Technical Analysis of MTNL

Submitted by: Ranjini Ballal (08PG339)

MTNL is one of the largest Telecom Service Providers in India and is

poised to grow from strength to strength. It has unmatched technical
expertise and infrastructure and presence in the entire metropolis to cater
to communication needs of customers.

The current market position of MTNL looks as shown below:

Last Trade: 93.50INR 4th Sept's 92.80 - 94.00

Trade Time: 3:59PM IST Range:
Change: 0.00 (0.00%) 52wk Range: 51.75 - 123.70
Prev Close: 93.50 Volume: 105,632
Open: 94.00 Avg Vol (3m): 529,249
Bid: 93.25 Market Cap: N/A
Ask: 93.50 P/E (ttm): N/A
1y Target Est: N/A EPS (ttm): N/A
Div & Yield: 1.00 (1.07%)
The data for analysis MTNL has been taken on a daily basis from 1st Jan
2009 till 3rd Sept 2009.

Following indicators are used for technical analysis:

1. Moving averages 5. ROC

2. MACD 6. Volume trading

3. MFI 7. Bollinger bands

4. RSI

(Note: Calculations are shown in the Excel ‘MTNL’.xls)

1. Simple moving averages:

A Moving Average is an indicator that shows the

average value of a security's price over a period of
time. A buy signal is generated when the security's
price rises above its moving average and a sell signal
is generated when the security's price falls below its
moving average.
From the graph we can say that a buy signal was
generated around the end of May 09 and a sell signal was
generated around mid July 09.

2. MACD:

MACD is defined is the difference obtained by subtracting

the 26-day EMA of the closing stock, index, or other
security closing price from the 12-day EMA of the same
value.

1. Crossovers – When the MACD falls below the signal line,

it is a bearish signal, which indicates that it may be
time to sell. Conversely, when the MACD rises above the
signal line, the indicator gives a bullish signal, which
suggests that the price of the asset is likely to experience
upward momentum.
2. Divergence - When the security price diverges from the
MACD. It signals the end of the current trend.
3. Dramatic rise - When the MACD rises dramatically - that
is, the shorter moving average pulls away from the
longer-term moving average - it is a signal that the
security is overbought and will soon return to normal
levels.

Traders also watch for a move above or below the zero

line because this signals the position of the short-term
average relative to the long-term average. When
the MACD is above zero, the short-term average is above
the long-term average, which signals upward momentum.
The opposite is true when the MACD is below zero. The
zero line often acts as an area of support and resistance
for the indicator.

3. MFI:

The Money Flow Index measures the strength of money

flowing in and out of a security.

Calculation of Money Flow Index (MFI):

1. Typical Price = (High + Low + Close) / 3

2. Money Flow = Typical price * Volume

3. Money Ratio (MR) = Positive Money Flow/Negative

Money Flow
 4. MFI = 100 - (100 / (1 + MR))

MFI values below 20 suggest that the stock has been

oversold and values above 80 indicate overbuying of
stock. MFI of MTNL lies well within the range of 20-80.

4. RSI:

RSI (Relative Strength Index) compares the magnitude of

recent gains to recent losses in an attempt to determine
overbought and oversold conditions of a stock. It is
calculated using the following formula:

RSI = 100 – (100 / (1+RS))

RS = Average no. of up closes / Average no. of down

closes
RSI is a price-following oscillator that ranges between 0
and 100. RSI tops above 70 and bottoms below 30. In
case of MTNL the RSI is below 30 in Feb 09. RSI often
forms chart patterns such as head and shoulders or
triangles. This trend can be seen from April till June.

5. ROC:

Rate-of-Change (ROC) indicator displays the percentage

difference between the current price and the previous
price. As prices increase, the ROC rises; as prices fall, the
ROC falls.

The higher the ROC, the more overbought the security;

the lower the ROC, the more likely a rally. From the graph
we can see that MTNL shares were overbought at the end
of May 09 and oversold in July 09.

6. Volume trading:

Volume is the number of shares (or contracts) traded

during a specified time frame. Volume provides clues as
to the intensity of a given price move.
Low volume levels are characteristic of the indecisive
expectations that typically occur during consolidation
periods. Low volume also often occurs during the
indecisive period during market bottoms. High volume
levels are characteristic of market tops when there is a
strong consensus that prices will move higher. High
volume levels are also very common at the beginning of
new trends. Just before market bottoms, volume will often
increase due to panic-driven selling.

MTNL shares show a healthy up-trend with higher volume

in June 09 and a healthy downtrend with lower volume in
May 09.

7. Bollinger band:

Bollinger band is a band plotted having two standard

deviations away from a simple moving average. It consists
of:

- A middle band being an N-period simple moving

average (MA)

- An upper band (MA+K*sigma)

- A lower band (MA-K*sigma)

The closer the prices move to the upper band, the more
overbought the market, and the closer the prices move to
the lower band, the more oversold the market. From the
graph we can see that MTNL shares were overbought at
the end of May 09 and oversold in July 09.