Technical Analysis

Project Report on Technical Analysis
Submitted to
Amit Bagga
1

ACKNOWLEDGEMENT
I would like to thank Amit Bagga for providing me the opportunity to work on
this project. My sincere thanks continue to our institute for providing me the
opportunity to work on this project. It was a great part and a source of
learning for me. Last but not the least, I would like to thank all the people who
helped and contributed me knowingly or unknowingly during this project.
Signature:

Rang Narayan

2

DECLARATION
I Mr Rang Narayan declare that this project report is the record
of authentic work carried out by me. This project has not been
submitted to any other university or institute for the award of
any degree or diploma.

Rang Narayan
11318

3

PREFACE
Technical Analysis is the forecasting of future financial price movements
based on an examination of past price movements. Like weather
forecasting, technical analysis does not result in absolute predictions
about the future. Instead, technical analysis can help investors anticipate
what is "likely" to happen to prices over time. Technical analysis uses a
wide variety of charts that show price over time.
"One way of viewing it is that markets may witness extended periods of random
fluctuation, interspersed with shorter periods of nonrandom behavior. The goal of the
chartist is to identify those periods

4

INDEX

TABLE OF CONTENT PAGE NO.
ACKNOWLEDGEMENT 1
DECLARATION 2
PREFACE 3
INDEX 4
INTRODUCTION 5
TECHNICAL ANALYSIS TOOLS:
CHAPTER 1 : CANDLESTICKS
PATTERN
IT SECTOR
PHARMACEUTICAL SECTOR
FMCG SECTOR
6
CHAPTER 2: CHART PATTERN
DOUBLE TOP PATTERN
DOUBLE BOTTOM PATTERN
HEAD AND SHOULDER
PATTERN
SUPPORT AND RESISTANCE

13
CHAPTER 3: TECHNICAL
INDICATORS AND OSCILLATORS:
LEADING INDICATOR
RELATIVE STRENGTH INDEX
STOCHASTIC OSCILLATOR (
FAST AND SLOW)
LAGGING INDICATORS :
RATE OF CHANGE
MOVING AVERAGE
CONVERGENCE /
DIVERGENCE

23
CHAPTER 4: FIBONACCI
RETRACEMENT
33

BIBLIOGRAPHY 39

5

INTRODUCTION
Technical analysis is applicable to stocks, indices, commodities, futures or any tradable instrument where
the price is influenced by the forces of supply and demand. Price refers to any combination of the open,
high, low, or close for a given security over a specific time frame. The time frame can be based on intraday
(1-minute, 5-minutes, 10-minutes, 15-minutes, 30-minutes or hourly), daily, weekly or monthly price data
and last a few hours or many years. In addition, some technical analysts include volume or open interest
figures with their study of price action.
The Basis of Technical Analysis
At the turn of the century, the Dow Theory laid the foundations for what was later to become modern
technical analysis. Dow Theory was not presented as one complete amalgamation, but rather pieced
together from the writings of Charles Dow over several years. Of the many theorems put forth by Dow,
three stand out:
Price Discounts Everything
Price Movements Are Not Totally Random
"What" Is More Important than "Why"
Price Discounts Everything
This theorem is similar to the strong and semi-strong forms of market efficiency. Technical analysts believe
that the current price fully reflects all information. Because all information is already reflected in the price, it
represents the fair value, and should form the basis for analysis. After all, the market price reflects the sum
knowledge of all participants, including traders, investors, portfolio managers, buy-side analysts, sell-side
analysts, market strategist, technical analysts, fundamental analysts and many others. It would be folly to
disagree with the price set by such an impressive array of people with impeccable credentials. Technical
analysis utilizes the information captured by the price to interpret what the market is saying with
the purpose of forming a view on the future.
Prices Movements are not Totally Random
Most technicians agree that prices trend. However, most technicians also acknowledge that there are
periods when prices do not trend. If prices were always random, it would be extremely difficult to make
money using technical analysis. In his book, Schwager on Futures: Technical Analysis, Jack Schwager
states:
"One way of viewing it is that markets may witness extended periods of random fluctuation, interspersed
with shorter periods of nonrandom behavior. The goal of the chartist is to identify those periods (i.e. major
trends)."
"What" is More Important than "Why"
In his book, The Psychology of Technical Analysis, Tony Plummer paraphrases Oscar Wilde by stating, "A
technical analyst knows the price of everything, but the value of nothing". Technicians, as technical
analysts are called, are only concerned with two things:
1. What is the current price?
2. What is the history of the price movement?
The price is the end result of the battle between the forces of supply and demand for the company's stock.
The objective of analysis is to forecast the direction of the future price. By focusing on price and only price,
technical analysis represents a direct approach. Fundamentalists are concerned with why the price is what
it is. For technicians, the why portion of the equation is too broad and many times the fundamental reasons
given are highly suspect. Technicians believe it is best to concentrate on what and never mind why. Why
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did the price go up? It is simple, more buyers (demand) than sellers (supply). After all, the value of any
asset is only what someone is willing to pay for it. Who needs to know why?
Technical Analysis Tools
CHAPTER 1
1. Chart Analysis
Candlesticks Charts Patterns Analysis
Candlestick Parts
There are three main parts to a candlestick:
Upper Shadow: The vertical line between the high of the day and the close (bullish candle) or
open (bearish candle)
Real Body: The difference between the open and close; colored portion of the candlestick
Lower Shadow: The vertical line between the low of the day and the open (bullish candle) or
close (bearish candle)
Types of Candles:
Bullish Candle: When the close is higher than the open (usually green or white)
Bearish Candle: When the close is lower than the open (usually red or black)

Open-High-Close-Low (OHCL) charts: An open-high-low-close chart (also OHLC
chart, or simply bar chart) is a type of chart typically used to illustrate movements in the price of a
financial instrument over time. Each vertical line on the chart shows the price range (the highest and
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lowest prices) over one unit of time, e.g., one day or one hour. Tick marks project from each side of
the line indicating the opening price (e.g., for a daily bar chart this would be the starting price for that
day) on the left, and the closing price for that time period on the right. The bars may be shown in
different hues depending on whether prices rose or fell in that period.

Line Charts: A style of chart that is created by connecting a
series of data points together with a line. This is the most basic
type of chart used in finance and it is generally created by
connecting a series of past prices together with a line.

Candlestick Analysis of IT sector companies
A candlestick chart is a style of bar-chart used primarily to describe price movements of a
security, derivative, or currency over time. It is a combination of a line-chart and a bar-chart,
in that each bar represents the range of price movement over a given time
interval. Candlesticks were invented by Japanese. The Japanese traders have been using
candlestick charts to track market activity. Eastern analysts have identified a number of patterns to
determine the continuation and reversal of trend.
These patterns are the basis for Japanese candlestick chart analysis. This places candlesticks rightly
as a part of technical analysis. Japanese candlesticks offer a quick picture into the psychology of
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short term trading, studying the effect, not the cause. Applying candlesticks means that for short-term,
an investor can make confident decisions about buying, selling, or holding an investment.

Analysis of Candlesticks patterns in HCL Technologies
NSE Code: HCLTECH
Data time period: 07.05.2013 to 14.02.2014

May 10
th
2013,
Doji Star: Doji are patterns with the same open and close price. Its a significant reversal indicator.
On May 10
th
2013 its a doji in an uptrend market and then market goes down which means Doji
pattern has been successfully affect the market.

July 17
th
2013
Shooting Star: The Shooting Star candlestick formation is a significant bearish reversal
candlestick pattern that mainly occurs at the top of uptrends. On 17
th
July 2013 there is a
shooting star in uptrend market which means market will reverse but the volume is very low so
we cannot say that the reverse pattern will continue or not.

July 18
th
2013
Bearish Engulfing: The Bearish Engulfing Candlestick Pattern is a bearish reversal pattern,
usually occurring at the top of an uptrend. On the given date there is a bearish Engulfing candle
but after that date the market didnt go down so it is a failure of bearish Engulfing.

August 22
nd
2013
Bullish Engulfing: The Bullish Engulfing Candlestick Pattern is a bullish reversal pattern, usually
occurring at the bottom of a downtrend. The bearish candle real body of Day 1 is usually
contained within the real body of the bullish candle of Day 2. The power of the Bullish Engulfing
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Pattern comes from the incredible change of sentiment from a bearish gap down in the
morning, to a large bullish real body candle that closes at the highs of the day. Bears have
overstayed their welcome and bulls have taken control of the market.
On 22
nd
Aug, 2013 bullish engulfing candle is there and after that market has change its
sentiment and went up from next day. It is showing a strong reversal downtrend.

October 23
rd
2013
Hanging Man: The Hanging Man candlestick formation, as one could predict from the name, is
a bearish sign. This pattern occurs mainly at the top of uptrends and is a warning of a potential
reversal downward. It is important to emphasize that the Hanging Man pattern is a warning of
potential price change, not a signal, in and of itself, to go short.
The Hanging Man formation, just like the Hammer, is created when the open, high, and close are
roughly the same price. Also, there is a long lower shadow, which should be at least twice the
length of the real body.
When the high and the open are the same, a bearish Hanging Man candlestick is formed and it is
considered a stronger bearish sign than when the high and close are the same, forming a bullish
Hanging Man (the bullish Hanging Man is still bearish, just less so because the day closed with
gains).
After a long uptrend, the formation of a Hanging Man is bearish because prices hesitated by
dropping significantly during the day. Granted, buyers came back into the stock, future, or
currency and pushed price back near the open, but the fact that prices were able to fall
significantly shows that bears are testing the resolve of the bulls. What happens on the next day
after the Hanging Man pattern is what gives traders an idea as to whether or not prices will go
higher or lower.
On 23
rd
Oct, 2013 there is a hanging man in uptrend market and then there is a bearish candle
on the next day with a gap down from next day.
November 25
th
, 2013
Inverted Hammer: The Inverted Hammer candlestick formation occurs mainly at the bottom of
downtrends and is a warning of a potential reversal upward. It is important to note that the
Inverted pattern is a warning of potential price change, not a signal, in and of itself, to buy.
The Inverted Hammer formation, just like the Shooting Star formation, is created when the open,
low, and close are roughly the same price. Also, there is a long upper shadow, which should be
at least twice the length of the real body.
When the low and the open are the same, a bullish Inverted Hammer candlestick is formed and it
is considered a stronger bullish sign than when the low and close are the same, forming a
bearish Hanging Man (the bearish Hanging Man is still considered bullish, just not as much
because the day ended by closing with losses).
After a long downtrend, the formation of an Inverted Hammer is bullish because prices hesitated
their move downward by increasing significantly during the day. Nevertheless, sellers came back
into the stock, future, or currency and pushed prices back near the open, but the fact that prices
were able to increase significantly shows that bulls are testing the power of the bears. What
happens on the next day after the Inverted Hammer pattern is what gives traders an idea as to
whether or not prices will go higher or lower.
In a downtrend there is an Inverted Hammer which reverse the market as seller came back to the
market and bulls take over the bears from this day.
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14
th
January, 2014
Bearish Harami: A bearish Harami occurs when there is a large bullish green candle on Day 1
followed by a smaller bearish or bullish candle on Day 2. The most important aspect of the
bearish Harami is that prices gapped down on Day 2 and were unable to move higher back to the
close of Day 1. This is a sign that uncertainty is entering the market.
On 14
th
Jan, 2014 there is a bearish harami candle is being made in the market.

Company Name: MPHASI S LIMITED
NSE CODE: MPHASIS
DATA TIME PERIOD: 01-05-2013 TO 14-02-2014

GRAVESTONE DOJI: The Gravestone Doji is a significant bearish reversal candlestick pattern
that mainly occurs at the top of uptrends. The Gravestone Doji is created when the open, low,
and close are the same or about the same price (Where the open, low, and close are exactly the
same price is quite rare). The most important part of the Graveston Doji is the long upper
shadow.
The long upper shadow is generally interpreted by technicians as meaning that the market is
testing to find where supply and potential resistance is located.
The construction of the Gravestone Doji pattern occurs when bulls are able to press prices
upward.
However, an area of resistance is found at the high of the day and selling pressure is able to
push prices back down to the opening price. Therefore, the bullish advance upward was entirely
rejected by the bears.
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Date Candlestick pattern Success/Failure
8-05-2013 Doji Star Success
14.05.2013 Gravestone Doji Failure
31.05.2013 Doji Success
14.06.2013 Inverted Hammer Failure
18.06.2013 Bullish Engulfing Success
02.07.2013 Doji No signal
03.07.2013 Hammer No signal
19.07.2013 Bearish Engulfing
22.07.2013 Shooting Star Success
29.07.2013 Bearish Engulfing Failure
31.07.2013 Hanging Man success
5.08.2013 Hanging Man Success
13.08.2013 Bearish Engulfing Success
12.09.2013 Bearish Harami Success
27.11.2013 Inverted Hammer Success
02.12.2013 Inverted hammer Success
05.12.2013 Bullish Engulfing Failure
11.12.2013 Doji Failure
31.01.2014 Doji No Signal
03.02.2014 Doji No Signal
13.02.2014 doji Success

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Candlestick patterns for Pharmaceuticals companies

Company Name: Piramal Enterprise Ltd.
NSE code: PEL
Data Record Date: 01.05.2013 to 19.02.2014

Date Candlestick Pattern Success / Failure
05.07.2013 Bullish Engulfing Failure
16.07.2013 Doji & Dragonfly Doji Success
22.07.2013 Bearish Harami Failure
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02.12.2013 Inverted Hammer Failure
17.12.2013 Shooting star Success
07.01.2014 Bearish Harami Failure

Company Name: Glenmark Pharma
NSE code: glenmark

13.06.2013 Bearish engulfing success
24.06.2013 Bullish engulfing Success
12.07.2013 Bearish engulfing Failure
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26.07.2013 Doji success
02.09.2013 Inverted hammer Failure
04.10.2013 Bullish engulfing Failure
11.10.2013 Bearish Engulfing success
30.12.2013 Bearish engulfing Success
10.01.2014 Hammer Success

Candlestick patterns for FMCG companies

Company Name: Imperial Tobacco Company of India Ltd.
NSE code: ITC

15

20.05.2013 Gravestone Doji Failure
03.10.2013 Bearish Engulfing No signal
16


Company Name: Colgate Palmolive (India)
NSE code: COLPAL

25.07.2013 Bearish engulfing Success
17

02.09.2013 Bullish engulfing success
08.11.2013 Bullish engulfing Failure
21.11.2013 Inverted hammer Failure
12.12.2013 Bearish harami Success
22.01.2014 doji Success
20.02.2014 Shooting star success

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Chapter 2
Chart Patterns

2. Chart Patterns: A Price pattern is a pattern that is formed within a chart when prices
are graphed. In stock and commodity markets trading, chart pattern studies play a large role
during technical analysis. When data is plotted there is usually a pattern which naturally
occurs and repeats over a period. Chart patterns are used as either reversal or continuation
signals.
Different chart patterns:
Double Top Pattern
Double Bottom Pattern
Support and Resistance
Head and Shoulder Pattern

And there are many other patterns but in this project I am going to explain the
above mentioned patterns.

Double Top Pattern: A term used in technical analysis to describe the
rise of a stock, a drop, another rise to the same level as the original
rise, and finally another drop. The double top looks like the letter "M".
The twice touched high is considered a resistance level.
The double-top pattern is found at the peaks of an upward trend and is
a clear signal that the preceding upward trend is weakening and that
buyers are losing interest. Upon completion of this pattern, the trend is
considered to be reversed and the security is expected to move lower.

The first stage of this pattern is the creation of a new high during the
upward trend, which, after peaking, faces resistance and sells off to a
level of support. The next stage of this pattern will see the price start
to move back towards the level of resistance found in the previous run-
up, which again sells off back to the support level. The pattern is
completed when the security falls below (or breaks down) the support
level that had backstopped each move the security made, thus
marking the beginnings of a downward trend.
19

Double Top Pattern:
Company name: Ralles India Limited
NSE Code: Rallis
First high: 31.12.2013 @ Rs. 184.4
Second high: 07.01.2014 @ Rs. 184.9.
Sell signal: 22
nd
Jan 2014 @ Rs. 169.1
when the market crosses the neck line or support level

20

Double Bottom Pattern: The Double Bottom Reversal is a bullish reversal pattern typically
found on bar charts, line charts and candlestick charts. As its name implies, the pattern is made up of two
consecutive troughs that are roughly equal, with a moderate peak in-between. Note that a Double
Bottom Reversal on a bar or line chart is completely different from Double Bottom Breakdown on
a P&F chart. Namely, Double Bottom Breakdowns on P&F charts are bearish patterns that mark a
downside support break. Although there can be variations, the classic Double Bottom Reversal usually
marks an intermediate or long-term change in trend. Many potential Double Bottom Reversals can form
along the way down, but until key resistance is broken, a reversal cannot be confirmed.

Double Top and Double Bottom Pattern in HDFC Ltd.
Time period: December 2013 March 2014
NSE Code: hdfc
First high: 16.01.2014 @Rs. 857.6
Second high: 23.01.2013 @ Rs. 856.15
Conformation line: 20. 01.2014
Sell Price with date: 27.01.2014 @ Rs 833
First low: 10.02.2014 @ Rs. 765.4
Second low: 13.02.2014 @ Rs. 766.05
Conformation signal: 12.02.2014
Buy Price with date: Rs.779.3 on 17.02.2014

21

Support Level: 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.

Resistance Level: 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
22

believed that supply will overcome demand and prevent the price from rising above
resistance.

Support and Resistance Level

Company Name: PTC India Limited
NSE Code: PTC
Data Period: July 2013 Feb. 2014
Support Level (I): 5/08/2013 @ Rs. 33.2
(II): 19/11/2013 @ Rs. 52.50

Resistance Level: 24/12/2013 @ Rs. 64.25

23

Head and Shoulder Pattern: The head and shoulders pattern is
generally regarded as a reversal pattern and it is most often seen in
uptrends. It is also most reliable when found in an uptrend as well.
Eventually, the market begins to slow down and the forces of supply and
demand are generally considered in balance. Sellers come in at the highs
(left shoulder) and the downside is probed (beginning neckline.) Buyers
soon return to the market and ultimately push through to new highs (head.)
However, the new highs are quickly turned back and the downside is tested
again (continuing neckline.) Tentative buying re-emerges and the market
rallies once more, but fails to take out the previous high. (This last top is
considered the right shoulder.) Buying dries up and the market tests the
downside yet again. Your trendline for this pattern should be drawn from
the beginning neckline to the continuing neckline. (Volume has a greater
importance in the head and shoulders pattern in comparison to other
patterns. Volume generally follows the price higher on the left shoulder.
However, the head is formed on diminished volume indicating the buyers
aren't as aggressive as they once were. And on the last rallying attempt-
the left shoulder-volume is even lighter than on the head, signaling that the
buyers may have exhausted themselves.) New selling comes in and
previous buyers get out. The pattern is complete when the market breaks
the neckline. (Volume should increase on the breakout.)
24

Company Name: GMR Infrastructure Limited
NSE Code: gmrinfra
Data Period: Apr. 2013 Mar. 2014
Pattern: Head and Shoulder Pattern
Left Shoulder @ date: 10
th
May 2013
Head @ date: 17
th
May 2013
Right Shoulder @ date: 28
th
May 2013

25

Chapter 3

Major Indicators and Oscillators

A Technical indicator is a mathematical formula applied to the securitys price, volume or
open interest. The result is a value that is used to anticipate future changes in prices. A
technical indicator is a series of data points derived by applying a formula to the price data of
a security. Price data includes any combination of the open, high, low or close over a period
of time. Some indicators may use only the closing prices, while others incorporate volume
and open interest into their formulas. The price data is entered into the formula and a data
point is produced. Technical analysts use indicators to look into a different perspective from
which stock prices can be analysed. Technical indicators provide unique outlook on the
strength and direction of the underlying price action for a given timeframe. Technical
Indicators broadly serve three functions: to alert, to confirm and to predict. Indicator acts as
an alert to study price action, sometimes it also gives a signal to watch for a break of
support. A large positive divergence can act as an alert to watch for a resistance breakout.
Indicators can be used to confirm other technical analysis tools. Some investors and traders
use indicators to predict the direction of future prices.

Indicators can broadly be divided into two types LEADING and LAGGING.
Leading indicators
Leading indicators are designed to lead price movements. Benefits of leading indicators are
early signalling for entry and exit, generating more signals and allow more opportunities to
trade. They represent a form of price momentum over a fixed look-back period, which is the
number of periods used to calculate the indicator. Some of the well more popular leading
indicators include Commodity Channel Index (CCI), Momentum, Relative Strength Index
(RSI), Stochastic Oscillator and Williams %R.
Lagging Indicators
Lagging Indicators are the indicators that would follow a trend rather than predicting a
reversal. A lagging indicator follows an event. These indicators work well when prices move
in relatively long trends. They dont warn you of upcoming changes in prices, they simply tell
you what prices are doing (i.e., rising or falling) so that you can invest accordingly. These
trend following indicators makes you buy and sell late and, in exchange for missing the early
Opportunities, they greatly reduce your risk by keeping you on the right side of the market.
Moving averages and the MACD are examples of trend following, or lagging, indicators.

Fast Indicators
1. Stochastic Oscillator
Stochastic Fast
Stochastic Fast plots the location of the current price in relation to the range of a certain
number of prior bars (dependent upon user-input, usually 14-periods). In general, stochastic
are used to measure overbought and oversold conditions. Above 80 is generally
considered overbought and below 20 is considered oversold.The inputs to Stochastic Fast are
as follows:
Fast %K: [(Close - Low) / (High - Low)] x 100
Fast %D: Simple moving average of Fast K (usually 3-period moving average)
Stochastic Slow
26

Stochastic Slow is similar in calculation and interpretation to Stochastic Fast. The difference is
listed below:
Slow %K: Equal to Fast %D (i.e. 3-period moving average of Fast %K)
Slow %D: A moving average (again, usually 3-period) of Slow %K
The Stochastic Slow is generally viewed as superior due to the smoothing effects of the
moving averages which equates to less false buy and sell signals.
Stochastic Buy Signal
When the Stochastic is below the 20 oversold line and the %K line crosses over the %D line,
buy.
Stochastic Sell Signal
When the Stochastic is above the 80 overbought line and the %K line crosses below the %D
line, sell.

2. Relative Strength Index (RSI)
The RSI is part of a class of indicators called momentum oscillators. Momentum is simply
the rate of change the speed or slope at which a stock or commodity ascends or
declines. Measuring speed is a useful gage of impending change. RSI are referred to as
trend leading indicators.
RSI which oscillates between 0% and 100%. You will notice there is a pair of horizontal
reference lines: 70% overbought and 30% oversold lines. The overbought region
refers to the case where the RSI oscillator has moved into a region of significant buying
pressure relative to the recent past and is often an indication that an upward trend is
about to end. Similarly the oversold region refers to the lower part of the momentum
oscillator where there is a significant amount of selling pressure relative to the recent
past and is indicative of an end to a down swing.
RSI is a momentum oscillator generally used in sideways or ranging markets where the
price moves between support and resistance levels. It is one of the most useful technical
tool employed by many traders to measure the velocity of directional price movement.
The RSI is a price-following oscillator that ranges between 0 and 100. Generally,
technical analysts use 30% oversold and 70% overbought lines to generate the buy and
sell signals.
27

Go long when the indicator moves from below to above the oversold line.
Go short when the indicator moves from above to below the overbought line.

3. Moving Average Convergence / Diversion (MACD)
MACD stands for Moving Average Convergence / Divergence. It is a technical
analysis indicator created by Gerald Appel in the late 1970s. The MACD indicator is
basically a refinement of the two moving averages system and measures the distance
between the two moving average lines. The MACD does not completely fall into either
the trend-leading indicator or trend following indicator; it is in fact a hybrid with
elements of both. The MACD comprises two lines, the fast line and the slow or signal line.
These are easy to identify as the slow line will be the smoother of the two.

The importance of MACD lies in the fact that it takes into account the 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,
as opposed to simple moving averages, 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 going to end 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. The MACD indicator is basically
a refinement of the two moving averages system and measures the distance between
the two moving average. The standard setting for MACD is the difference between the 12
and 26-period EMA. However, any combination of moving averages can be used.

28

4. Rate of Change (ROC) :
The Rate of Change (ROC) indicator measures the percentage change of the current price as
compared to the price a certain number of periods ago. The ROC indicator can be used
to confirm price moves or detect divergences; it can also be used as a guide for
determining overbought and oversold
conditions.

29

5. Support and Resistance:
Support and Resistance is one of the most important and fundamental part of technical analysis:
Support: Prices should rise after touching support.
Resistance: Prices should fall after hitting resistance.

6. Bollinger Band: Bollinger Bands is a versatile tool combining moving
averages and standard deviations and is one of the most popular technical analysis
tools available for traders. There are three components to the Bollinger Band
indicator:
1. Moving Average: By default, a 20-period simple moving average is used.
2. Upper Band: The upper band is usually 2 standard deviations (calculated
from 20-periods of closing data) above the moving average.
3. Lower Band: The lower band is usually 2 standard deviations below the
moving average.
30

Buy Signal
A trader buys or buys to cover when the price has fallen below the lower Bollinger Band.
Sell Signal
The sell or buy to cover exit is initiated when the stock, future, or currency price pierces outside
the upper Bollinger Band.

31

Company with Bollinger Band:
Name of Company: PVR limited
NSE Code: PVR
Data Period: Mar. 2013 Mar 2014
Oscillator / Indicator used: Bollinger Band

Companies with different Oscillators and Indicators
1. Company Name: Grasim Industry Limited
NSE Code: grasim
Data Period: Sep. 2013 Mar.2014
32

Indicators used: RSI (14d) and Stochastic (14d)

2. Company Name: Havells India Limited
NSE Code: havells
Data period: Mar. 2013- Mar 2014
Indicators Shown: Rate Of Change (10 d) and MACD (26d,12d)

33

3. Company: Ambuja Cements Limited
NSE Code: ambujacem
Data Period: Aug. 2013- Mar. 2014
Indicators / Oscillators Shown: MACD (26d, 9d) and RSI (14d)

34

4. Company Name: Sesa Sterlite limited
NSE Code: SSLT
Date Period: Aug. 2013 Mar. 2014
Indicators Shown: MACD (26d, 12d) and RSI (14d)

35

5. Company Name: Oil and Natural Gas Corporation (ONGC)
NSE Code: ONGC
Data Period: Nov.2013 Mar. 2014
Indicator shown: MACD (26d, 12d), RSI (14d), Stochastic (14d), Moving Average (50d)

36

CHAPTER 4
FIBONACCI RETRACEMENT

Fibonacci Retracements
Arguably the most heavily used Fibonacci tool is the Fibonacci Retracement. To calculate the
Fibonacci Retracement levels, a significant low to a significant high should be found. From there,
prices should retrace the initial difference (low to high or high to low) by a ratio of the Fibonacci
sequence, generally the 23.6%, 38.2%, 50%, 61.8%, or the 76.4% retracement.
For the examples of this section, the S&P 500 Depository Receipts (SPY) will be used based on
the logic that the S&P 500 is a broad measure of human nature, thus the Fibonacci sequence
should apply very well. Nevertheless, the Fibonacci sequence is applied to individual stocks,
commodities, and forex currency pairs quite regularly. The chart above shows the 38.2%
retracement acting as support for prices.
Note that a trend line was drawn from a significant low (beginning of trend) to a significant high
(end of trend); the trading software calculated the retracement levels.

Fibonacci Retracement with a Support Level
Company Name: KRBL Limited
NSE Code: krbl
Data Period: Dec. 2013 Mar 2014
Support Level: 38.2% level
37

Calculation of Support level:
Highest top: 48.14
Lowest bottom: 31.68
Difference between highest top and lowest bottom: 48.14-31.68 = 16.46
38.2% of 16.46 = 6.287
Support level = 48.14-6.287 = 41.852

2. Fibonacci Retracement with Resistance Level
Company Name: Colgate Palmolive
NSE Code: colpal
Data Period: July 2013 Mar. 2014
Resistance Level: 50%
Calculation of Resistance level:
Highest top: 1525
Lowest bottom: 1200
Difference between highest top and lowest bottom: 1525-1200 = 325
50 % of 325 =162.5
Resistance level = 1200+162.5 = 1362.5

38

3 Company with Support Level and Resistance Level:

Company Name: Godrej Industry Limited
NSE Code: Godjrejind
Data Period: July 2013 - Mar 2014
Resistance Level: 23.6%
Highest top: 306.6
23.6% of 89.2 =21.05
Resistance level = 306.6-21.05 = 285.55
Highest top: 306.6
39

61.8% of 89.2 = 55.12
Support level = 306.6-55.12 =251.47

4 Company with Support Level and Resistance Level:

Company Name: Cipla Limited
NSE Code: cipla
Data Period: Mar. 2013 Mar. 2014
Highest top: 450.6
23.6% of 86.8 = 20.48
Resistance level = 450.6-20.48 = 430.12
40

Highest top: 450.6
Lowest bottom:363.8
Difference between highest top and lowest bottom: 450.6 363.8 = 86.8
78.6% of 86.8 = 68.2248
Support level = 450.6- 68.2248 = 382.37

5 Company with Resistance Level:
Company Name: IDFC Limited
NSE Code: IDFC
Data Period: Mar. 2013 Mar. 2014

Highest top: 165.9
23.6% of 89.77 = 21.18
41

Resistance level = 76.13 + 21.18 = 97.31

42

BIBLIOGRAPHY
http://www.onlinetradingconcepts.com
http://www.nseindia.com/ChartApp/install/charts/mainpage.jsp
http://www.charttrader.in/
http://www.chartpatterns.com

43

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