research analysis
DESCRIPTION
Presentation contains technical and fundamental description of Research.TRANSCRIPT
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Technical Analysis Presentation
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Introduction
Basic of Financial Market What is Research F & O Strategies
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Financial Market
It is a mechanism that allows people to buy and sell financial securities .
Types of Financial Market Capital Market (Primary and
secondary) Commodity market Money Market (Short term Debt) Foreign Exchange market
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Financial Instrument
FD Govt. Security Equity Mutual Fund Commodity Real estate Bond Currency
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Research
Fundamental Analysis
Political Factors
Demand & Supply
Macro Economic Issues
Environmental Conditions
Global Events & Markets
International Price Movements
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Research
Technical Analysis
Intra Day Charts
Prices & Volumes
Open Interest
Historical Data- Monthly & Weekly
Indicators: Candlesticks, Trend lines & Moving average
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Basic Assumption & Chart
Price moves in trend History tends to repeat it self The market discounting everything Charts Line chart Bar chart Candle Stick Point and Figure chart
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Technical Indicator
Trend line Support Resistance Pivot Moving average
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Different types of Pattern
Doji candle stick pattern The Bullish and Bearish Engulfing The Hammer Morning star and Evening star Triangle pattern Double Top and Double bottom Head and Shoulder
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Open Interest
Open Interest detailsChange in OI and priceRollover figures
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Technical Analysis (Versus Fundamental Analysis)
Technical analysis is a method of forecasting price movements by looking at purely market-generated data. A trader who uses technical analysis (sometimes called a technician or chartist) is essentially concerned with two things;
1) what is the current price? 2) What is the history of price
movement?
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Tools Of The Trade
We accomplish these things by: Identifying the short, medium and long-term
trends for market direction. Identifying the levels of support and resistance to
determine where price is likely to change direction.
Identifying price (or Chart) patterns that indicate reversals or the continuation of a trend.
Using technical indicators to reveal useful market forces behind the price to predict future movements and determine good points of entry and exit.
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Technical analysis
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.
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Premise of Technical Analysis
All known Fundamental Information are shown in Price.
All changes in Emotion and Sentiment are shown in Price and Volume action.
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The three basic principles of Technical Analysis
Price Discounts Everything Prices move in trends History repeats itself
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1. Price discounts everything
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, and investors
Stock Market 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.
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2. Prices Move in Trends
Technical analysts or chartists believe that profits can be made by following the trends.
In other words if the price has risen, they expect it to continue rising; if the price has fallen, they expect it to continue falling.
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Prices move in Trends Price may be rising – Market is in an
Uptrend (Bullish)
Prices may be falling – Market is in a Downtrend (Bearish)
Prices may be moving sideways – Non-trending market (Sideways market)
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Up Trend
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Down Trend
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Sideways Trend
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3. History Repeats Itself
This result’s in periodical emerging of the similar price patterns and technical indicators (based on price patterns). These patterns, generated by price movement, often signify what type of movement is to come in the near future.
The goal in technical analysis is to identify and use these price patterns in the current market to predict what will happen in the future by examining and quantifying their regular effects in the past.
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Chart Presentation Styles Bar Chart
Candlestick
Line Chart
Total Return or Comparative
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Basic Tool of Technical Analysis
The Chart A picture of changes in Investor Sentiment and
Emotions over time. Shows where Trader Greed became excessive and
turned to Fear – “Resistance” Shows where Trader Fear became excessive and
turned to Greed – “Support” Shows when Investor Sentiment has changed. –
“Breakouts” above Resistance or below Support Show Investor Commitment – Big Volume Breakout Shows when the Public is jumping in – Up trends Shows when the Pros are bailing out – Down
trends
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Charts Shows Where: Investor
Sentiment: Turned Negative Turned Positive
Pros bailing out Public jumping in Trader Emotion:
Greed turned to Fear
Fear turned to Greed
Resistance
Support
Breakout
BreakDown
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Chart Timeframes Monthly
Weekly
Daily
Intra-day Hourly 10
minute 2
minute,
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Market Participants
Participant Time in Position
Selection Decision Based on:
Timing Decision Based on:
Long Term (LT) Investor
Months to Years Company Fundamentals Fund Manager History
Charts
Intermediate (IT) Trader
Weeks to Months Market Rankings Charts
Short Term (ST) “Swing” Trader
3 – 10 Days Charts Charts
Day Trader Hours Charts Charts
Micro Trader Seconds to Minutes Charts Charts
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Levels of Technicals
Support level – level at which declining share may evoke a substantial increase in price is called support level (price fall below certain level)
Resistance level – the share price is not likely to rise above the level of stock price (price rise above certain level)
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Support & Resistance
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More about trends There are 3 types of trends as per the time factor.
Major Trend – Seen on the Monthly charts (6 months to 3-4 years)
Intermediate Trend – Seen on the Weekly charts (3 weeks to 6 months)
Minor Trend – Seen on the Daily charts (3 days to 3 weeks)
Trend Reversal. When the Index/Stock changes direction from Up Trend to a Sideways Trend or Down Trend or
vice versa.
Support & Resistance.
Once a support/resistance is violated by 3% or 3 consecutive trading sessions it reverses its role, i.e., Support becomes resistance and vice versa.
Chart Patterns.Trendlines - Support lines & Resistance lines
Channels
Rectangles
Head & Shoulders Top & Bottom
Triangles
Cup & Handle
Rounding
Trendline support
Trendline resistance
HLL – Quarterly chart (Channels)
EKC – Rectangle Pattern
RIL – Rectangle Pattern
RIL – Daily chart (Head & Shoulders Top)
Shipping Corp – Head and Shoulders Bottom
Tata Motors – Daily chart (Triangles)
L&T – (Ascending Triangle)
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Triangles
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Tripple Top & Bottom
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Cup and Handle Pattern
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Rounding Pattern
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Wedges
How to use Technical Analysis Volumes
Price increase Volume increase …… Bullish
Price decrease Volume increase…… Bearish
Moving Averages
Short, Medium, and Long Term moving averages
MACD
Moving Average Convergence Divergence
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Volume & Price Relationship
Important part of technical analysis High trade volume is considered as
bullish trend Low trade volume is considered as
bearish trend. High volume with constant rise in
price is consider as more bullish trend.
Trends – stock price behaviour
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Analysis
IndicatorsOscillatorsVolatility
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Element in Strategy Testing
Entry Rate: Entry rate is the actual rate where one can enter a trade on getting a buy/sell signal. One can either consider the Day’s close as the entry rate OR Next day’s opening as the entry rate.
Exit Rate: Exit rate is the actual rate where one can exit a trade on getting a sell/short cover signal. One can either consider the Day’s Close as the exit rate OR Next day’s open as the exit rate.
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Element in Strategy Testing
Entry Stop: It may happen that when one enters a trade using a particular strategy, the stock price may come down immediately. In such a case an Entry Stop loss has to be entered, which if triggered, the trader may exit the position. One needs to monitor such exits also in testing the Strategy. The trader may keep the Entry Stop according to the Risk reward ratio. This may help the trader identify how many times an entry stop is hit when he enters a trade using a particular strategy.
Trailing Stop: If the Trailing stop feature is enabled, it would help the trader to identify as to how many times the Trailing stop is triggered and it made the Trader exit the trade. For eg,if the Entry rate is 800 and the Trailing Stop is Initiated (Initiate Trailing Stop) is kept at 10%,then when the stock reaches 880,the Trailing stop would be initiated and when the Stock fall below 2% from this level (i.e. 880) to 862.4.
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Exit Reasons
Exit Signals: Displays all the exit trades that have been generated by the reversal of the entry trade strategy. For eg: If one enters a long trade when a 8 day EMA crosses the 13 day EMA and when you get a exit signal on reversal (ie 8 day EMA cuts 13 day EMA down),it is displayed as Exit Signal
Entry Stops: Displays all the exit trades that due to hitting of the entry Stops.
Profit Stops: Displays all the Exit Trades that occurred due to hitting of the Target set.
Trail stops: Displays the entire exit Trades that occurred due to hitting of the Trailing Stops.
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Indicators
Moving Averagessimple MAweighted MAexponential MA
MACD MACD-line:
EMAshort-term – EMAlong-term
Oscillators
Momentum Stochastics many more
(RSI, ROC, …)
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Buy Signal
Stock price rises through the Moving Average (M.A.)line when the graph of the M.A. line is flattering out.
Stock price line falls below the M.A. line which is rising
Stock price line which is above the M.A. line, falls but begins to rise again before reaching the M.A. line
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Sales Signal
Stock price line falls through the M.A. line when the graph of the M.A. line is flattering out.
Stock price line rises above the M.A. line which is falling
Stock price line which is below the M.A. line, rises but begins to fall again before reaching the M.A. line
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Moving Averages – Monthly chart
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Moving Averages – Weekly chart
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Tisco MACD (Weekly chart – buy/sell)
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Punj Lloyd MACD – Daily Chart buy/sell)
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Gold Kg – Daily chart – Buy/Sell
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Negative Divergence on AD Line
10:J A S O N
Log IRIS
Source : www.SpiderSoftwareIndia.Com5300
5400
5500
5600
5700
5800
5900
6000
6100
6200
6300
Cr
25.00
50.00
75.00
100
-152000.00
-150000.00
-148000.00
Price
Vol
ADL
NIFTY [N59901] 6143.45, 6144.05, 5970.60, 5988.70, 903835008 -2.17%
Dly
1085744256.0015/09/10 Wed
Op 5795.25Hi 5869.45Lo 5792.20Cl 5860.95
Qt 80.98
AD-150361.00
Negative Divergence : Market was Rising But Ad Line was Falling
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10:J A S O N
Log IRIS
Source : www.SpiderSoftwareIndia.Com5300
5400
5500
5600
5700
5800
5900
6000
6100
6200
6300
Cr
25.00
50.00
75.00
100
13000
13250
13500
13750
14000
Price
Vol
ADvL
NIFTY [N59901] 6143.45, 6144.05, 5970.60, 5988.70, 903835008 -2.17%
Dly
0.0013/10/10 Wed
Op 6091.45Hi 6240.25Lo 6089.75Cl 6233.90
Qt 100.87
AD 13934.65
AD Volume Line
In the Last Screen we have seen that AD Line was not supporting the Market ,But Though Market Made New High Reason is AD Vol Line was Supporting it.
6310:J A S O N
Log IRIS
Source : www.SpiderSoftwareIndia.Com 5400
5500
5600
5700
5800
5900
6000
6100
6200
6300
Cr
25.00
50.00
75.00
100
-2.50
0.00
2.50
-2.50
0.00
2.50
Price
Vol
McOsc(Y,E,19,E,39)
Avg(S,1) Avg(S,20)
NIFTY [N59901] 6143.45, 6144.05, 5970.60, 5988.70, 903835008 -2.17%
Dly
618335360.0015/10/10 Fri
Op 6175.90Hi 6200.60Lo 6050.35Cl 6062.65
Qt 85.98
Mc -2.63
Av -2.63Av -0.64
Base Line Like MACD Zero Line
McOsc Ploted as an Average
McClellan Oscillator
Useful For Traders to Know the Market Strength
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10:A M J J A S O N
Log IRIS
Source : www.SpiderSoftwareIndia.Com 4800
5000
5200
5400
5600
5800
6000
6200
Cr
50.00
100
0.00
5.00
-50.00
0.00
-50.00
0.00
Price
Vol
McOsc(Y,E,19,E,39)
McSum(Y,E,19,E,39)
Avg(S,1) Avg(S,20)
NIFTY [N59901] 6143.45, 6144.05, 5970.60, 5988.70, 903835008 -2.17%
Dly
0.0020/09/10 Mon
Op 5885.05Hi 5989.50Lo 5885.05Cl 5980.45
Qt 89.44
Mc 1.49
Mc -28.79
Av -28.79Av -36.25
McClellan Summation Index
Base Line Like MACD Zero Line
McSum Ploted as an Average
Useful to Medium to Long Term Investor to know Market Strength
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This (Arrow Signal) Feature is available for following indicators only.
-> Adaptative moving Avg-> Arron Up Down Indicator-> ATP-> Average-> Avg 2 line 2 input-> Avg OHLCVUT-> Avg Short Long-> Candlestick momentum index-> Chande Mommentum Oscillator-> Chande Vidya Indicator-> Commodity Chanel Index-> Directional Mov Index-> Directional Trend Index-> KST-> Money flow index-> Relative Strenght Index (RSI)-> Rsi Up/Down
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Alternative methods
Fibonacci.Dow Theory.Elliot Wave.Japanese Candlesticks.Gann Theory.