33 Dheeraj Trilokchandani - Technical Analysis of Indian Stock Market

7/31/2019 33 Dheeraj Trilokchandani - Technical Analysis of Indian Stock Market

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CONTEMPORARY ISSUE ON SEMINAR

A STUDY ON

TECHNICAL ANALYSIS IN INDIAN STOCK MARKET

Master of Business Administration

Session: 200911

Presented at

Submitted By: - Submitted To:-

Dheeraj trilokchandani Mr. Rajat Mendiratta

MBA II Sem.

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Acknowledgement

The beatitude, bliss & euphoria that accompany successful completion any task would

not be completed without the expression of appreciation of simple virtues to the people

who made it possible.

So, I take my immense pleasure in expressing a whole hearted thanks to all the faculty

members who guided me all the way making this project successful.

It is my privilege to express a deep sense of gratitude and thanks to Mr. RAJAT

MENDIRATTA for providing us various information directly related to project.

I am also thankful to Ms. Mahima roy for his/her guidance & cooperation in this work.

I extend my gratitude and thankfulness to Apex Institute of Management & Science.

Date: Submitted By:

Dheeraj trilokchandani

Place: Jaipur

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Preface

The underlying aim of the seminar on contemporary issue as an integral part of MBA

program is to provide the students with practical aspects of the organization working

environment.

Such type of presentation helps a student to visualize and realize about the

congruencies between the theoretical learning in the premises of college and actual

followed by the organization. It gives the knowledge of application aspect of the theories

learnt in the classroom.

The seminar project in TECHNICAL ANALYSIS IN INDIAN STOCK MARKET is a

complete experience in itself, which provide me with the understanding. This has

become as inspirable of my knowledge of management being learned in MBA

program.

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Stock market ,face value ,market value , NSE,BSE,etc.

Limitation:

It was an Descriptive research, secondary data used and primary data cant use.

Time is limited period so cant analysis all factors.

Conclusion:

Charts are one of the most fundamental aspects of technical analysis. It is important that you clearly

understand what is being shown on a chart and the information that it provides. Now that we have

an idea of how charts are constructed, we can move on to the different types of chart patterns.

EXECUTIVE SUMMARY

Technical Analysis of Indian Stock Market

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Introduction:

Technical analysis can be defined as a method of evaluating future security prices and market

directions based on statistical analysis of variables such as trading volume, price changes, trends,

patterns, and formations in charts. These formations within the charts are, as believed by technical

analysts, said to be in large part dictated by the psychological makeup of the market. The methods

used to analyze stock market and make investment decisions are vast, but it usally fall into one of

two categories known as fundamental analysis and technical analysis.

Fundamental analysis involves researching and evaluating the characteristics of the company

including the evaluation of company financial statements in order to approximate the value of a

company.

Technical analysis, on the other hand, pays no attention to the value of a stock and cares more

about price movements based on general market psychology and historical trends. Technical

analysts attempt to explain the supply and demand of a security and help in determining the

emotions of those in the market. Technical analysis is based on the basic theory that the price of a

stock reflects everything that could or has affected a stock. Therefore, fundamental factors as well

as economic factors like the overall psychology of the market are all priced into the stock, which

leaves only the analysis of supply and demand in predicting the price movement of the forecasted

stock.

Analysts believe that future prices are dictated by previously established trends, attributing the

repetitive nature of these trends to the basic makeup of the markets psychology. They believe that

market participants tend to react in common ways to events within the market, therefore through

the use of technical charting, patterns can be used to analyze price movements and understand

these trends.

Technical analysis is not a magic wand which we can swing and get instant results in a few

minutes, instead technical analysis is a tool which can be used to enter and exit from stocks

profitably, or in any financial markets, technical analysis lays a lot of weight age on volume. Make

sure the stocks we are analyzing have enough volume so that our analysis is accurate on the basis

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of tools we are using. For example my thumb rule is based on atleast 1 million shares are traded on

that stock to be listed in my analysis list, otherwise I don't do analysis on that stock.

The BSE SENSEX is not only scientifically designed but also based on globally accepted

construction and review methodology. The base year of 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.

The Index was initially calculated based on the "Full Market Capitalization" methodology but was

shifted to the free-float methodology with effect from September 1, 2003. The "Free-float Market

Capitalization" methodology of index construction is regarded as an industry best practice

globally. All major index providers like MSCI, FTSE, STOXX, S&P and Dow Jones use the Free-

float methodology.

Due to is wide acceptance amongst the Indian investors; SENSEX is regarded to be the pulse of

the Indian stock market. As the oldest index in the country, it provides the time series data over a

fairly long period of time (From 1979 onwards). Small wonder, the SENSEX has over the years

become one of the most prominent brands in the country.

There are numerous charting indicators available and over time I will attempt to discuss and

educate on these types of indicators and how to read them for important data. However, for the

scope of, this project simply wanted to introduce to the basics of technical analysis and how it can

be helpful when completing due diligence on investment or trading opportunities.

The data was collected through various websites, books, live examples, mentors,News papers etc..

And these information acts as a catalyst in analysis of data and in further study of the issue.

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Table of Contents

S.no Contents Page No.

Acknowledgement

Preface

Executive Summary

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1 Indian Stock Market 9

Introduction 9-18

a) Fundamental Analysis 18

b) Technical Analysis 19-20

2 The Pillars of Technical Analysis 20

3 Technical Analysis Rationale 20-21

4 Technical Analysis Core Theme 21-22

5 Technical Analysis The Perfect World 23-24

6 Where should a pure technician start 247 Technical Analysis Required Background 24-27

a) Support

b) Resistance

c) Trend

d) Channel

8 Technical Analysis Type of Charts 27-29

a) Introduction

b) Line Charts

c) Bar Charts

d) Candlestick Chart

9 Technical Analysis Indicators 29-41

a) Moving Average

b) Bollinger Band

c) MACD-Moving Average Convergence Divergence

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d) RSI-Relative Strength Indicator

e) ADX/Directional movement index Stochastic

10 Research Methodology 41-45

a) Title of the study

b) Duration of the project

c) Scope of the study

d) Objective of the study

e) Limitation of Study

11 Core Study 45

a) Finding 46

b) Results 46

12 SWOT Analysis 53-54

13 Conclusion 54

14 Appendix 55-61

15 Bibliography 61-62

Indian Stock Market

INTRODUCTION

In India securities market have a very long history. The first stock exchange was set up in Bombay

in 1875. Since then the number of stock exchanges in the country has grown to 23 including the

Over the Counter Exchange of India (OTCEI), Bombay Stock Exchange (BSE) and National Stock

Exchange (NSE). In NSE there are about 2000 companies are listed with a market capitalization of

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rs 47,01,923 crore (7 August 2009) and is expected to become the biggest stock exchange in India

in terms of market capitalization by 2010 end.

Before 1992,.the securities market were governed by three principles These were:(A) the capital

issues (Control ) Act, 1947, which restricted issuers access to securities market and controlled the

pricing issues; (B) the companies, 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; and (C) the Securities Contracts (Regulation) Act (SCRA), 1956, which provides for

regulation of transactions in securities through control over stock exchanges. However, with the

process of liberalization, the need for an independent regulatory body, which would be empowered

to regulate the securities market and be responsible for fostering its development, was widely felt.

Thus, the Securities and Exchange Board of India (SEBI) was set up in 1988 as an administrativearrangement. In 1992, the SEBI Act was enacted. The twin objectives of SEBI are:

(a) Development of the Capital Market, and

(b) Protection of the interest of the investors and regulation of the securities market.

Among the major stock exchanges the Bombay Stock Exchange (BSE) and National Stock

Exchange (NSE) dominate the Indian Capital Market.

Bombay Stock Exchange (BSE) is a value weighted index composed of 30 stocks with the base

April 1979=100. It consist of the 30 largest and the most actively traded stocks. SENSEX touched

21,078 points on January 8, 2008.

National Stock Exchange (NSE) was incorporated in November 1992 and in October 1995 it

became the largest stock exchange of the country. It consists of a well diversified 50 stock index,

nicknamed as S&P CNX Nifty or Nifty 50 or simply Nifty, accounting for 22 sectors of the Indian

economy.

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National Stock Exchange - NSE

The National Stock Exchange (NSE) is Indias leading stock exchange covering various cities and

towns across the country. NSE was set up by leading institutions, at the behest of the Government

of India and was incorporated in November 1992 as a tax- paying company unlike other stock

exchanges in the country, to provide a modern, fully automated screen-based trading system withnational reach.

On its recognition as a stock exchange under the Securities Contracts (Regulation) Act, 1956 in

April 1993, NSE commenced operations in the wholesale Debt Market (WDM) segment in June

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1994. The Capital Market (Equities) segment commenced operations in 1994 and operations in

Derivatives segment commenced in June 2000.

The Exchange has brought about unparalleled transparency, speed & efficiency, safety and market

integrity. It has set up facilities that serve as a model for the securities industry in terms of systems,

practices and procedures.

Corporate Structure

NSE is one of the first de-mutualised stock-exchanges in the country, where the ownership and the

management of the Exchange is completely divorced from the right to trade on it. Though the

impetus for its establishment came from policy makers in the country, it has been set up as a public

limited company, owned by the leading institutional investors in the country.

From the day one, NSE has adopted the form of a demutualised exchange the ownership,

management and trading is in the hands of three different sets of people.

Promoters

Board

Committees

Promoters

NSE has been promoted by leading financial institutions, banks, insurance companies and other

financial intermediaries:

1. Industrial Development Bank of India Limited

2. Industrial Finance Corporation of India Limited

3. Life Insurance Corporation of India

4. State Bank of India

5. ICICI Bank Limited

6. IL & FS Trust Company Limited

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7. Canara Bank etc

Board

Board comprises of senior executives from promoters institutions, eminent professionals in the

fields of law, economics, accountancy, finance, taxation, etc, public representatives, nominees of

SEBI and one full time executive of the Exchange.

Sensex milestones check here

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Here is a timeline on the rise and rise of the Sensex through main history of Indian stock market.

1000, July 25, 1990 - On July 25, 1990, the Sensex touched the four-digit figure for the

first time and closed at 1,001 in the wake of a good monsoon and excellent corporate

results.

2000, January 15, 1992 - On January 15, 1992, the Sensex crossed the 2,000-mark and

closed at 2,020 followed by the liberal economic policy initiatives undertaken by the then

finance minister and current Prime Minister DrMan Mohan Singh.

3000, February 29, 1992 - On February 29, 1992, the Sensex surged past the 3000 mark in

the wake of the market-friendly Budget announced by Man Mohan Singh.

4000, March 30, 1992 - On March 30, 1992, the Sensex crossed the 4,000-mark and closed

at 4,091 on the expectations of a liberal export-import policy. It was then that the Harshad

Mehta scam hit the markets and Sensex witnessed unabated selling.

5000, October 11, 1999 - On October 8, 1999, the Sensex crossed the 5,000-mark as the

Bharatiya Janata Party-led coalition won the majority in the 13th Lok Sabha election.

6000, February 11, 2000 - On February 11, 2000, the information technology boomhelped the Sensex to cross the 6,000-mark and hit and all time high of 6,006.

7000, June 21, 2005 - On June 20, 2005, the news of the settlement between the ambani

brothers boosted investor sentiments and the scrips of RIL, Reliance energy, Reliance

capital and IPCL made huge gains. This helped the Sensex crossed 7,000 points for the first

time.

8000, September 8, 2005 - On September 8, 2005, the Bombay Stock Exchange'sbenchmark 30-share index the Sensex - crossed the 8000 level following brisk buying by

foreign and domestic funds in early trading.

9000, December 9, 2005 - The Sensex on November 28, 2005 crossed 9000 to touch

9000.32 points during mid-session at the Bombay Stock Exchange on the back of frantic

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http://en.wikipedia.org/wiki/Manmohan_Singhhttp://en.wikipedia.org/wiki/Harshad_Mehtahttp://en.wikipedia.org/wiki/Harshad_Mehtahttp://en.wikipedia.org/wiki/Bharatiya_Janata_Partyhttp://en.wikipedia.org/wiki/Lok_Sabhahttp://en.wikipedia.org/wiki/Manmohan_Singhhttp://en.wikipedia.org/wiki/Harshad_Mehtahttp://en.wikipedia.org/wiki/Harshad_Mehtahttp://en.wikipedia.org/wiki/Bharatiya_Janata_Partyhttp://en.wikipedia.org/wiki/Lok_Sabha


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buying spree by foreign institutional investors and well supported by local operators as

well as retail investors.

10,000, February 7, 2006 - The Sensex on February 6, 2006 touched 10,003 points during

mid-session. The Sensex finally closed above the 10,000-mark on February 7, 2006.

11,000, March 27, 2006 - The Sensex on March 21, 2006 crossed 11,000 and touched a

peak of 11,001 points during mid-session at the Bombay Stock Exchange for the first time.

However, it was on March 27, 2006 that the Sensex first closed at over 11,000 points.

12,000, April 20, 2006 - The Sensex on April 20, 2006 crossed 12,000 and touched a peak

of 12,004 points during mid-session at the Bombay Stock Exchange for the first time.

13,000, October 30, 2006 - The Sensex on October 30, 2006 crossed 13,000 for the first

time. It touched a peak of 13,039.36 and finally closed at 13,024.26.

14,000, December 5, 2006 - The Sensex on December 5, 2006 crossed 14,000.

15,000, July 6, 2007 - The Sensex on July 6, 2007 crossed 15,000 mark.

16,000, September 19, 2007 - The Sensex on September 19, 2007 crossed the 16,000

mark.

17,000, September 26, 2007 - The Sensex on September 26, 2007 crossed the 17,000 mark

for the first time.

18,000, October 9, 2007 - The Sensex on October 09, 2007 crossed the 18,000 mark for

the first time.


the first time.


the first time.

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21,000, Jan 08, 2008 - The Sensex on January 08, 2008 touched all time peak of 21078

before closing at 20873.

Visual History of Stock Market in INDIA

The Sensex eventually recovered from the volatility, and on October 16, 2006, the Sensex closed at

an all-time high of 12,928.18 with an intra-day high of 12,953.76. This was a result of increased

confidence in the economy and reports that India's manufacturing sector grew by 11.1% in August

2006.

January 2008

In the third week of January 2008, the Sensex experienced huge falls along with other markets

around the world. On January 21, 2008, the Sensex saw its highest ever loss of 1,408 points at the

end of the session. The Sensex recovered to close at 17,605.40 after it tumbled to the day's low of

16,963.96, on high volatility as investors panicked following weak global cues amid fears of a

recession in the US.

The next day, the BSE Sensex index went into a free fall. The index hit the lower circuit breaker in

barely a minute after the markets opened at 10 AM. Trading was suspended for an hour. On

reopening at 10.55 AM IST, the market saw its biggest intra-day fall when it hit a low of 15,332,

down 2,273 points. However, after reassurance from the Finance Minister of India, the market

bounced back to close at 16,730 with a loss of 875 points.]

Over the course of two days, the BSE Sensex in India dropped from 19,013 on Monday morning to

16,730 by Tuesday evening or a two day fall of 13.9%. [4]

9,975, October 17, 2008 - Sensex crashes below the psychological 5 figure mark of 10K,

following extremely negative global financial indications in US and other countries.

Exactly one year back in October 2007, Sensex had gone past the 20K mark.

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http://en.wikipedia.org/wiki/Finance_Minister_of_Indiahttp://en.wikipedia.org/wiki/BSE_Sensex#cite_note-rediff-3http://en.wikipedia.org/wiki/Finance_Minister_of_Indiahttp://en.wikipedia.org/wiki/BSE_Sensex#cite_note-rediff-3


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8 - A statistical analysis of monthly returns between stock market indices in India and various global

markets over a ten-year period reveals a ... While the significant returns in Indian equities in the last

two years (2006 and 2007) may have lulled investors into believing that the ...

Dec 16, 2008 - NEW DELHI, May 25 (IPS) - On an unprecedented roll for two years, India's stock

markets nosedived this past fortnight with investors -- nervous after losing more ... Markets in India

are not the only ones to have crashed over the last fortnight. The emerging markets of Russia, China

Sensex falls

The top 18 single-day falls of the Sensex have occurred on the following dates :

1. January 21, 2008 --- 1,408.35 points

2. Oct 24, 2008---1070.63 points

3. March 17, 2008 --- 951.03 points

4. January 22, 2008 --- 857 points

5. February 11, 2008 --- 833.98 points

6. May 18, 2006 --- 826 points

7. October 10,2008 --- 800.10 points

8. March 13, 2008 --- 770.63 points

9. December 17, 2007 --- 769.48 points

10. January 7,2009 --- 749.05 points

11. March 31, 2007 --- 726.85 points

12. October 06, 2008 --- 724.62 points

13. October 17, 2007 --- 717.43 points

14. September 15, 2008 --- 710.00 points

15. January 18, 2007 --- 687.82 points

16. November 21, 2007 --- 678.18 points

17.August 16, 2007 --- 642.70 points

18. June 27, 2008 --- 600.00 points

January 2009

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In the third week of January 2009, the Sensex experienced a huge falls along with other market

around the world. On 21 January 2008, the Sensex saw it highest ever loss of 1,408 points at the

end of the session. The Sensex recovered to close at 17,605.40 after it tumbled to the days low of

16,963.96, on high volatility as investors panicked following weak global cues amid fears of a

recession in the US.

The next day BSE Sensex index went into a free fall. The index hit the lower circuit breaker in

barely a minute afte rthe market opened at 10 AM. Trading was suspended for an hour. On

reopening at 10 AM IST. The market saw its biggest intra-day trading fall when it hit a low of

15,332 down 2,273 points. However after reassurance from the Finance Minister of India, the

market bounced back to close at 16,730 with a loss of 875 points.

TECHNICAL ANALYSIS IN INDIAN STOCK MARKET

Introduction

When holding periods are lengthy, it is possible to indulge in the luxury of fundamental analysis,

but when time is short, timing is everything. In such an environment, technical analysis really

comes into its own.

The Indian stock market, which mainly consists of the Bombay stock exchange and the national

stock exchange, is one of the fastest growing emerging markets in the world. One of the mainly

thinks people want to know about the stock market is, what to buy and when to buy?

There are many different approaches for analyst the market. Two basic methods are classified as

either fundamental analysis or technical analysis.

a) Fundamental analysis :- The massive amount of numbers in a companysfinancial statement can be wildering and intimidating to many investors. On the

other hand, if one knows how to read them, the financial statements are a gold mine

of information.

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Financial statement analysis is the biggest part of fundamental analysis. Also known as

quantitative analysis, it involves looking at historical performance data to estimate the

future performance of stocks. Followers of quantitative analysis want as much data as they

can find on revenue, expenses, assets, liabilities and all the other financial aspects of acompany. Fundamental analysts look at this information to gain insight on a companys

future performance, this doesnt mean that they ignore the companys stock price; they

avoid focusing on it exclusively.

Financial markets, by their very nature, reveal itself in the form of rhythmic, patterned,

price movement that bear not only a natural relationship to one another but also are

essentially predictable once they are understood. Thus the discipline of technical analysis-

hearing the message of the market via price movement becomes an accurate tool for

making profitable trading decisions.

Furthermore, since markets essentially attempt to anticipate movements in economic and

social fundamentals, the accurate use of technical analysis actually implies an ability to

predict those fundamentals. This is why technical analysis is such an important tool for

making investment decisions.

b) Technical analysis:

Technical analysis is a method of predicting price movements and future market trends by

studying charts of historical data. The initial data for a technical analysis are prices: the

highest and the lowest prices, the price of opening and closing within a certain period of

time, and the volume of transactions. Technical analysis presupposes that all the

information about the market and its further fluctuations is contained in the price chain.

Any factor, that has some influence on the price, be it economic, political or psychological,

has already been considered by the market and included in the price, technical analysis is

concerned with what has actually happened in the market, rather than what should happen

and takes into account the price of instruments and the volume of trading, and creates

charts from that data to use as the primary tool.

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In a shopping mall, a fundamental analyst would go to each store, study the product that

was being sold, and then decide whether to buy it or not. By contrast, a technical analyst

would sit on a bench in the mall and watch people go into the stores. Disregarding the

intrinsic value of the products in the store, his or her decision would be based on thepatterns or activity of people going into each store.

THE PILLARS OF TECHNICAL ANALYSIS

There are four main areas of technical analysis that analysts can objectively measure and use in

trading systems, they are as follows:

a) Price

b) Volume

c) Time

d) Sentiment

Price is the most important of these areas; we measure profits and losses in price differences

between buys and sells. It deserves most focus by analysts and academics alike, but if all four can

be employed together, the odds of making successful decisions can be dramatically increased.

Volume includes such concepts as accumulation and distribution, market breadth, open interest,

and trade count, Time includes cycles, seasonality, and relationships between patterns and trends

from a duration point of view.

Finally, Sentiment is a more subjective area that seeks to determine solely if the masses i.e. theconsensus of investors- is tipped too far in one direction. At that point, it pays to consider

positioning against the crowd. Such indicators as cocktail partyu chatter and options premiums

play roles here, and there will be more on each aspect later in various places in this book.

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TECHNICAL ANALYSIS -RATIONALE

Why would someone rely on just studying charts that plot past and current price and volume

information as well as perhaps technical indicators or formulas that use the same information? The

reasons are found in observations of the stock market, as first noted by Charles dow in this country

and can be described in three ways.

i. Efficient market- Over time , market prices reflect everything that can be

known about a stock and its future prospects. The market as a mechanism

is very efficient ay discounting whatever can affect price, even unforeseen

events, such as new competition, legal or financial problems, a company

takeover, the death of a founder, and so on are quickly priced into the stock,

even unknown (not yet publicized) fundamental factors, such as a sharp

earning drop, are seldom unknown or unanticipated by everyone; those who

know often act on the information, and selling volume starts to pick up on

rallies. Here I am talking necessarily about facts known only by company

insiders. There are traders, investors and analysts outside a company or an

industry who see changes coming, through astute observation and sharp

analysis.

b.Trends

The information about a companys stock and its future earning prospects

that are reflected in the stock price will also be reflected in a price trend or tendency

to go up or down. Trends are not only up or down, but sideways as well or what is

sometimes called a trendless pattern I consider a sideways movement to be the

third trend possibility, for example, a stock moves between 40 and 50 multiple

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times. A trend is the action of a body in motion staying in motion until an equal

countervailing force occurs.

c. Reoccurrence - Price trend occurs and reoccur in patterns that are largely

predictable. The idea of trends reoccurring is that history repeats itself. If there was

abundant stock for sale (supply) previously for sale at 50 and that selling caused a

retreat in prices, it may as well be the case again when the stock approaches this

level again. If it doesnt , that tells you something also, as demand was this strong

enough to overcome selling.

The basic technical anal analysis rationale can be remembered by the ETR acronym (as in

Estimated Time of Arrival ). Well, one can estimate arrival with technical analysis!

TECHNIACL ANALYSIS CORE STUDY

Making Money, Not corrected Market Forecast

One cannot tell the market what to do, even if it is wrong by all the measures. What one needs to

do is listen to the market. It tell where it is going, so that one can jump on the ride. At its best,

technical analysis will never let one miss a big move. That include the unusual situation of legal

changes, or natural disasters. However, if a market is going to have a sustained move either up or

down, technical analysis will get one out or keep one in, respectively. It probably will not be at the

very beginning or the very end, but one will capture the bulk of the move and get out before giving

back a significant portion of the profits.

What makes a stock look good?

One need to look for stocks where the demand exceeds supply, where the so called smart money

has been placed in the early stages of their individual bull markets. Stock that are already moving

higher with increasing public interest are ideal candidates. These are all evident on price charts

with supporting indicators.

What make a stock look good? Find atleast 3 of the following, and chances are, one will pick a

winner.

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A rising prive trend as more investors jump abroad.

Rising volume as investors become more aggressive in their purchase.

Strong, but not excessive, price momentum. There is likely to be enough business for all

the stocks in it.

Strong market. Arising tide rises most boats.

Supportive environment. Low input prices, high output prices, low cost of doing business,

and favorable supply and demand in the industry.

All of this information is available on the charts.

Choosing the Right Tools

Technical analysis offers a vast array of tools for every type of analytical task. There are charts that

display prices in frames ranging from trade-by-trade to daily to monthly and longer. They can

show market cycles, phases of fear and greed, and projected targets.

Indicators are available to measure price momentum, volume distribution, and market breadth.

There are even methods in popular use to measure sentiments and how perceptions change. One

needs to stick to the basis and use the tools available to the individual investor.

Flexible Analysis for the Real World

Allow yourself to hear the market is telling you and be able to listen to it, no matter what you may

have thought beforehand. Thus one must See patterns develop and Feel the changing tides of

investor sentiments.

Enhancing the Returns

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Technical analysis will not and should not replace other methods. One should focus on enhancing

ones other decision making processes such as fundamental analysis to increase the likelihood of

success.

Technical analysis The Perfect World

Technical analysis involves the major areas of recognizing trends, finding patterns, and using

supporting studies to assess the stock market and pick a winning stock.

Heres the process:

Determine if conditions are favorable for equity assets using our current analytical

techniques(earnings, inflation, etc..)

If they are fair to good, then determine what sectors of the market would be best to focus

upon.

Now what the best sectors are found, which stocks should you buy?

What technical tools should you apply to help us out?

What is the upside target likely to be?

What will cause you to sell the stock early, before it reaches its upside target?

What will cause you to sell when the stock reaches its target?

One may not cover them all individually, but this is the thinking going behind the scenes.

Where should a pure technician start?

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The answer is in the business cycle. How can one determine where he it is in the cycle using

technical analysis? This answer is relative strength. Which sectors are starting to rise faster or even

fall slower than the general market? Are gold are starting to rise faster? Chances are we are nearer

to the end and the decline in the cycle. Rather than at the beginning, or rise. Go with it.

Sure, a select few stocks will do well when they theoretically should not, but we are trying to

maximize profits, not nail down every winning stock out there. The stocks with the best odds for

success will come from the sectors that the business cycle is favoring.

Keeping in mind that we are not trying to time the entire market. We are just trying to find the best

places to put the money we have already allocated to stocks.

TECHNICAL ANALYSIS REQUIRED BACKGROUND

a) Support

A term used in technical analysis indicating a specific price level at which a currency will have the

inability to cross below. Recurring failure for the price to move below that point produces a pattern

that can usually be shaped by a straight line. A support level penetrated becomes resistance.

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b) Resistance

A term used in technical analysis indicating a specific price level at which a currency will have the

inability to cross above. Recurring failure for the price to move above that pint produces a pattern

that can usually be shaped by a straight line. A resistance level penetrated becomes support.

c) Trend

Trend is simply, the overall direction prices are moving. UP, DOWN, OR FLAT.

Classification :

Short term less than 3 weeks,

Medium term 3 weeks to 6 months Long term (major term)- more than 6 months.

An up-trendline is a straight line passing through the rising troughs of an up-move. The

importance of a trendline is increasing with every additional touching point, confirming the

trendlines value. A reversal of the trend is indicated with a violation of the up-trendline.

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A down-trendline is a straight line passing through he falling troughs of a down-move. The

importance of a trendline is increasing with every additional touching point, confirming the

trendlines value. A reversal of the trend is indicated with a violation of the down-trendline.

A Neutral Trend (No trend, sideways trend) means there is no direction.

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d) Channel

When prices trend between two parallel trendlines they form a Channel. When prices hit the

bottom trendline this may be used as a buying area and when prices hit the upper trendline this

may be used as a selling.

TECHNICAL ANALYSIS TYPES OF CHARTS

Introduction

A chart is a graphical representation of price movement over a specific period of time and is

composed of an x-axis (time) and a y-axis(price). The choice of the time frame employed depends

on the users need.

a) Line Chart

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A line chart shows a line connecting the closing prices. The closing is the last price recorded at

the end of a specific period of time (session).

b) Bar Chart

Bar chart: Basically all characteristics mentioned for the line chart also hold true for the bar chart.

However, the construction is a different one. The bar chart is composed of a high (higher price

during a session), a low (lowest price during a session) and the close. All that required is to draw a

vertical line (bar) from the high to the low. Then, set a horizontal dot from the vertical line to the

right, representing the close. Sometimes it also refers to the opening price: a dot drawn on the left

side of the bar.

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c) Candlestick Chart

The building blocks for the candlestick chart are the high, the low, the opening and the closing.The difference to the bar chart is that the open and the close form the cornerstones for the, so

called, real body. The body is white if the closing is higher than the opening. The contrary is true

for the block body.

TECHNICAL ANALYSIS INDICATORS

a) Moving Average

A Moving Average is a moving mean of data. In other words, Moving Averages perform a

mathematical function where data within a selected period is averaged and the average moves as

new data is included in the calculation while older data is removed or lessened. Moving Averages

essentially smooth data by removing noise. This smoothing of data makes Moving Averages

popular tools in identifying price trends and trend reversals.

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Simple Moving Average

Simple Moving Averages are the most common and popular form of moving average. The primaryreason for this is the relative ease with which Simple Moving Averages are calculated. A Simple

Moving Average is calculated by adding values over a set number of periods and then dividing the

sum by the total number of values.

Moving average weighted

As with Simple Moving Averages, Weighted Moving Average smooth the data by removing

noise over the selected period. However, a Weighted Moving Average will be more sensitive to

recent changes in data. This is because a Simple Moving Average gives all observations equal

emphasis in its calculation, but a Weighted Moving Average assigns a greater weight to the most

recent observations.

Moving average exponential

The Exponential Moving Average is similar to the Weighted Moving Average in that they both

assign greater weight to the most recent data. Where they differ is that instead of dropping off the

oldest data point in the selected period of the moving average, the Exponential Moving Average

continues to maintain all the data. In other words, a 5 day Exponential Moving Average will

contain more than 5 pieces of data information. Each observation becomes progressively less

significant but still includes in its calculation all the price data in the life of the instrument. The

Exponential Moving Average is another method of weighting a moving average.

The most common uses of Moving Averages are to:

Identify the trend

A common method involves looking at the slope of the Moving Average and the relationship of the

prices to the Moving Average. For example, if the Moving Average is sloping down and prices are

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below the Moving Average then prices are considered to be in a downtrend. The opposite is true

for an uptrend. If prices are moving above and below the Moving Average and the Moving

Average is flat then a non-trending market exits.

Give buy and sell signal

This can be achieved a number of ways. The first method looks at the relationship between the

close and a single Moving Average. If the market close above the Moving Average then a buy

signal is generated, if the market closes below the moving Average then a sell signal is generated.

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The second method uses Moving Averages, one with a shorter observation period than the other.

Buy and sell signals are generated when the short moving average crosses over the moving

average. Foe example if the short moving average crosses above the long moving average a buy

signal is generated; a sell signal is generated when the short moving average crosses below the

long moving average.

Note: Both of these buy and sell techniques are almost effective when the market is trending. If the

market is non-trending then these techniques are likely to give false signals. This is simply because

the market needs to continue in the direction of the buy or sell signal in order for the trade to be

profitable.

Parameters

The averaging period to be used will depend upon the purpose of moving average.

If one is using moving averages to identify the trend, then the length of the averaging period

should reflect the length of the trend one is trying to identify. The longer the trend the longer the

averaging period.

For example, if one is looking at a daily chart to identify the long term trend, one may decide to

use an averaging period of 200. For short and medium term trends periods of 20 and 50 could be

used respectively.

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If one is using moving averages to generate buy and sell signals, then shorter, more responsive

averaging periods are normally used. For example a two moving average system may use

averaging periods of 5 and 20.

Note: When selecting an averaging period there is a tradeoff between the averaging period, the

number of signals generated and the risk associated with the signals.A longer averaging period will

generate less signals but will require a larger price move before responding, sacrificing potential

profits in order to confirm the signal. A shorter averaging period will generate more signals and

require less of a price move before responding, however the risk that the signal is false increases.

b) Bollinger Band

Developed by John Bollinger, Bollinger Bands are charted by calculating a simple moving average

of price, then creating two bands a specified number of standard deviations above and below the

moving average. One can draw the simple moving average analyhsis on the same chart as the

Bollinger Bands analysis, using the same interval. In addition, Bollinger Bands are usually plotted

with a bar analysis so that the proximity of the bands to the price can be easily observed.

The most common uses of Bollinger Bands are to:

Identify overbought and oversold markets

An overbought or oversold market is one where the prices have risen or fallen too far and are

therefore likely to retrace. Prices near the lower band signal an oversold market and prices near

the upper band signal an overbought market. Overbought and oversold signals are most reliable in

a non-trending market where prices are making a series of equal highs and lows.

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Used in combination with an oscillator, generate buy or sell signals

If one uses Bollinger Bands in combination with an oscillator such as Relative Strength Index

(RSI), buy and sell signals are generated when the Bollinger Bands signal an overbought/oversold

market at the same time the oscillator signals a divergence.

Parameters

The length of the moving average is usually 20 days or less. Bollinger suggested using a moving

average that would catch the first retracement of an up move.

Bollinger used a figure of 2 standard deviations in his work, which was in stock trading. A value of

2 captures about 96% of the variation in price action. Different figures may be more appropriate

for other types of markets.

c) MACD Moving Average Convergence Divergence

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Moving Average Convergence Divergence or MACD as it is more commonly known, was

developed by Gerald Appel to trade 26 and 12-week cycles in the stock market. MACD is a type of

oscillator that can measure market momentum as well as follow or indicate the trend.

MACD consists of two lines, the MACD Line. The MACD Line measures the difference between

a short Exponential Moving Average and a long Exponential Moving Average. The Signal Line is

an Exponential Moving Average of the MACD Line. MACD oscillates above and below a zero

line without upper and lower boundaries.

The most common uses of MACD are to:

Generate buy and sell signals

Signals are generated when the MACD Line and the Signal Line cross. A buy signal occurs when

the MACD Line crosses from below to above the Signal Line, the further below the zero line that

this occurs the stronger the signal. A sell signal occurs when the MACD Line crosses from above

to below the Signal Line, the further above the zero line that this occurs the stronger the signal.

Indicate trend direction

If a trend is gaining momentum then the difference between the short and long moving average

will increase. This means that if both MACD lines are above (below) zero and the MACD Line is

above (below) the Signal Line, then the trend is up (down).

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Parameters

Short averaging period :(default12)

Long averaging period :(default26)

Signal line averaging period :(default9)

RSI-Relative Strength Index

Developed by J. Welles Wilder and introduced in his book New Concepts in Technical Trading

Systems. RSI calculates the difference in values between the closes over the Observation period.

These values are averaged, with an up average being calculated for periods with higher closes and

a down-average being calculated for periods with lower closes. The up average is divided by the

down average to create the Relative Strength. Finally, the Relative Strength Index formula to

produce an oscillator that fluctuates between 0 and 100.

The most common uses of RSI are to:

Indicate overbought or oversold conditions

An overbought or oversold market is one where prices have risen or fallen too far and are therefore

likely to retrace.

If the RSI is above 70 then the market is considered to be overbought, and an RSI value below 30

indicates that the market is oversold. 80 and 20 can also be used to indicate overbought and

oversold levels.

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Overbought and oversold signals are most relable in a non-trading market where prices are making

a series of equal highs and lows.


If the RSI is above 70 and you are looking for the market to form a top, the RSI crossing back

below 70 can be used as a sell signals. The same is true for market bottoms, buying after the RSI

has moved back above 30. These signals are best used in non-trading markets.

Parameters

Observation Period : (default 14)

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Lower Bound % :(default 30); this provides the lower boundary

expressed as a % of the instruments value. The number must be less

than the Upper Bound.

Upper Bound % : (default 70); this provides the upper boundary expressed as a % of the

instruments value.

d) ADX/ Directional Movement Index

J. Welles Wilder developed the Average Directional Index (ADX) to evaluate the strength of a

current trend, be it up or down. The ADX is an oscillator that fluctuates between 0 and 100. Even

though the scale is from 0 to 100, readings above 60 are relatively rare. ADX Below 20 indicate a

weak trend and above 40 indicate a strong trend. The indicator does not grade the trend a bullish or

bearish, but merely assesses the strength of the current trend. A reading above 40 can indicate a

strong downtrend as well as a strong uptrend.

ADX can also be used to identify potential changes in a market from trending to non-trending.

Interpreting the ADX

Below 20 : Non-trending market.

Crosses above 20 : Signal that a trend might be emerging: Consider initiating buy or

sell in direction of prevailing stock, future, or currency price

movement.

Between 20 & 40 : If ADX is increasing between 20 and 40, then it is further

confirmation of emerging trend. Buy or short sell in the direction of

the current market direction. Avoid using oscillator technical

indicators and use trend following indicators like moving averages.

Above 40 : Very strong trend.

Crosses above 50 : Extremely strong trend.

Crosses above 70 : Power Trend; very rare occurrence.

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ADX is generally made up of three lines; ADX and +DI & -DI.

The +DI indicates the up average.

The DI indicates the down average.

The ADX indicates the strength of a prevailing trend.

Signals

A buy signal is given when +DI crosses above the DI line.

A sell signal is given when +DI crosses below the DI line.

Parameters

Observation Period : Default (14 days)

ADX must be above both DI lines.

An ADX below 25 is a strong warning to avoid trading.

e) Stochastic

Stochastics are an oscillator developed by George Lane and are based on the following

observation:

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As prices increase closing prices tend to be closer to the upper end of the price range.

As prices decrease closing prices tend to be closer to the lower end of the price range.

Fast Stochastics consists of two lines, %K and %D:

The %K line measures, as a percentage, where the current close is, in relation to the lowest

low over the observation period. This is shown on a scale of 0 to 100, where 0 is the

observation period low, and 100 is the observation period high.

The %D line is a Simple Moving Average of the %K. Because it is a moving average, this

line is smoother than the %K and provides the signals for an overbought / oversold market.

Calculations

96k = 100 x ( Recent Close Lowest Low (n) )

Highest High (n) Lowest Low (n)

96D = 3-period moving average of 96 K

(n) = Number of periods used in calculation

The most common uses of Stochastics are to:

Indicate overbought and oversold conditions

An overbought or oversold market is one where the prices have risen or fallen too far and are

therefore likely to retrace. If the %D line is above 80% then the close is near the top end of the

range of the observation period, while a reading below 20% means that the close is near the bottom

end of the range of the observation period. Generally the area 80 is considered overbought, while

the area below 20 is oversold.

Overbought and oversold signals are most reliable in a non-trending market where prices are

making a series of equal highs and lows.

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For a buy or sell signal the following conditions must be met or order.

1. The %K and %D lines move above 80 or below 20

2. The %K and %D lines cross

Parameters

Observation Period for %K FAST: (default 5)

A value greater than default, results in a smoother, less sensitive %K Fast line.

Averaging period for %D FAST: (default 3)

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RESEARCH METHODOLOGY

The research is primarily focused on national stock exchange for the purpose of determining the

stocks for investment based o n technical analysis, nifty is chosen over the BSE Sensex due to the

following reasons:

1. NSE is the largest stock exchange of the country.

2. Data of the various companies is easily available on the net.

3. NSE is considered as more transparent then BSE sensex.

After this, the nifty exchange is divided into a total of 21 sectors. The following are the names of

the different sectors.

Automobiles FMCG Paper & chemicals

Banking & Finance Health care & food Power

Cement Hotel Retailing

Construction IT Sugar

Consumer durables Media Telecom

Diversified Metals Textiles

Engineering & machinery Oil & gas Transport

Next step includes selection of approximately 10 companies from each sector on the basis of their

market capitalization i.e. in the descending order of their market capitalization starting from the

company with highest capitalization.

Then historical data of the selected companies is downloaded from NSE & PROWESS ranging

from 1st December, 2006 to 30th November, 2007.

Then different technical indicators are used to determine future price trends of the stocks of

selected companies.

Then on the basis of the results given by different indicators and the weights assigned to thoseindicators, their score is calculated and decision is taken as to whether to buy, sell, hold or avoid.

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Process of calculating score: Assigning Weights

Firstly, weights are assigned to each strategy as follows:

Strategy Buy sell Wait watch Hold Avoid

Score +2 -2 0 +1 -1

After this weights are assigned to diff. indicators for calculating the total score.

Since all indicators have their own relevance and are successful under diff. situations,we have

assigned equal weights to all of them.

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Indicator weight score Weighted score

Simple moving average 0.167 X =0.167*x

MACD 0.167 X =0.167*x

Bollinger band 0.167 X =0.167*xRSI 0.167 X =0.167*x

ADX 0.167 X =0.167*x

Stochastic 0.167 X =0.167*x

Total score 1 =(D2:D7)


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After this, score if all the companies was calculate and then keeping in view the conservative

aspect of human psychology, approximately top 10% companies selected for BUY, next 25%

were kept for HOLD ,next 30% were recommended for WAIT & WATCH, next 25% were

recommenced for AVOID and the remaining 10%were recommended for SELL.

Broadly the results obtained could be categorized as:-

Strategy buy hold Wait & watch avoid Sell

Score(s) S>0.65 0.30


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Type of Research:

Hence during the whole project I have worked on secondary data so it was an exploratory

research. I have firstly collected the data from internet, search engine, magazines, journals, books

and further explore it in detail.

Limitation of the study

As the research study has just begun, all the flaws in the work are not yet known exactly, howeversome of the limitations known as of now are:

1. Stock markets are known for their uncertainty. There is nothing which can be said about

them with entire certainty. They are driven by the psychology of the investors and we all

know that human behavior is unpredictable.

2. Due too the lack of the necessary resources such as time and money, the researchcould not

be conducted as thoroughly as one would have liked. Hence the number of the companies

analyzed in the research has been limited.

3. Noise in the data obtained from prowess and internet.

4. Lack of exposure to the real trading environment.

5. It is quite difficult to give preference to a particular indicator over others, since each

indicator has its own relevance. Therefore, it becomes difficult to decide whether to buy or

sell particular scrip when some indicators give buy signal, while others give sell signals.

Core theme

Financial markets moe in the trends caused by the changing attitudes and expectations of investors

with regards to the business cycle. Since investors continue to report the same tupeof behavior

from cycle to cycle, an understanding of the historical relationships between retains price averagesand market indicators can be used to identify turning points. No single indicator can ever be

expected to signal all trend reversals, so it is essential to use a number of them together to build up

a consensus.

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This approach is by no means infallible, but a careful, patient and objective use of the principles of

technical analysis can put the odds of success very much in favour of the investor or trader who

incorporates these principles into an overall strategy.

FINDINGS: SECTOR WISE

IT sector is looking very attractive at present and stocks of this sector of this sector can be

bought and hold.

Consumer durable sector is in buy and hold category. Stocks of this sector can be kept on

hold and particularly the shares of vaibhav gems , Hindustan sanitary and Videocon

industries are quite attractive and can be bought.

FMCG, Media, metal paper & chemical, textile and transport sectors are looking good.

Shares of these sectors are recommended for hold.

Most of the shares of power and oil & gas sector are touching their life time highs and it is

high time to redeem any investment made in these sectors. For any fresh investment these

sectors should be completely avoided.

Sugar sector is cyclical in nature and most of the companies belonging to thirds sector

touch their 52 week high during October-November, hence any investments made in this

sector should be redeemed and fresh investments must be avoided. However some of

stocks of this sector like Ballarpur china and Shakti are an exception and can be bought

oeing to their goo performance and market expectations to rise further.

Cement, hotel and pharmacy sectors should be avoided at present.

Telecom sector should be avoided but shares like bharti and himchal futuristic can be

bought owing to high growth prospects and expansion plans of these companies.

Banking, automobile and construction sectors are in wait & watch category. If reserve bank

cuts the interest rate then stock of these sectors can be bought as in that case the shares of

these sectors will start rising. Otherwise these sectors should be avoided. However at

present DLF and L&T looks very attractive and can be bought.

Engineering &machinery and retail sectors are giving mix result. Some stocks are giving

hold signal and some are giving avoid signal.

INDINGS: INDICATOR

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Moving average is of great help in identifying trend in the security or in other words it can

also be called as trend indicator. It also helps in measuring price momentum.

However, it does not speak anything about the trend reversals. If studied along with

volume, moving average can help in predicting trend reversals, which nowadays is

becoming a key to windfall gains in stock markets.

MACD-if we look towards the graps of MACD we can clearly that MACD help in

studying the overuse momentum. Moreover, from the results obtained we can slo conclude

that MACD is one of the most realizable indicators both in bullish as well as in bearish

markets.

Bollinger band from the above study we can clearly see that Bollinger band is nost of

much significance in trending market. As in trending market it always remains near of the

upper or lower bands thereby generating flawed signals. However one of the advantages of

Bollinger band is that it helps in studying the volatility of the security. Thus, Bollingerband priovises best results only when used in conjunction with other indicators.

ADX this is also one of the most reliable indicators and helps in predicting the trend in a

security.

RESULTS:-

To begin with, 10 companies were chosen from each sector. Then using the technical analysis

software amibroker & stock predictor various indicators were applied to the historical price data.The graps of the indicators thus generated are included in the appendix.

The results obtained are as follows:-

Symbols used

Buy B

Sell S

Hold H

Avoid A

Wait&watch W

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SWOT Analysis

Strengths: Sensex and Nifty scrips are top made up of top performing scrips that should capture

much of Indias growth over the next 10 years. Companies that stand to gain the most as Indian

economy gallops at 8-9% pa.

Weakness: Illiquidity outside the scrips in futures and options may lead to large scale price

manipulation in illiquid scrips and lower price realizations in such counters.

Poor Indian Accounting disclosures may lead to large scale manipulation of figures by publicly

traded companies.

Opportunities: A large domestic market that is still into traditional fixed income and other

government savings is all buy bound to enter the market sooner if not later.

Threats: Global Economic slowdown, Currency mismanagement, High global commodity prices,

Over valuation in Index scrips, Non liquidity in non derivatives related scrips, Change in

government focus on controlling inflation, the attitude of government relating to FIIs taxation etc

Brief about SWOT Analysis

A tool that identifies the strengths, weaknesses, opportunities and threats of an organization.

Specifically, SWOT is a basic, straightforward model that assesses what an organization can and

cannot do as well as its potential opportunities and threats. The method of SWOT analysis is to

take the information from an environmental analysis and separate it into internal (strengths and

weaknesses) and external issues (opportunities and threats). Once this is completed, SWOT

analysis determines what may assist the firm in accomplishing its objectives, and what obstacles

must be overcome or minimized to achieve desired results.

When using SWOT analysis, be realistic about the strengths and weaknesses of your organization.

Distinguish between where your organization is today, and where it could be in the future. Also

remember to be specific by avoiding gray areas and always analyze in relation to the competition

(i.e. are you better or worse than competition?). Finally, keep your SWOT analysis short and

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simple, and avoid complexity and over-analysis since much of the information is subjective. Thus,

use it as a guide and not a prescription.

Conclusion

Financial markets move in trends callused by the changing attitudes and expectations of investors

with regards to the business cycle. Since investors continue to repeat the same type of behavior

from cycles to cycle. And understanding of the historical relationships between certain price

averages and market indicators can be used to identify turning points. No single indicator can ever

be expected to signal all trend reversals, so it is essential to use a number of them together to build

lup a consensus.

This approaches if by no means infallible, but a careful, patient, and objective us of the principles

of technical analysis can put the odds of success very much in favor of h investor or trader who

incorporates these principles into an overall strategy.

As we can see that the stock exchange is now seen increasingly for what it really is, namely an

essential financial infrastructure for any economy. It is this view of the exchange as infrastructure

that motivated the Indian government to encourage the establishment of the National Stock

Exchange of India at Mumbai, which in a few short years completely revolutionized the Indian

capital market. The transparency of the price discovery process which results, especially in

technology driven stock exchanges encourages participation in economic activity and enhances the

efficient utilization of resources. In addition, the stock market is increasingly perceived as an

electronic marketplace for buyers and sellers of securities to transact their business, under the full

view of observers.

The research is primarily focused on national stock exchange for the purpose of determining the

stocks for investment based o n technical analysis, nifty is chosen over the BSE Sensex due to the

following reasons:

4. NSE is the largest stock exchange of the country.

5. Data of the various companies is easily available on the net.

NSE is considered as more transparent then BSE Sensex.

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APPENDIX

AUTOMOBILES MARUTI SUZUKI INDIA LIMITED

At a GlanceNSE code MARUTI

Industry Auto-cars & jeeps

Business group MNC associate

CEO MR. JAGDISH KHATTAR

Face value 5

1. Simple moving average

From the chart we can see that, whenever short moving average crosses over long moving

average, it generates a buy signal (green arrow) & whenever short moving average crosses below

long moving average, it generates a sell signal (end arrow).

According to the latest price data, the simple moving average generated a sell signal in the

beginning of this month and it marginally missed buy signal in the middle of this month.

However since the 20 day SMA hence it is advised to AVOID this stock.

2. MACD-Moving Average Conversion Diversion

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From the chart we can see that, a buy signal occurs whenever MACD line crosses signal line from

below to above and vice versa. Further, whenever the buy signal occurs below zero line it a strong

buy signal & whenever the sell signal occurs above zero line it is a strong sell signal.According to

the latest price data, MACD generates a very strong sell signal in the past and after that signal line

has continuously remained above the MACD line. Hence it is advised to AVOID this stock.

3. BOLLINGER BAND

From the chart we can see that, a buy signal occurs whenever price line touches the lower

Bollinger band and sell signal occurs whenever the price line touches the upper band.According to

the latest price data, Bollinger band has generated a BUT signal.

4. RSI- Relative Strength Index

From the chart we can see that, a buy signal occurs whenever the RSI lie crosses lower circuit of

30 and a sell signal occurs whenever it crosses the upper circuit of 70.

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According to the latest price daters generates a BUY signal.

5. ADX- Average Directional Movement Index\

From the chart we can see that, whenever +DI line crosses above DI line from below , it generatesa buy signal & whenever-DI line crosses above +DI line from below, it generates a sell signal (red

arrow).

According to the latest price data, the ADX generated a sell signal in the past and after that the

distance between the two lines has remained almost constant hence it is advised to AVOID this

stock.

6. Stochastic

F

rom the chart we can see that, whenever % K line crosses above the %D line and both the lines are

above the circuit of 80 or below the circuit of 20, it generates a buy signal (green arrow) &

whenever %K line crosses below the %D line and both the lines are above the circuit of 80 or

below the circuit of 20, it generates a sell signal (red arrow).

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According to the latest price data, a BUY signal has been generated.

On the basis of the above suggestions, the final score for MARUTI comes out to be +0.501

II. BANKING & FINANCE ICICI BANK LIMITED

At a glance

NSE Code ICICI BANK

Industry Finance-banks-private sector

Business group ICICI Group

CEO Mr.kundapur vaman kamath

Face Value 10

1. Simple moving average

From the chart we can see that, whenever short moving average crosses over long moving average,

it generates a buy signal (green arrow) & whenever short moving average crosses below long

moving average, it generates a sell signal (red arrow).

According to the latest price data, we can see that though the simple moving average has already

generated a sell signal, but the 5 day moving average line is slowly moving upwards and it is

expected to cross the 20 day moving average in near future, so it is advised to AVOID the stock

until it crosses the 20 day moving average.

2. MACD- Moving average conversion diversion

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From the chart we can see that, a buy signal occurs whenever MACD line crosses signal line from

below to above and vice versa. Further, whenever the buy signal occurs below zero line it a strong

buy signal & whenever the sell signal occurs above zero line it is a strong sell signal.

According to the latest price data,MACD has already generated a very strong sell signal sometime

back, and from the graph we can see that the distance between the signal lime and the MACD is

also increasing and the MACD line is not expected to cross the signal line soon, hence it is

recommended to SELL the stock,

3. BOLLINGER BAND

From the chart we can see that, a buy signal occurs whenever price line touches the lower

Bollinger band and sell signal occurs whenever the price line touches the upper band.

According to the latest price data, Bollinger band generates a BUY signal.

4. RSI- relative strength index

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From the chart we can see that, a buy signal occurs whenever the RSI line crosses lower circuit of

30 and a sell signal occurs whenever it crosses the upper circuit of 70.

According to the latest price data, RSI has already generated a buy signal sometime back; hence itis advised to HOLD the stock.

5. ADX-Average directional movement index

From the chart we can see that, whenever +DI line a crosses above-DI line from below, it

generates a buy signal & whenever DI line crosses above +DI line from below, it generates a sell

signal (red arrow).

According to the latest price data, the ADX has generated a BUY signal.

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6. Stochastic

From the chart we can see that, whenever %k line crosses above the %D line and both the lines areabove the circuit of 80 or below the circuit of 20, it generates a buy signal (green arrow) &

whenever %k line crosses below the %D line and both the lines are above the circuit of 80 or

below the circuit of 20, it generates a sell signal (red arrow).

According to the latest price data, though the buy signal has already been generated sometimes

back and at present it does not generate any signal but since the % k line is above the %D line,

hence it is advised to HOLD the stock.

On the basis of the above suggestions, the final score for icici bank comes out to be +0.501

Review of Literature:

1.Technical analysis explained

By: Martin J. Pring

McGraw-Hill

An introduction of technical analysis and fundamental analysis..2.Martin pring on market momentum

By:Martin J. PringVision books

Edition 2001

Topic:-main areas of technical analysis i.e. price and its role in technical analysis.

63


64/64

3. ICFAI Journal:

Applied finance (volume 13

Topic:- A Study Of Indian Stock Market

Mr. Ash Narayan Sah

4. Times of India

31 march 1992 .

Topic:-.about NSE AND BSE sensex .and how scam hit the markets.

5. Hindustan times

16 October 2007

.

Topic: factor supporting growth in Indian stock market. Table of sensex growth.

Webliography

www.nseindia.com

www.bseindia.com

www.ask.com

www.stockanlysis.com

www.realtimeforex.com

www.stockpedia.technicalanlysis/11asp.

www.moneycontrol.com

www.usetrade.com

www.indiabulls.com
http://www.nseindia.com/http://www.bseindia.com/http://www.ask.com/http://www.stockanlysis.com/http://www.realtimeforex.com/http://www.stockpedia.technicalanlysis/11asphttp://www.moneycontrol.com/http://www.usetrade.com/http://www.indiabulls.com/http://www.nseindia.com/http://www.bseindia.com/http://www.ask.com/http://www.stockanlysis.com/http://www.realtimeforex.com/http://www.stockpedia.technicalanlysis/11asphttp://www.moneycontrol.com/http://www.usetrade.com/http://www.indiabulls.com/

33 Dheeraj Trilokchandani - Technical Analysis of Indian Stock Market

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