to which the study may not be detailed in all respects.

There are many tools in technical analysis but i have incorporated my study using six of them, which are important and widely used by technical analysts.

y y

Due to time constrain all aspects are not covered in the study. The study is limited to only 16 securities, 8 intraday calls and 8 positional calls.


6.2 FINDINGS & SUGGESTIONS: y Volumes and candlesticks charts are the major, important and widely used indicators in the present day around the world. The other indicators like RSI, MACD, SMA crossovers are used for positional calls for the future y Before investing or trading in any particular stock the share holding pattern of the company should be checked out. Higher the holding of FIIs than the promoters is not good for investor to invest in that stock, those types of stocks should be avoided and stocks with low volumes are also to be avoided. y Prefer the stocks which have good profits and show increasing profits when compared to the previous results. Beware of the results and profits of the stocks that you choose, during the results its advised to noticing the market, because big cap companies like Reliance will influence the market a lot. y Considering the sectors to invest, for the long term investment its better to invest in pharmacy & banking sectors. y The intraday trading and short term investing is done on basis of technical analysis, but for long term investment we need to consider also the fundamental analysis of those scrips. y Indian markets are mostly depended on global markets, so its recommended to have a glance at the world markets before we invest in stocks in our market and also many other factors like inflation, RBI policies, economic & socio-political factors should be considered before we invest. y The daily news and press releases should be sighted for intraday and short term these factors are more to be considered to gain short term benefits.



Stock market is the term given to the act of trading company shares, stocks, and other securities and its derivatives. The stock market has a number of players, which could be range from an individual stockholder to a very large corporate trader. These players can be anybody coming from any part of the world. Trading in the stock market can be done privately with an attorney or with a professional stock exchange dealer who have the power to execute the order. For the most part, stock market is very volatile in nature and that's the reason why it is so hard to predict. But due to persistent studies, the changes in the stock market can now be calculated in a relatively acceptable precision. Here are the various efforts carried out by stock market experts to predict the market's movements. Such a tool is Technical analysis which helps the investors to identify the right stocks at right time with right amounts