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Technical Analysis - RSI, MACD,Moving Averages, Bollinger Bands(/ 2011/aug/19/technical-analysis-introduction-tutorial-rsi-macd-moving-average-bollinger-bands/)August 19th, 2011 — Comments closed — Permalink (/2011/aug/19/technical-

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bollinger-bands (/tag/bollinger-bands/)

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8/19/2019 Technical Analysis - RSI, MACD, Moving Averages, Bollinger Bands

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12/30/2015 Technical Analysis - RSI, MACD, Moving Averages, Bollinger Bands

http://techpaisa.com/2011/aug/19/technical-analysis-introduction-tutorial-rsi-macd-moving-average-bollinger-bands/#rsi

We use 14-day period to calculate RSI. We derive custom overbought and oversold

levels for each security by analysing historical data. It is also pointed out in above

tutorial that these levels vary for each stock.

By analysing RSI, we generate following signals:

Overbought and Oversold Zones.

Bullish and Bearish Divergences.

Support-Resistance Zones.

Apart from signals, we also report whether a stock is technically weak or strong.

In the chart above, RELIANCE's (/stock/reliance/) oversold and overbought levels

are shown. 65-70 RSI act as oversold levels, whereas 25-30 RSI act as overbought

levels. We also see that 50-60 RSI levels act as resistance for RELIANCE. For eachstock, we calculate these levels using our algorithm. Also note that, a stock can

remain oversold in an uptrend. RSI should be used with other technical indicators

discussed below. We get good trading signals whenever the resistance or support is

broken.

8/19/2019 Technical Analysis - RSI, MACD, Moving Averages, Bollinger Bands

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12/30/2015 Technical Analysis - RSI, MACD, Moving Averages, Bollinger Bands

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In the chart above, we see that ITC (/stock/itc/) has its support at 40-50 RSI levels.

MACD (Moving Average Convergence Divergence)

To understand MACD, you should read Stockcharts Tutorial on MACD

(http://stockcharts.com/school/doku.php?

id=chart_school:technical_indicators:moving_average_conve). We use MACD

(12,26,9). MACD generates following signals:

Singal line Crossovers

Centerline Crossovers

Again, we try to find whether stock is technically weak or strong.

8/19/2019 Technical Analysis - RSI, MACD, Moving Averages, Bollinger Bands

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12/30/2015 Technical Analysis - RSI, MACD, Moving Averages, Bollinger Bands

http://techpaisa.com/2011/aug/19/technical-analysis-introduction-tutorial-rsi-macd-moving-average-bollinger-bands/#rsi

Chart above shows bearish centerline and bearish signal line crossovers forASHOKLEY (/stock/ashokley/). Various areas are also marked as "No Trend" as macd

gave no signal and there are just too many crossovers.

Moving Averages

To understand Moving Averages, you should read Stockcharts Tutorial on Moving

Averages (http://stockcharts.com/school/doku.php?

id=chart_school:technical_indicators:moving_averages). We use exponential moving

averages with 20, 50 and 200 period. EMA generates following signals:

Double Crossoves - For example, 20-Day EMA crosses 50-Day EMA and

becomes greater than 50-Day EMA, then it's a positive signal.

Price Crossovers - For example, when price crosses 20-Day EMA and becomes

smaller than 20-Day EMA, it's a negative signal.

Trend Identification - For example, when price is above all three 20-Day, 50-

Day and 200-Day EMA, then stock is in a strong uptrend.

Exponential moving averages act as support and resistance levels when price is

above and below EMA respectively.

8/19/2019 Technical Analysis - RSI, MACD, Moving Averages, Bollinger Bands

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12/30/2015 Technical Analysis - RSI, MACD, Moving Averages, Bollinger Bands

http://techpaisa.com/2011/aug/19/technical-analysis-introduction-tutorial-rsi-macd-moving-average-bollinger-bands/#rsi

Chart above shows Exponential Moving Averages (EMA) of JUBLFOOD

(/stock/jublfood/). We can see bearish double crossover when 20-EMA goes below

50-EMA and stock price goes down for 10-days. 200-EMA acts as a strong support.

20-EMA acts as support in a mild uptrend. Also there is a bullish double crossover

when 20-EMA becomes larger than 50-EMA.

In the chart above, we see that GMRINFRA (/stock/gmrinfra/) faces resistance from

20-EMA and 50-EMA in a strong downtrend.

8/19/2019 Technical Analysis - RSI, MACD, Moving Averages, Bollinger Bands

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12/30/2015 Technical Analysis - RSI, MACD, Moving Averages, Bollinger Bands

http://techpaisa.com/2011/aug/19/technical-analysis-introduction-tutorial-rsi-macd-moving-average-bollinger-bands/#rsi

Bollinger Bands

To get an overview of Bollinger Bands, read

Bollinger on Bollinger Bands (http://www.bollingerbands.com/)

Stockcharts Tutorial on Bollinger Bands

(http://stockcharts.com/school/doku.php?

id=chart_school:technical_indicators:bollinger_bands)

Stockcharts Tutorial on Bollinger Bandwidth

(http://stockcharts.com/school/doku.php?

id=chart_school:technical_indicators:bollinger_band_width)

As you can see, bollinger bands are volatility bands placed above and below a moving

average. We use 20-Day Simple Moving Average (SMA). Outer bands are set 2

standard deviations above and below 20-Day SMA. 20-Day SMA is also know as

middle band. Bollinger bands can be used to generate various signals, we support

following signals at techpaisa:

Squeeze - It happens when a stock is trading with a very low volatility with a

very high possibility of a breakout above upper band or lower band.We also capture sharp moves towards lower or upper band.

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12/30/2015 Technical Analysis - RSI, MACD, Moving Averages, Bollinger Bands

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Tweet   3

Chart above shows NIFTY (/stock/nifty/) Bollinger Bands. Before September 2010

uptrend, we see a squeeze and a breakout above upper band. Recently, we see a

squeeze and breakout below lower band and NIFTY continues to go down.

You must be cautious for fake signals and all above technical indicators should be

consulted before taking a decision. Please give your feedback and suggest othertechnical analysis tools you would like to have on techpaisa.

Here are tutorials to following indicators:

Fibonacci Retracement (http://techpaisa.com/2011/oct/13/fibonacci-

retracement/)

Average True Range (http://techpaisa.com/2011/nov/13/average-true-range/)

Average Directional Index (http://techpaisa.com/2011/nov/22/average-

directional-index/)

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