technical analysis(tirthan final gp )1

TECHNICAL ANALYSIS OF NSE BANKING SCRIPTS

SUBMITTED BY: TIRTHAN ZAVERI

SUBMITTED TO: MR. PANKAJ TIWARI

SHRI CHIMANBHAI PATEL

INSTITUTE OF MANAGEMENT &

RESEARCH


CERTIFICATE

This is to certify that the project titled “Technical Analysis of NSE Banking Scripts‟‟ is a work

done by student of this institute. The students have successfully completed this project under my

guidance.

I am sure that the experience gained during the project work will enable them to take similar

challenging projects in future.

Mr. Pankaj Tiwari

(Project Guide)

Date:

Place: Ahmedabad

Dr. Ashvin Dave

(Co-ordinator)


DECLARATION

I the undersigned hereby declare that the work incorporated in the mega project report titled

“Technical Analysis of NSE Banking Scripts” is original and has not been submitted to any

university as part fulfillment of award of any degree or diploma.

The material obtained and used from other sources has been duly acknowledged in the report.

Date: Student

Place: Ahmedabad TIRTHAN ZAVERI

(Enroll. NO. - 097680592106)


ACKNOWLEDGEMENT

It is said success is a journey. The same is applicable to us during the successful completion of our project.

We have come across many persons who helped us all possible ways. We would like to express as immense

of gratitude to all of them.

I am also thankful to Dr Ashvin Dave, Coordinator-MBA program, of my institute for giving us this

opportunity and also to all faculty members whose knowledge and support were a great help during the

project. This opportunity has made us have a deep insight of vast knowledge that we have studied during the

course of MBA.

I am very grateful to Mr. Pankaj Tiwari, Faculty of CPIMR, Whose guidance, suggestions, and help

boost the interest for this work. The valuable ideas, recommendation, and response are simply adorable.

I am very thankful to all the respondents for giving us their valuable time for discussion & survey. Sincere

efforts have been made to make our endeavors worth studying and interpreting. However, I welcome helpful

suggestions.


PREFACE

There is a large gap between theoretically knowledge and practical knowledge about handling and

managing a business. Only book‟s knowledge can‟t help in building up an effective administrator.

Practical study, knowledge, and learning can only be useful to become more eligible and competitive.

Due to this point of view each and every student of M.B.A. has to prepare MEGA PROJECT as per

Gujarat Technology University norms, which is really helpful to the students for making their bright

career.

Master of Business Administration course is design with the objective of preparing the most

competent person with a view to achieve this objective in the best possible manner.

I consider myself very fortunate that i got an opportunity to work on Study of under guidance of Mr.

Pankaj Tiwari, Faculty of CPIMR. It is a sincere attempt to present the information, facts &

findings.


EXECUTIVE SUMMARY

The objective of the study is to calculate and use the technical tools and indicators to know the

time of buying and selling of the stocks.

The whole project is divided into three parts:

The first is introduction part introductory part which consists of fundamental and technical

analysis and the history of stocks broking industry in India as well as the theoretical aspects of

the technical analysis indicators and patterns.

The second part covers the research methodology. The data collected is secondary from internet,

books and magazines.

The third and last part of this report consists of technical analysis. In this part the data is

collected secondary which is calculated by using different technical tools and indicators. The

tools are like RSI, ROC, EMA Bollinger bands and MACD (Moving Average Convergence –

Divergence) as well as also use one of the patterns like candle stick which is very useful for

technical analysis.


TABLE OF CONTENT

No. Chapter Page

1 Introduction 8

2 About stock broking industry 11

3 Theoretical aspect of topic 18

4 Research methodology 36

5 Chart analysis 38

6 Findings 81

7 Suggestions 85

8 Conclusion 87

Bibliography 89

Appendix 90


CHAPTER – 1

INTRODUCTION


The methods used to analyze and predict the performance of a company‟s stock fall into

two broad categories:-

(1)Fundamental analysis

(2)Technical analysis

Fundamental analysis is a type of stock selection discipline. If you conduct thorough

research of a company's accounting statements before deciding to purchase stock in the company

for investment purposes, you are said to be following a fundamental analysis approach to

investing. Another very common approach is technical analysis, which is almost the opposite

type of approach.

A fundamental analysis approach attempts to determine whether the company is financially

sound and will continue to earn money. A technical analysis approach to investing is almost

entirely concerned with how the price of the stock has performed over time and attempts to

predict what it will do in the future based on this. Sometimes, the two approaches are combined,

with a fundamental analysis approach used to select the stocks and a technical analysis approach

used to time the investment in the stocks of interest.

When performing a fundamental analysis of the stock of interest, one tries to determine whether

the stock is worth investing in. In this approach, one looks at how well the company is

performing financially. What are the company's earnings? Have they been growing? How does

the ratio of the price of the stock versus the earnings per share, the P/E ratio, compare with other

similar companies?

This approach attempts to answer some basic or fundamental questions about the financial health

of the company and the industry in which the company operates. How large is the company?

How long has it been in business? What is the management of the company like? What is the

outlook for the industry that the company is in?

http://www.wisegeek.com/what-is-accounting.htm

http://www.wisegeek.com/what-is-technical-analysis.htm

http://www.wisegeek.com/what-are-earnings-per-share.htm


Fundamental analysis is usually viewed as a more conservative approach to stock selection than

technical analysis. It is certainly a more exact science. The price earnings ratio is easy to

calculate; it is simply the price of each share of the stock divided by the earnings per share. The

book value of the company can easily be determined from the company's financial statements,

and the earnings are easily calculated from the financial records.

In contrast, the mathematics behind most technical analysis is much more complex and

frequently requires much more of a judgment call on the part of the investor. In a technical

analysis approach, the investor attempts to predict crowd behavior, while a fundamental analysis

simply attempts to determine whether the company has been earning money and at what rate it

will likely continue to earn money.

The price of the stock in the short term is not that important in a fundamental analysis, since the

theory is that if the company is earning money and continues to earn money, then the stock price

will eventually go up. A technical analysis approach is much more concerned with short term

price movements.

Investing in stocks is much more likely to be successful if a systematic approach is used. A

fundamental analysis approach is the easiest to understand and learn, and as such, it is perhaps

the best place to start for a beginning investor. However, both approaches have their strengths,

and knowledge of both will benefit any investor and result in improved investment returns.

http://www.wisegeek.com/what-are-financial-statements.htm

http://www.wisegeek.com/what-are-the-different-disciplines-of-mathematics.htm


CHAPTER – 2

ABOUT STOCK BROKING

INDUSTRY


INTRODUCTION

Stock exchanges to some extent play an important role as indicators, reflecting the performance

of the country‟s economic state of health. Stock market is a place where securities are bought

and sold. It is exposed to a high degree of volatility; prices fluctuate within minutes and are

determined by the demand and supply of stocks at a given time. Stock brokers are the ones who

buys and sells securities on behalf of individuals and institutions for some commission.

The Securities and Exchange Board of India (SEBI) is the authorized body, which regulates the

operations of stock exchanges, banks and other financial institutions. The past performances in

the capital markets especially the securities scam by „Hasrshad Mehta‟ has led to tightening of

the operations by SEBI. In addition the international trading and investment exposure has made

it imperative to better operational efficiency. With the view to improve, discipline and bring

greater transparency in this sector, constant efforts are being made and to a certain extent

improvements have been made.

HISTORY

Indian Stock Markets are one of the oldest in Asia. Its history dates back to nearly 200 years ago.

The earliest records of security dealings in India are meager and obscure. By 1830's business on

corporate stocks and shares in Bank and Cotton presses took place in Bombay. Though the

trading list was broader in 1839, there were only half a dozen brokers recognized by banks and

merchants during 1840 and 1850. The 1850's witnessed a rapid development of commercial

enterprise and brokerage business attracted many men into the field and by 1860 the number of

brokers increased into 60.

In 1860-61 the American Civil War broke out and cotton supply from United States of Europe

was stopped; thus, the 'Share Mania' in India begun. The number of brokers increased to about

200 to 250. However, at the end of the American Civil War, in 1865, a disastrous slump began

(for example, Bank of Bombay Share which had touched Rs 2850 could only be sold at Rs. 87).


At the end of the American Civil War, the brokers who thrived out of Civil War in 1874, found

a place in a street (now appropriately called as Dalal Street) where they would conveniently

assemble and transact business.

In 1887, they formally established in Bombay, the "Native Share and Stock Brokers'

Association" (which is alternatively known as "The Stock Exchange"). In 1895, the Stock

Exchange acquired a premise in the same street and it was inaugurated in 1899. Thus, the Stock

Exchange at Bombay was consolidated.

Thus in the same way, gradually with the passage of time number of exchanges were increased

and at currently it reached to the figure of 24 stock exchanges

Traditional Broking

Traditionally In stock Market, the investors invest their money in shares under the guidance of

the Brokers of any stock broking company. This is convenient to those investors who are not

familiar with the computer and the use of internet. But it requires more dealers to the share

broking companies to give guidance related to investment. There was a chance of inaccuracy of

price because it is a time consuming process. The cost of the company also increases due to more

paperwork. The investor point of view, there was a problem of privacy. The information of

investor may leak by the broker. So, to remove these limitations of traditional broking, there was

an emergence of new concept e-Broking.

E- Broking - A small beginning:

You have some money to dabble with. Trading shares on BSE/NSE has always been your dream.

When will you ever find the time? And besides, the hassle of finding a broker is not easy.

Realizing there is untapped market of investors who want to be able to execute their own trades

when it suits them, brokers have taken their trading rooms to the Internet. Known as online

brokers, they allow you to buy and sell shares via Internet.

There are 2 types of online trading service: discount brokers and full service online broker.

Discount online brokers allow you to trade via Internet at reduced rates.


Some provide quality research, other don‟t. Full service online brokerage is linked to existing

brokerages. These brokers allow their clients to place online orders with the option of talking/

chatting to brokers if advice is needed. Brokerage rates here are higher. 5Paisa.com,

ICICIDirect.com, IndiaBulls.com, Sharekhan.com, Geojit securities.com, HDFCsec.com,

Tatatdw.com, Kotakstreet.com are some of the online broking sites in India. With Net trading in

securities and rapid consolidation between multiple stock exchanges, the international securities

marketplace is fast becoming a "global village" through the creation of a universal virtual equity

market.

Compared to the Western countries, online trading is still in its infancy in India. With trading

turnover at around Rs. 10 crores per day from online trading compared to a combined gross

turnover of around Rs. 9000-10,000 crores handled by the BSE and NSE together, online trading

has a long way to go.

INTERNET TRADING IN INDIA

In the past, investors had no option but to contact their broker to get real time access to market

data. The Net brings data to the investor on line and net broking enables him to trade on a click.

Now information has become easily accessible to both retail as well as big investors.

The development of broking in India can be categorized in 3 phases:

1. Stock brokers offering on their sites features such as live portfolio manager, live quotes,

market research and news to attract more investors.

2. Brokers offering on line broking and relationship management by providing and offering

analysis and information to investors during broking and non-broking hours based on their

profile and needs, that is, customized services.

3. Brokers (now e-brokers) will offer value management or services such as initial public

offerings on line, asset allocation, portfolio management, financial planning, tax planning,

insurance services and enable the investors to take better and well-considered decisions.


In the US, 82 per cent of the deals are done on line. The European on line broking market is

expected to be of $8 billions and is likely to raise five fold by 2002. In India, presently Internet

trading can take place through the order routing system, which will route client orders to

exchanges trading systems for execution of trades on stock exchanges (NSE and BSE). This will

also require interface with banks to facilitate instant cash debit or credit and the depository

system for debit or credit of securities.

Objectives of Internet trading

Increase transparency in the markets.

Enhance market quality through improved liquidity, by increasing quote continuity and

market depth.

Reduce settlement risks due to open trades, by elimination of mismatches.

Provide management information system (MIS).

Introduce flexibility in system, to handle growing volumes easily and to support

nationwide expansion of market activity.

Besides, through Internet trading three fundamental objectives of securities regulation can be

easily achieved, these are: Investor protection, creation of a fair and efficient market and,

reduction of the systematic risks.

Factors to keep in mind while selecting online brokers:

Brokerage cost:

It is important to weigh up the subscription and trading costs charged by an online broker against

benefits offered by the site. All online brokers display their charges on their sites. Some make

sure you find the charges easily, while with others you will have to search a bit.

Safety:

Please make sure site has 128-bit encryption to ensure safety of transaction online.

ICICIDirect.com, 5paisa.com are few sites with 128-bit encryption.


You normally get a secured Login id and password. It is always advisable to frequently change

trading password. Ideally online trading site should be fully integrated. The greater the backward

integration, the better it is for the customer. Ideally broking account, demat account and bank

account should be linked electronically.

Rate refresh:

Rate refresh has to be real-time with no time lag. The speed and reliability comes with huge

investment in technology. It is always advisable to check rates of online broking sites with BSE/

NSE terminal rates.

Speed of execution:

System has to be fast and reliable that does just one job- executes your trades. The last thing you

need is a site that is heavily congested with the users who are downloading heavy jpeg graphs or

pulling the latest story why market is moving. The site should be one click wonder where

squaring off all your positions or canceling all your pending orders takes one click and a

confirmation of action.

Trading limit:

For trading, all sites provide 4 times buy and sell limit against margin money put in by customer.

For delivery of shares, buying limit is equal to margin money put in by customer. Couple of sites

also provides margin funding for buying of shares.

Free trial period:

Site should allow users free trial period to familiarize yourself with system before you decide to

become trading member of the site.


Intraday chart/ historical chart:

The site should provide intraday chart tick by tick time and price data / historical chart for

technical analysis by investors of particular scrip. Lot of people trade based on charting

packages.

Challenges in Internet Trading:

For Internet trading to succeed it is imperative to have both, a robust business model as well as a

comprehensive technology strategy. Some of the challenges are discussed: Transaction

fulfillment--In the Net-based economy, it is both prudent and essential for a broker/intermediary

to offer total solution to the clients at a single point. Total solutions would essentially mean

offering interfaces with banks, depositories, information feeds, etc. for efficiency in trade

completion and reducing duplication of client information. The service providers will have to go

beyond the stage of mere order execution and emerge as "informediaries" rather than

"intermediaries". This will not only ensure lower trading costs in terms of offering cross services

but will also help in maximizing RoIs.

A true Internet trading system should deliver cost effective transaction fulfillment at a single

point.

MAJOR PLAYERS OF INDUSTRY

India Infoline Ltd.

ICICI Web trade Ltd.

HDFC Securities Ltd.

Angel Broking Ltd.

Indiabulls Financial Services Ltd.

Motilal Oswal Securities Ltd.

Anand Rathi Securities Ltd.

Karvy Stock Broking Ltd.


CHAPTER – 3

THEORETICAL ASPECTS OF

TOPIC


TECHNICAL ANALYSIS

Technical Analysis is the science of recording, usually in graphic form, the actual history of

trading (price changes, volume of transactions, etc.) in a certain stock or in “the Averages” and

then deducing from that pictured history the probable future trend.

Technical analysis is a method of evaluating securities by analyzing statistics generated by

market activity, past prices and volume. Technical analysts do not attempt to measure a

security's intrinsic value; instead they look at stock charts for patterns and indicators that will

determine a stock's future performance.

Technical analysis has become increasingly popular over the past several years, as more and

more people believe that the historical performance of a stock is a strong indication of future

performance. The use of past performance should come as no surprise. People using

fundamental analysis have always looked at the past performance of companies by comparing

fiscal data from previous quarters and years to determine future growth. The difference lies in

the technical analyst's belief that securities move according to very predictable trends and

patterns. These trends continue until something happens to change the trend, and until this

change occurs, price levels are predictable. There are many instances of investors successfully

trading a security using only their knowledge of the security's chart, without even understanding

what the company does.

However, although technical analysis is a terrific tool, most agree it is much more effective

when used in combination with fundamental analysis.


THE BASIC ASSUMPTIONS

Technicians say that a market's price reflects all relevant information, so their analysis looks

More at "internals" than at "externals" such as news events. Price action also tends to repeat

Itself because investors collectively tend toward patterned behavior – hence technicians' focus

on identifiable trends and conditions.

The field of technical analysis is based on three assumptions:

1. The market discounts everything.

Based on the premise that all relevant information is already reflected by prices, pure

technical analysts believe it is redundant to do fundamental analysis they say news and

news events do not significantly influence price.

2. Price moves in trends.

Technical analysts believe that prices trend. Technicians say that markets trend up, down,

or sideways (flat). This basic definition of price trends is the one put forward by Dow

Theory.

3. History tends to repeat itself.

Technical analysts believe that investors collectively repeat the behavior of the investors

that preceded them. To a technician, the emotions in the market may be irrational, but

they exist. Because investor behavior repeats itself so often, technicians believe that

recognizable (and predictable) price patterns will develop on a chart

Technical analysis is not limited to charting, but it always considers price trends. For

example, many technicians monitor surveys of investor sentiment. These surveys gauge

the attitude of market participants, specifically whether they are bearish or bullish.


Technicians use these surveys to help determine whether a trend will continue or if a

reversal could develop; they are most likely to anticipate a change when the surveys

report extreme investor sentiment. Surveys that show overwhelming bullishness, for

example, are evidence that an uptrend may reverse – the premise being that if most

investors are bullish they have already bought the market (anticipating higher prices).

And because most investors are bullish and invested, one assumes that few buyers

remain. This leaves more potential sellers than buyers, despite the bullish sentiment. This

suggests that prices will trend down, and is an example of contrarian trading.

THE BASIC CHART CONSTRUCTION

As shown in chapter-1, technicians do not believe that the price of securities and that the overall

stock market moves in a random manner. Rather, they contend that a direct relationship exists

between price movements in the past and those that will occur in the future. Their objective is to

determine what this relationship is so that they will be able to predict accurately whether the

stock market or a particularly security‟s price will go up or down.

The primary tool that a technician uses is a “picture” or chart of a stock‟s price movement.

TYPES OF CHARTS:

Technician use four types of charts

1. Bar chart

2. Line chart

3. Japanese candlestick chart


Bar Chart

A bar chart is the most popular way to display security prices. A bar chart is made up of vertical

bars, with each bar representing the price movement for a time period (i.e., hour, day, week,

month, etc.). Hash marks on the left and right sides of the bar represent the opening and closing

prices respectively. The top of the bar represents the high price and the bottom of the bottom

represents the low price

The advantage of using a bar chart over a straight-line graph is that it shows the high, low, open

and close for each particular day. This is the type of chart that will be used to display various

indicators throughout this tutorial.

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95100105110115120125130135140145150155160165170175180185190195200205210215220225230235240245250255260265270275280285INDO GULF CORP (247.850, 274.000, 241.000, 260.650, +20.3500)


Line Chart

A line chart is the simplest type of chart. One price (typically the close) is plotted for each time

period (i.e., day, week, month, etc.). A single, unbroken line connects each of these price

points.

Japanese Candlestick Chart

The highest and the lowest price of the day are joined by a vertical bar. The opening and the

closing price of the day, which would fall in between the highest and the lowest prices would be

represented by the rectangle so that the price bar chart looks like a candle stick.


There are mainly three types of candle sticks:-

DOJI OR NEUTRAL: - it is the one where the opening price and the closing price of

the day are the same.

WHITE: - A white candle stick is used to represent a situation where the closing price of

the day is higher than the opening price of the day. It indicates the bullish trend.

BLACK: - Is used when the closing price of the day is lower than the opening price of

day. It indicates the bearish trend.

JAPANESE CANDLESTICKS

Candlestick charts have been around for hundreds of years. They are often referred to as

"Japanese candles" because the Japanese would use them to analyze the price of rice contracts.

Similar to a bar chart, candlestick charts also display the open, close, daily high and daily low.

The difference is the use of color to show if the stock went up or down over the day.


Two different types of color is used. Green color is used when the ending price of the

stock is higher than the opening price while the red color is used when the opening price is

higher than the closing price.


THE BASIC CONCEPTS:

There are two basic concepts of technical analysis through which we can predict the stock

pattern or trend. Viz.

1. Support

2. Resistance

Support and resistance represent key junctures where the forces of supply and demand meet. In

the financial markets, prices are driven by excessive supply (down) and demand (up). Supply is

synonymous with bearish, bears and selling. Demand is synonymous with bullish, bulls and

buying. These terms are used interchangeably throughout this and other articles. As demand

increases, prices advance and as supply increases, prices decline. When supply and demand are

equal, prices move sideways as bulls and bears slug it out for control.

WHAT IS SUPPORT?

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.


Support does not always hold and a break below support signals that the bears have won out

over the bulls. A decline below support indicates a new willingness to sell and/or a lack of

incentive to buy. Support breaks and new lows signal that sellers have reduced their

expectations and are willing sell at even lower prices. In addition, buyers could not be coerced

into buying until prices declined below support or below the previous low. Once support is

broken, another support level will have to be established at a lower level.

WHERE IS SUPPORT ESTABLISHED?

Support levels are usually below the current price, but it is not uncommon for a security to trade

at or near support. Technical analysis is not an exact science and it is sometimes difficult to set

exact support levels. In addition, price movements can be volatile and dip below support briefly.

Sometimes it does not seem logical to consider a support level broken if the price closes 1/8

below the established support level. For this reason, some traders and investors establish

support zones.

WHAT IS RESISTANCE?

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 believed that supply will overcome demand and prevent the

price from rising above resistance.


Resistance does not always hold and a break above resistance signals that the bulls have won

out over the bears. A break above resistance shows a new willingness to buy and/or a lack of

incentive to sell. Resistance breaks and new highs indicate buyers have increased their

expectations and are willing to buy at even higher prices. In addition, sellers could not be

coerced into selling until prices rose above resistance or above the previous high. Once

resistance is broken, another resistance level will have to be established at a higher level.

WHERE IS RESISTANCE ESTABLISHED?

Resistance levels are usually above the current price, but it is not uncommon for a security to

trade at or near resistance. In addition, price movements can be volatile and rise above

resistance briefly. Sometimes it does not seem logical to consider a resistance level broken if

the price closes 1/8 above the established resistance level. For this reason, some traders and

investors establish resistance zones.

CONCLUSION

Charts are one of the most fundamental aspects of technical analysis. Regardless of the type of

the chart used, the length of the period examined will vary depending on whether one is

oriented to short-term, intermediate-term or long term investments. Short term roughly refers to

the next three months, intermediate term is about three to six months from the present time, and

long time is considered to be approximately six months to one year from the current period.

Technicians often use hourly and daily charts to determine the short-term trend of security price

movements. They use weekly charts for gaining an intermediate term perspective. And monthly

and yearly charts help technicians examine the long term.

Apart from the type of chart used the main aspect of the trend forecasting is to identify the key

levels of support and resistance establishment, where is established and where it breakout and

where it breakdown etc.


MATHEMATICAL INDICATORS (THEORITICAL PARTS)

Share price do not rise or fall in straight line. The movements are erratic. The mathematical tool

of moving averages is used to smoothen out the apparent erratic movements of share prices.

3.8.1 Moving Averages

Moving averages are mathematical indicators of the underlying trend of the price movement.

There are Two types of Moving Averages (MA) – the simple moving average and the

exponential moving average. The closing prices of shares are generally used for the calculation

of moving averages.

Simple Moving Average

An average is the sum of prices of a share for a specific number of days divided by the number

of days.

Calculation of Five-day Simple MA

Days Closing prices Total of prices of 5 days Five day MA (1) (2) (3) (4)

1 33 _ _ 2 35 _ _ 3 37.5 _ _ 4 36 _ _ 5 39 180.5 36.1 6 40 187.5 37.5 7 40.5 193.0 38.6 8 38.5 194.0 38.8 9 41 198.0 39.6 10 42 202.0 40.4


Exponential moving average

Exponential moving average (EMA) is calculated by using the Following

formula:

EMA = (Current closing price – Previous EMA)( Factor) +Previous EMA

Where,

o Factor = 2/n+1

n= number of days for which the avg. is calculated

Calculation of five-day EMA

Days Closing prices EMA (1) (2) (3)

1 33 33 2 35 33.66 3 37.5 34.93 4 36 35.28 5 39 36.51

Here,

Factor = 2/n+1 = 2/5+1 = 2/6 = 0.33

The EMA for the first day is taken as the closing price of that day itself.

EMA for second day = (Closing price – Previous EMA) Factor + Previous EMA

(35 – 33) (0.33) + 33 = 33.66

EMA for third day = (37.5 -33.66) (0.33) + 33.66 = 34.93

If we are calculating the five day exponential moving average, the correct five day EMA

will be available from sixth day onwards. The period of the average indicates the type of

trend being identified. E.g. five day or ten day avg. would indicate the short-term trend;

50day avg. would indicate the medium-term trend and a 200 day avg. would represent the

long-term trend.

Sometimes, two moving avg. one short-term and the other long-term are used in

combination. In this case, trend reversal is indicated by the intersection of the two

moving avg.


Rate of change Indicator (ROC)

It is very popular „oscillator‟ (identify overbought and over sold condition and also the

possibility of trend reversals.) This measures the rate of change of the current price as

compared to the price a certain number of day or weeks back. To calculate a 7 day ROC,

ROC = Current price/Price „n‟ period ago -1

Where,

o n= number of days for which ROC is to be found

Calculation of 7 Day ROC

Days Closing prices Closing price Price ratio ROC = Ratio -1 7 days ago

1 70 _ _ _ 2 72 _ _ _ 3 73 _ _ _ 4 70 _ _ _ 5 74 _ _ _ 6 76 _ _ _ 7 77 _ _ _ 8 75 70 1.07 0.07 9 78 72 1.08 0.08 10 80 73 1.10 0.10 11 79 70 1.13 0.13 12 78 74 1.05 0.05

The RC values may be positive, negative or zero.


ROC chart


Relative Strength Index (RSI)

This is a power full indicator that signals buying and selling opportunities ahead of the

market which is calculated by using a following formula.

RSI = 100-(100/1+RS)

Where,

o RS = Avg. gain per day/Average loss per day

The most commonly used time period for calculation for RSI is 14 days. The gain or loss

is decided by the difference between current day and previous day‟s closing price.

Calculation of 14 Day RSI

Day Closing Price Change over

previous day Change over previous day

Gain Loss

1 130 - -

2 132 2 -

3 130 - 2

4 135 5 -

5 137 2 -

6 134 - 3

7 136 2 -

8 140 4 -

9 140 - -

10 142 2 -

11 139 - 3

12 141 2 -

13 145 4 -

14 143 - 2

15 145 2 -

25 10

14 Day Average

25 = 1.786 10 = 0.714

14 14


RS = 1.786/0.714 =2.50

RSI = 100 – [100/(1+2.50)]

= 100- (100/3.50)

= 100 – 28.58 =71.42

These values are plotted n and graph as shown below.

RSI chart


Moving Average Convergence and Divergence (MACD)

MACD is an oscillator that measures the convergence and divergence between two

exponential moving avg. The MACD value for different days are derived by deducting

the long term EMA from each day from the corresponding short term EMA for the day.

The difference between short- term EMA and the long-term EMA represent the MACD.

The buy and sell signals are generated by the cross over of the average line and the

MACD line. When the line are below the zero line, if the MACD line crosses the average

line from below to above it indicated a buying opportunity.

When the lines are above the zero line crosses the MACD line above to below the

average line signals a selling opportunity


CHAPTER – 4

RESEARCH METHODOLOGY


Study Objectives

To learn about various type of techniques used for forecasting of future stock price

To analyze the type of trend on basis of various charts

To find out appropriate time to buy and sell securities

To forecast the future target price of various stock on long term basis, Intermediate basis

and short term basis.

Scope of Study

This project can help investors to see the perfect time to buy and sell the security by calculating

the different tools of technical analysis and maximize their returns in stock market.

Methods of Data Collection

Secondary Data

From Books

From Internet

From Research Reports

Limitations

One of the limitation was that the field is so large that an in depth study of the all the avenue is

not possible.

Lack of time.

We were not able to find all chart patterns. For e.g. patterns like head and shoulders,

Elliot wave theory, Fibonacci retracement, Key Reversals, etc…..


CHAPTER-5

CHART ANALYSIS


Interpretation: The graph shows that at the first week of the December month the EMA Cross

the price from down so we can say it is sell call for the investors as per 200 – day moving

average.

Interpretation: The above Roc Graph gives the sell signal at the middle of the November month

because ROC cross the 100 from up.


Interpretation: The above graph gives the indifferent result of the stock because the RSI are not

crossing any limit of 70 and 30. So that the graph gives no result of buy and sell signal.

Interpretation: The MACD graph are not giving signal of buy and sell because the short term

line of EMA are not intersecting the long term line of EMA. So this graph gives indifferent result

of the Axis Bank.

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Axis Bank

200-day EMA 60-day EMA


Interpretation: From the above chart, on 15th

January‟10, the upper band value is 1331.845.

Then it increase to 1864 on 15th

October‟10. The middle band was 1029, then it has moved

upward and 1561 on 15th

October‟10. The lower band was 727, then it has moved downward

from 29th

October‟10.

Interpretation: The above chart shows that the graph of candle stick is moving upward and at

the date of 26th

February ‟10 the white candle stick shows that the closing price is higher than the

opening which gives bullish trend. And from the 15th

October ‟10 the black candle sticks shows

the bearish trend because the opening price is higher than the closing price.

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upper Band middle Band Lower Band

9001000110012001300140015001600

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Axis Bank


Interpretation: The above graph of Bank of Baroda gives indifferent result because the price

line is not intersecting the EMA line at any point of time.

Interpretation: In the above Graph the line of ROC cross the line of 100 from up so its gives

Sell signal in the 1st week of the December.


Interpretation: The Graph shows that the RSI of the stock cut the limit of the 70 from up so the

graph gives sell signal.

Interpretation: The above MACD graph is not giving any result of buy and sell because short

term line of EMA are not intersecting the long term line of EMA. As per this chart the result is

indifferent for the stock of bank of Baroda in the year 2010.

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Bank of Baroda



Interpretation: From the above graph the three bands are moving in same direction. Three

bands are stable till the July‟10 then they are raised and again in the month of November the

upper, lower and middle band are moved downward.

Interpretation: The above graph shows the Doji or Neutral result by candle stick pattern

because the opening and closing price of that day has same or some minor difference. And the

graph shows the upper trend till the middle of the November. Then it moves downward.


Interpretation: The EMA graph is giving Buy signal at the 1st week of July because the price

line is going up and cut the EMA line.

Interpretation: The ROC graph shows that the ROC line goes down to up and cross the limit of

100 which gives buy signal at the month of April. And at the November month the line of Roc

goes uo to down and cut the limit of 100 which gives sell signal.


Interpretation: The RSI graph gives sell signal because the line of RSI goes up to down and

cross the limit of 70 from up so that it gives sell Signal at the month of October.

Interpretation: As Above the MACD Graph the short term line of EMA Cross the long term

line EMA from down and go to upward side so it gives buy Signal at the middle of the July.


Interpretation: The Bollinger band graph shows the upper trend to the September month and

then it decreased. The upper, lower and middle band shows the positive result to the September

then they move downward.

Interpretation: The above candle stick graph shows the up and down trend in the year but it

touch highest in October month then again it decrease till the year end. And the closing and

opening price are similar so that it shows Doji and Neutral sticks.


Interpretation: The graph shows indifferent result because the EMA line are not intersecting the

price line at any point of time.

Interpretation: The ROC graph is giving sell signal at the end of the year. The line of ROC

goes up to down and the cross the limit of 100 so it shows sell signal.

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Canara Bank

Price 200-day EMA


Interpretation: RSI graph of the Canara Bank gives sell signal because the line of RSI goes up

to down and cut the limit of 70 in the month of November.

Interpretation: The MACD graph of Canara Bank is giving indifferent result because the short

term line of EMA is not intersecting the long term line of EMA at any point of time.

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Canara Bank



Interpretation: The Bollinger band graph shows the upper trend to the November month and

then it decreased. The upper, lower and middle band shows the positive result to the November


Interpretation: The above graph shows that the price of the share is slightly go up till the July

and then it touches the high of 52th week in the November month and again moves downward.

The candle stick chart shows the neutral sticks because there is no much difference in closing

and opening price.


Interpretation: The EMA graph of Federal Bank gives indifferent result. There is no buy or

signal as per the above graph because the EMA line is not intersecting the price line.

Interpretation: The above ROC graph of federal bank is giving the sell signal first then the line

of ROC again rise and cut the limit of 100 which gives buy signal. And again at the month of

December th ROC line goes up to down and cross the limit of 100 which is giving sell signal.

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Federal Bank

Price 200-day EMA


Interpretation: In the above graph the RSI line goes up to down and cross the limit of 70 from

up so its gives sell signal in the moth of October.

Interpretation: The MACD graph is not giving any signal of buy or sells because the two EMA

lines short term and long term are not intersecting each other so that the result is indifferent as

per this graph.

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Interpretation: The above graph shows that the price of the share is slightly go up till the July

and then it touches the high of 52th week in the November month and again moves downward.

The candle stick chart shows the neutral sticks because there is no much difference in closing

and opening price.


Interpretation: The EMA graph gives indifferent result for this period because the price is not

intersecting the EMA line at any point of time.

Interpretation: The ROC graph of HDFC Bank gives both signal buy and sell. At the 1st week

of July the Roc line cross the limit of 100 from down which gives Buy call and at the month of

December the ROC line goes down and cross the limit of 100 from up which gives sell Call.

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HDFC Bank

Price 200-day EMA


Interpretation: In the above graph the RSI line goes gown at the month of may and it shows

sell signal because it cuts the limit of 70 from up.

Interpretation: The MACD graph gives indifferent result because the line of short term is not

intersecting the line of long term at any point.

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HDFC Bank






Interpretation: The above graph shows the upper trend and it touches the 52th week high. In

this graph the white candle stick shows the bullish trend because the closing price is higher than

the opening price and the black candle stick shows the bearish trend because the closing is lower

than the opening.


Interpretation: In the Above EMA graph the price line three times intersect the EMA line. 1st

intersect in 2nd

week of march which gives buy signal and second intersect in the middle of the

may which gives sell signal and third which again intersect EMA line From down in the July

which gives buys call.

Interpretation: In the ROC graph the ROC line goes downward and intersect the limit of 100

which gives sell signal and again in July the Roc lines goes upward and cut the limit of 100

which signals of buy call.


Interpretation: The above RSI graph gives the indifferent result because the RSI line are not

intersecting any of the limit of 70 and 30 so that the RSI is not giving the any call of buy or sell.



per this graph.

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ICICI Bank



Interpretation: The above graph shows in the march the price of ICICI Bank rise than it moves

downward. Again it increases in the month of October till the year end.

Interpretation: The above graph shows up and down trend. They reaches the 52 week high at

the November. In the graph the white candle stick shows bullish trend and the black candle stick

shows the bearish trend.


Interpretation: The EMA graph of IDBI Bank gives buy signal because the price line goes

upside and cross the EMA line from down in the month of September.

Interpretation: The ROC graph gives buy signal in the July month because the ROC line goes

upside and cross the limit of 100 from down.


Interpretation: The RSI graph gives sell signal in the November month because the line goes

down and cross the limit of 70 from up so its gives sell call.



per this graph.

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IDBI Bank



Interpretation: As per the above graph the price is slightly go up in the February month then it

is being stable and is again move upward and the touch the a year high in the month of

November.

Interpretation: As per the above graph the price of the losing is higher than opening price

which is seen in the month of April, showing bullish trend. In the month of November the price

of the share take a height of 52 week and again decreased.


Interpretation: : The above graph of Indus Ind. Bank give indifferent result because the price

line is not intersecting the EMA line at any point of time.

Interpretation: The above graph gives sell signal because the ROC line cross the limit of 100

from up in the month of December.

050

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Indus Ind Bank

Price 200-day EMA


Interpretation: In the above graph the RSI line are not crossing the any limit of 70 and 30 so

there is no signal of buy and sell. The result is indifferent.



per this graph.

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050

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Indus Ind Bank



Interpretation: The above graph shows the three bands upper lower and middle band. The three

bands moves upward till the month of November then it decreased in the December month. The

graph shows that the highest price of this period comes in the month of November as compare to

other months.

Interpretation: the above graph shows the upward trend as well as the white candle stick shows

that the opening price is higher than the closing price and black candle stick shows that the

opening is lower than the closing price.


Interpretation: The above EMA graph gives buy signal at the end of the July month because

the price line goes upside and intersect the EMA line which shows buy call.

Interpretation: The Roc Graph shows the sell signal in the November month. At that time the

Roc line cross the limit of 100 which shows downward trend so that it gives sell call.


Interpretation: The RSI gives the sell signal in the October month because the line cross the

limit of 70 from upside which shows sell signal.

Interpretation: The MACD graph shows the buy call because the line of short term EMA cross

the Long term EMA line from down. The result is buy signal in the month of August.


Interpretation: The Bollinger band graph of the Kotak Mah. Bank which moves upward from

the month September. And stable the height till the last month of the year.

Interpretation: In the above candle stick graph the candles are moving upward in the October

and again it decreased in the November to December.


Interpretation: As per the above graph of PNB the price goes up in the month of March and

cross the EMA line from down which gives buy call signal.

Interpretation: In the above graph ROC line goes down and cross the limit of 100 and gives

sell signal in the last week of the November.


Interpretation: As per the above graph the result is indifferent because the RSI line is not

crossing any of the limit in the graph. So that the RSI are not giving any signal of buy or sell.



per this graph.

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PNB



Interpretation: The above graph of PNB shows the three bands upper lower and middle bands.

They are going steadily till the August and then they increased and from the November month it

again moves downward.

Interpretation: In the above candle stick graph shows the upward trend and which touches the

52 week high in the month of October and at that time the black candle sticks shows that the

closing price is higher than the opening price. And there is very much increase on that day.


Interpretation: The EMA graph of SBI Bank gives buy signal because the price line goes

upside and cross the EMA line from down in the month of April.

Interpretation: The ROC graph of SBI Bank gives both signal buy and sell. At the 1st week of

April the Roc line cross the limit of 100 from down which gives Buy call and at the month of

November the ROC line goes down and cross the limit of 100 from up which gives sell Call.


Interpretation: The RSI line cross the limit of 70 from up which is giving buy call signal at the

October month as per above graph.

Interpretation: The MACD graph gives buy signal because the short term line of EMA crosses

the long term line of EMA from down which gives buy call.


Interpretation: The above SBI graph shows that at the starting of the year the prices are high

and then it decreased and again it moves upward and touch the 52 week high in the October

month and then it decreased in the last month of the year.

Interpretation: The above graph shows the bullish trend because it increases in the month of

October and the mostly all candles are Doji or Neutral because the opening and closing are

slightly different.


Interpretation: The above graph gives buy signal in the month of march because the price line

cross the EMA line from down and again in the December the price comes down the it cross the

EMA line from upside which gives sell signal.

Interpretation: The ROC graph Union Bank gives the sell signal at the end of the November

month because at that time the ROC line cross the limit of 100 from up.


Interpretation: The above graph gives the indifferent result of the stock because the RSI are

not crossing any limit of 70 and 30. So that the graph gives no result of buy and sell signal.



per this graph.

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Interpretation: The above graph shows that the prices and bands are moving upward till the

October month and it again decreased in the month of December.

Interpretation: In the above graph shows that the prices are high in the month of October as

well as the white candle stick shows the bearish trend and the black candle sticks shows the

bullish trend effect.


Interpretation: The price line cross the EMA line from down so that it gives buy call signal as

per this graph.

Interpretation: In the Above Roc graph gives buy signal in the starting of the April because the

RSI line goes up and intersects the 100 so it gives buy cal. Then in the November the RSI line

cross the 100 from upside so it shows sell signal.


Interpretation: In the above graph the result is indifferent because the RSI line is not

intersecting any of the limits so that there is no signal of buy or sells call.



per this graph.

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YES Bank



Interpretation: The above graph shows that the prices and bands are moving upward till the

October month and it again decreased in the month of December.

Interpretation: In the above graph shows that the prices are high in the month of October as

well as the white candle stick shows the bearish trend and the black candle sticks shows the

bullish trend effect.


CHAPTER – 6

FINDINGS


Findings

Name EMA ROC RSI MACD Result

Axis Bank Sell Sell Indifferent Indifferent Sell

Bank of baroda Indifferent Sell Sell Indifferent Sell

Bank of India Buy Sell Sell Buy Indifferent

Canara Bank Indifferent Sell Sell Indifferent Sell

Federal Bank Indifferent Sell Sell Indifferent Sell

HDFC Bank Indifferent Sell Sell Indifferent Sell

ICICI Bank Buy Buy Indifferent Indifferent Buy

IDBI Bank Buy Buy Sell Indifferent Buy

Indus Ind Bank Indifferent Sell Indifferent Indifferent Indifferent

Kotak Mahindra

Bank Buy Sell Sell Buy Indifferent

PNB Buy Sell Indifferent Indifferent Indifferent

SBI Buy Sell Sell Buy Indifferent

Union Bank of

India Sell Sell Indifferent Indifferent Sell

YES Bank Buy Sell Indifferent Indifferent Indifferent


From the above table the results are as under:

Axis Bank is giving sell signal as per the technical analysis indicators. Because the two of

the indicators are giving sell signal.

The result of Bank of Baroda is giving sell call signal as per the technical tools and

indicators.

Bank of India shows indifferent result because the two indicators shows buy signal and

two indicators shows the sell signal. There is not perfect call for buy and sell. So the

result is indifferent.

Canara Bank is giving sell signal as per the technical analysis indicators. Because the two

of the indicators are giving sell signal.

Federal Bank is giving sell signal as per the technical analysis indicators. Because the

two of the indicators are giving sell signal.

HDFC Bank is giving sell single because the two indicators shows the indifferent result

and two indictors are giving sell call. So the result is sell signal for HDFC Bank.

ICICI Bank is giving buy single because the two indicators shows the indifferent result

and two indictors are giving buy call. So the result is to buy the shares of the ICICI Bank.

IDBI Bank gives buy call because as per the technical indicators the two of the four

indicators gives buy signal, one is giving sell signal and the other shows the indifferent.

So the result of the IDBI Bank gives buy signal For this period of time.

Indus Ind. Bank is giving indifferent result because the three indicators out of the four

indicators are neither giving buy or sell signal. So the result of this bank is indifferent.

Kotak Mah. Bank shows indifferent result because the two indicators shows buy signal

and two indicators shows the sell signal. There is not perfect call for buy and sell. So the

result is indifferent.

PNB is giving indifferent result because one indicator is giving buy signal, the other is

giving sell signal. And the rest to indictors shows the indifferent result.


SBI shows indifferent result because the two indicators shows buy signal and two

indicators shows the sell signal. There is not perfect call for buy and sell. So the result is

indifferent.

Union Bank is giving sell signal as per the technical analysis indicators. Because the two

of the indicators are giving sell signal.

YES Bank is giving indifferent result because one indicator is giving buy signal, the other

is giving sell signal. And the rest to indictors shows the indifferent result.


CHAPTER – 7

SUGGESTIONS


Suggestions

The investor should be trained to use the technical analysis tools since it will help them in

their day to day investments to get more returns.

Fundamental analysis can also be suggested to the investors together with the technical

analysis in order to analyze the financial strength of corporate, growth of earnings and

profitability.

The company should orient the investors to mainly watch the business, economic, social

and political factors that affect the supply and demand for securities.

The investors can also use more numbers of charts which will depict a true picture on the

movement of the securities.

The investor should analyze market data in real time: plan their own market timing

strategy to make money regardless of upward and downward trending markets.

Minute by minute trading volume shows the reversal points of the market, and therefore,

when to buy and sell can be identified.

“The trend is your Friend” is the motto of technical analysis. So, the investor has to

monitor the trend of stocks before investments.


CHAPTER – 8

CONCLUSION


Conclusion Buying or selling of stocks is not an easy task if you want to make money doing it. Millions of

investors have lost their money in the past trying guessing stock price movements. In order to

consistently make money in the stock market, investors have to be right over 70% of the time.

In today‟s world, if you rely on fundamental analysis, broker‟s advice, newspaper articles or

business channels for your investing or trading decision, you are asking for a painful experience

in the markets. So, this study on technical analysis will help the investors in analyzing the scrip

based on the technical tools and oscillators to earn fruitful investment.

Technical analysis is the art and science of chart patterns in order to better analyze and predict

prices of a given security. It is also becoming popular with the younger generation. But further

research has to be conducted to know whether the technical analysis alone will guarantee profits

to the investors. Knowledge of the stock markets is the key to the success and emphasis should

be on managing trading risk while technical analysis can help us to control them.

Today, most of the trades in Indian stock markets are conducted in BSE and NSE. Although,

NSE was established only seventeen years ago, but growth in terms of value traded in NSE has

increased by leaps and bounds.


Bibliography

Web Sites:

www.moneycontrol.com

www.nse.com

www.money.rediff.com

Books

“Technical Analysis of Financial Markets “– By John Murphy

Magazine:

Indian Journal of Finance

http://www.moneycontrol.com/

http://www.nse.com/

http://www.money.rediff.com/


Appendix

technical analysis(tirthan final gp )1

Economy & Finance

project work

practical knowledge

mega project report

books knowledge

student of

guidance of

student place

faculty of cpimr