Technical Analysis of Stocks

1 | P a g e
TECHNICAL ANALYSIS | Lalit Kumar | MBA 14

A study on Technical Analysis of selected Banking Sector stocks in India

A Project Report submitted in partial fulfillment of the requirements of for the degree of

Master of Business Administration (MBA)
Under the guidance of
Mr. Gopal Krishnan

Submitted by
Lalit Kumar
Roll No N-14

Jamia Millia Islamia University
Delhi 110025

2 | P a g e


Declaration

I, the undersigned, hereby declare that the project report entitled, Technical Analysis of selected
Banking Sector stocks in India submitted by me to the FMS, Delhi University of, in partial
fulfillment of the requirement for the award of degree of Master of Business Administration
under the guidance of Mr. Narain, Faculty Finance, FMS, is my original work and the
conclusions drawn therein are based on the material collected by myself.
The Report submitted is my own work and has not been duplicated from any other source.

Lalit Kumar
11 MBA-114
CMS 2011-14
Project Guide

3 | P a g e


Acknowledgement

I would like to express my heartfelt gratitude to Mr. Narain. It is due to his guidance, that I have
been empowered to conduct this research study and compile the report.

I would also like to take this opportunity to thank all the learned professors of the Faculty of
Management Studies, who doing the course of this journey guided me in all my endeavors and
kindled in me a thirst for knowledge, it would be also appropriate to thank the staff of the
library, computer lab and the administrative section for their whole hearted cooperation and
support during the last three years.

I would also like to acknowledge all those scholars, journals and persons who are directly or
indirectly involved in publishing research papers, books, and other related material on the
subject matter of the project.
I would also like to acknowledge the TPDDL (Earlier NDPL) and my colleagues and senior officers
specially Sh Sujay K Saha for their unstinted support which has enabled me to complete the
course successfully.
Last but not the least, my MBA would not have been complete had it not been for the
numerous sacrifices made by all my family members. A big thank to Anju Rathore, my wife, who
patiently and unselfishly supported and shielded me all the times, to make this journey as
smooth as possible

Lalit Kumar
4 | P a g e


Contents
Declaration .................................................................................................................................. 2
Acknowledgement ...................................................................................................................... 3
List of Figures............................................................................................................................... 7
List of Tables ................................................................................................................................ 9
EXECUTIVE SUMMARY .............................................................................................................. 10
Technical Analysis ......................................................................................................................... 11
INTRODUCTION ......................................................................................................................... 12
Technical analysis versus Fundamental analysis ....................................................................... 12
The ......................................................................................................................................... 14
Objective ....................................................................................................................................... 15
Methodology ................................................................................................................................. 17
1. METHODOLOGY ..................................................................................................................... 18
TREND ANALYSIS ....................................................................................................................... 18
Types of Trend ........................................................................................................................... 19
Trend Lengths ........................................................................................................................ 19
Trend lines ............................................................................................................................. 20
Channels ................................................................................................................................ 21
Resistance and support ............................................................................................................. 22
Role Reversal ......................................................................................................................... 23
The Importance of Support and Resistance .......................................................................... 23
Technical Analysis: Volume Importance ....................................................................................... 24
Volume ...................................................................................................................................... 24
Why it is Important ................................................................................................................... 24
Volume and Chart Patterns ....................................................................................................... 24
Technical Analysis: What Is A Chart? ............................................................................................ 24
Chart Properties ........................................................................................................................ 25
1. Time scale, ......................................................................................................................... 25
2. The price scale and the price point explain the charts. ..................................................... 25
Chart Types ................................................................................................................................ 25
Line Chart .................................................................................................................................. 26
Bar Charts .................................................................................................................................. 26
Candlestick Charts ..................................................................................................................... 27
Point and Figure Charts ............................................................................................................. 28
5 | P a g e


Conclusion ................................................................................................................................. 29
Technical Analysis: Chart Patterns ................................................................................................ 29
Reversal Patterns ...................................................................................................................... 29
1. Head and Shoulders ............................................................................................................. 29
2 .Cup and Handle ................................................................................................................. 30
3 Rounding Bottom ................................................................................................................... 31
Double Tops and Bottoms ..................................................................................................... 31
5. Triple Tops and Bottoms ....................................................................................................... 32
6. Wedge ................................................................................................................................... 33
The falling wedge ................................................................................................................... 33
Rising wedge: ......................................................................................................................... 34
Continuation Pattern ................................................................................................................. 34
1. Triangles ............................................................................................................................. 34
2. Pennant and Flag ................................................................................................................... 35
Gaps ........................................................................................................................................... 36
Technical Analysis: Indicators and Oscillators........................................................................... 36
Result And Outcome ..................................................................................................................... 37
Comparison of returns .............................................................................................................. 38
Risk Free Rate ........................................................................................................................ 38
Return from Equity Market ....................................................................................................... 38
Note: .......................................................................................................................................... 38
FULL STOCHASTIC (FS) ............................................................................................................... 38
Formula .................................................................................................................................. 39
Use ......................................................................................................................................... 39
Interpretation of Full Stochastic Indicator ............................................................................ 40
SIMPLE MOVING AVERAGE (SMA) ............................................................................................ 40
Formula .................................................................................................................................. 40
Interpretation of Simple Moving Average ............................................................................. 41
PRICE OSCILLATOR (POS) ........................................................................................................... 42
Calculation ............................................................................................................................. 42
Use ......................................................................................................................................... 43
VOLUME WEIGHTED MOVING AVERAGE (VWMA) ................................................................... 44
Calculation ............................................................................................................................. 44
Use ......................................................................................................................................... 44
6 | P a g e


Interpretation of VWMA ....................................................................................................... 45
RELATIVE STRENGTH INDEX (RSI) .............................................................................................. 46
Formula .................................................................................................................................. 46
Use ......................................................................................................................................... 47
Interpretation of RSI .............................................................................................................. 48
WILLIAMS %R ............................................................................................................................ 49
Formula .................................................................................................................................. 49
Interpretation of William% R ................................................................................................. 50
Comparison of NSE and ICICI Bank ............................................................................................ 51
Analysis of selected Banking stocks with Full Stochastic Indicator .......................................... 52
Beta ........................................................................................................................................... 60
Limitations ................................................................................................................................. 62
Conclusion ................................................................................................................................. 63
Bibliography .................................................................................................................................. 64

7 | P a g e


List of Figures

Figure 1.Trend Analysis ................................................................................................................. 18
Figure 2.: Trend Analysis ............................................................................................................... 18
Figure 3.Uptrend ........................................................................................................................... 19
Figure 4.showing three trend lengths ........................................................................................... 20
Figure 5.Uptrend ........................................................................................................................... 21
Figure 6.Two parallel Line (upper resistance and Lower support) ............................................... 21
Figure 7.Resistance and support ................................................................................................... 22
Figure 8.Role reversal ................................................................................................................... 23
Figure 9.A line chart ...................................................................................................................... 26
Figure 10.Bar chart ........................................................................................................................ 27
Figure 11.A candlestick chart ........................................................................................................ 27
Figure 12.Point and figure chart ................................................................................................... 28
Figure 13.Head and shoulders top is shown on the left. Head and shoulders bottom, or inverse
head and shoulders, is on the right. ............................................................................................. 30
Figure 14.Cup and Handle Pattern ................................................................................................ 30
Figure 15: Rounding bottom ......................................................................................................... 31
Figure 16.A double top pattern is shown on the left, while a double bottom pattern is shown on
the right......................................................................................................................................... 32
Figure 17.A triple top pattern is shown on the left, while a triple bottom pattern is shown on
the right......................................................................................................................................... 33
Figure 18.Falling Wedge................................................................................................................ 33
Figure 19.Rising Wedge ................................................................................................................ 34
Figure 20.Triangles ........................................................................................................................ 35
Figure 21.Pennant and Flag .......................................................................................................... 36
Figure 22.Full Stochastic ICICI BANK ............................................................................................. 39
Figure 23.Simple Moving Average ICICI BANK .............................................................................. 41
Figure 24 Figure 24.PRICE OSCILLATOR (POS) ICICI Bank ............................................................. 43
Figure 25.VOLUMES WEIGHTED MOVING AVERAGE ICICI BANK ................................................. 45
Figure 26.Relative Strength Index ICICI BANK .............................................................................. 48
Figure 27.William % R ICICI Bank .................................................................................................. 50
8 | P a g e


Figure 28.Comparison of NSE and ICICI Bank ............................................................................... 52
Figure 29.Full Stochastic SBIN ....................................................................................................... 53
Figure 30.Full Stochastic PNB ....................................................................................................... 54
Figure 31.Full Stochastic AXIS BANK ............................................................................................. 55
Figure 32.Full Stochastic Bank Of India ......................................................................................... 56
Figure 33.Full Stochastic IDBI ........................................................................................................ 57
Figure 34. Full Stochastic HDFC .................................................................................................... 58
Figure 35.YES BANK Full Stochastic............................................................................................... 59
Figure 36.Beta Calculation of ICICI Bank (Price Data from Jan 2008 to Dec 2012) ...................... 60

9 | P a g e


List of Tables
Table 1.Risk free return for a period of one year. (PPF) ............................................................... 38
Table 2.Technical Analysis of ICICI Bank by Full Stochastic Indicators ......................................... 40
Table 3.Technical Analysis of ICICI Bank by SMA Indicators ......................................................... 42
Table 4.Technical Analysis of ICICI Bank by POS Indicators. ......................................................... 44
Table 5.Technical Analysis of ICICI Bank VWMA Indicators.......................................................... 46
Table 6.Technical Analysis of ICICI Bank by RSI Indicators ........................................................... 49
Table 7.Technical Analysis of ICICI Bank by William %R Indicators .............................................. 51
Table 8.Technical Analysis of SBIN Bank by Full Stochastic Indicators ......................................... 53
Table 9.Technical Analysis of PNB Bank by Full Stochastic Indicators .......................................... 54
Table 10.Technical Analysis of AXIS Bank by Full Stochastic Indicators ....................................... 55
Table 11.Technical Analysis of BOI Bank by Full Stochastic Indicators......................................... 56
Table 12.Technical Analysis of IDBI Bank by Full Stochastic Indicators ........................................ 57
Table 13.Technical Analysis of HDFC Bank by Full Stochastic Indicators ..................................... 58
Table 14.Technical Analysis of YES Bank by Full Stochastic Indicators ......................................... 59

10 | P a g e


EXECUTIVE SUMMARY

For making investment decisions about where and when to take a position, two different
approaches are i.e. fundamental analysis and technical analysis used.
Fundamental analysis is used to know where to invest and why to invest. Technical analysis
is concerned with the when and the how of placing money. It determines the ideal timing
for a position and its decisions about how long to stay in a particular trade.
Technical analysis is an art in which quasi-statistical techniques and formal statistics are
used to determine the existence and strength of trends in financial time series and to
identify turning points in these trends. If it is done this with a reasonable degree of
accuracy, then there are more chances of making a profitable trade. Timing is everything in
Technical analysis.
The objective of the this project is to make a study on the technical analysis on selected
stocks of banking sector and interpret on whether to buy or sell them by using techniques.
The study is purely based on secondary sources which includes the historical data available
from the website. Study on charting technique is done in understanding the various trends
and patterns. This will help in identifying the current trends and risk involved in trading.
Selected technical tools are used for investment decision in selected banking stocks for a
period of one year. The selected tools are full stochastic indicator, William %R, Simple
moving average, Relative strength indicator, Price oscillator and weighted volume moving
average are used in understanding the buy and sell signal of selected banking stocks. With
the help of the above technical tools trading is done and return is calculated by each
technical tool. The effective annual earning is calculated from number of traded days for a
period of one year. This effective annual return is compared with risk free return from
government security such as PPF (Public provident fund) to analysis which is giving a better
return. Comparative analysis between ICICI Bank stocks with NIFTY is done for a period of
one year to analysis which is better, i.e. Investment with technical tools or simply investing
in NIFTY. The study had shown that equity market could return better than PPF had proper
technical tools been used in decision making.
Beta of ICICI bank is calculated for a period of five years to know the volatility of ICICI Bank
stock.in relation to the market.

11 | P a g e


C
CC H
HH A
AA P
PP T
TT E
EE R
RR O
OO N
NN E
EE

Technical Analysis

TECHNICAL ANALYSIS | Lalit Kumar | 11 MBA 14

INTRODUCTION
Technical Analysis
Technical analysis is the analysis of price behavior in financial market, as against the analysis of
underlying asset represented by that price. It address the fact that a share price not only
reflects the value placed on it by those in the market, but also hopes and fears of those and
selling on it. As a consequence, over enthusiasm, or panic, can cause price to move away from
their value. The techniques using past experience as a guide, allow users to determine what the
price is most likely to do the next.
1

Just as there are many investment styles on the fundamental side, there are also many
different types of technical tools. Some rely on chart patterns; others use technical indicators
and oscillators, and most of the time some combination of the two are used. Although in any
case, historical price and volume data is used in technical analysis which separates the
fundamental analysis from technical analysis.
Technical analysts base trading decisions on examinations of prior price and volume data to
determine past market trends from which they predict future behavior for the market as a
whole and for individual securities.
The technical analysis is based on following assumptions:
1. The market value of any good or service is determined mainly by the interaction of supply
and demand.
2. Supply and demand is governed by numerous rational and irrational factors. Included in
these factors are those economic variables relied on by the fundamental analyst as well as
opinions, moods, and guesses. The market weighs all these factors continually and
automatically.
3. Disregarding minor fluctuations, the prices for individual securities and the overall value of
the market tend to move in trends, which persist for appreciable lengths of time.
4. Prevailing trends change in reaction to shifts in supply and demand relationships. These
shifts, no matter why they occur, can be detected sooner or later in the action of the market
itself.
2

Technical analysis versus Fundamental analysis
For making investment decisions about where and when to take a position, two different
approaches are i.e. fundamental analysis and technical analysis used.

1
(Gifford 1995): Introduction.
2
(Frank Reilly 2006) : page-624
13 | P a g e


The Differences
Charts vs. Financial Statements

Technical analysis of a security is done on the basis of charts and fundamental analysis is done
on the basis of financial statements.
In fundamental analysis, by analysis of balance sheet, cash flow statement and income
statement is done to determine a company's value. We can say that fundamental analysis is an
attempt to measure a company's intrinsic value. In fundamental analysis investment decisions
are based on intrinsic value, if the price of a stock trades below its intrinsic value, then it is
consider as a good investment.
In technical analysis it is presumed that a stock's price reflects everything that could affect the
company, at any given time including companys fundamentals. Thus removes the need of
considering fundamental factors separately .In Technical analysis, it is believed that all the
Information needed about a stock price is found in its charts.

Time Perspective
Fundamental analysis takes a relatively long-term approach to analyzing the market compared
to technical analysis. Technical analysis is used on a timeframe of weeks, days or even minutes,
fundamental analysis often looks at data of number of years as it takes a long time for a
company's value to be reflected in the market. Fundamental analysis estimates intrinsic value
of a stock which is realized when the stock's market price rises to its "correct" value. This type
of investing is called value investing and states that the short-term market is wrong and price of
a stock will correct it over the long run. This long-term timeframe used in fundamental analysis
is because the data required to analyze a stock is generated much more slowly than the price
and volume data used in technical analysis.

Trading Versus Investing
Technical analysis is used for a trade, whereas fundamental analysis is used to make an
investment. Investors buy assets they believe can increase in value, while traders buy assets
they believe they can sell to somebody else at a greater price.
Does Technical and Fundamental Co-Exist?
Although technical analysis and fundamental analysis are seems opposites of each other but
many market participants have experienced great success by combining of these two. As some
fundamental analysts use technical analysis techniques to find out the best time to enter into
an undervalued security. Many times situation occurs when the security is severely oversold by
investing that time into a security; the gains can be greatly improved.
14 | P a g e


Sometimes technical analyst used fundamentals to add strength to a technical signal.
Sometimes if a sell signal is given through technical patterns and indicators fundamental data is
used to take a decision. Many times both the fundamentals and technical factors provide the
best-case scenario for a trade.

There are certainly benefits to at least understanding both fundamentals and technical
analysis.

The Critique Of Technical Analysis
Technical analysis has only recently begun to use in mainstream credibility. The basic criticism
of technical analysis is based on academic theory of the efficient market hypothesis (EMH). This
theory states that the market's price is always the correct one i.e. any past trading information
is already reflected in the price of the stock and, therefore, any analysis to find undervalued
securities is useless.

There are three versions of EMH
Weak form efficiency
Semi-strong form efficiency
Strong form efficiency

The weak form efficiency states that all past price information of security is already included in
the current price. According to this theory, technical analysis cannot predict future movements
because all past information has already been accounted for and, therefore, analyzing the
stocks past price movements will provide no insight into its future movements.
The semi-strong form efficiency states that fundamental analysis is also have a little use in
finding investment opportunities.
The strong form efficiency states that all information in the market is accounted for in a stock's
price and neither technical nor fundamental analysis can provide investors with an edge. It is
believed that market is at least a version of weak form of EMH, therefore, if technical analysis
works, market efficiency will be called into question
15 | P a g e


C
CC H
HH A
AA P
PP T
TT E
EE R
RR t
tt w
ww o
oo

Objective
16 | P a g e


OBJECTIVE

Based on Technical Analysis study, interprets whether to buy or sell the selected
banking stocks.
To understand the use of charts and tools to identify trend of stocks i.e. where will they
go from here.
To find out the risk involved in ICICI banking stocks with market using Beta.
To recognize the use of various technical indicators and patterns for evaluating
selected Banking stocks.
To check whether the investment yields any extra returns in selected banking stocks
with the help of technical analysis.

17 | P a g e


C
CC H
HH A
AA P
PP T
TT E
EE R
RR t
tt h
hh r
rr e
ee e
ee

Methodology
18 | P a g e


1. METHODOLOGY
TREND ANALYSIS
One of the most important concepts in technical analysis is of trend. A trend shows direction in
which a security or market is headed. As shown in the chart below:
Figure 1.Trend Analysis
3

Source: Investopedia

It is no hard to see that the trend in Figure 1 is up. However, it's not always this easy to find a
trend. But in figure-2, There are lots of ups and downs in the below chart, but it is not a clear
indication of direction in which this security is headed.

Figure 2.: Trend Analysis

4

3
(Investopedia n.d.) http://www.investopedia.com/university/technical/techanalysis3.asp#ixzz2JvywyG2P
4
19 | P a g e


Definition
The trends are not always easy to see. As many times in a given chart, prices do not tend to
move in a straight line in any direction, but rather in a series of highs and lows. In technical
analysis, it is the movement of the highs and lows that constitutes a trend. The uptrend is
classified as a series of higher highs and higher lows, while a downtrend is one of lower lows
and lower highs. Point 2 in the Figure-3, is the first high, which is determined after the price
falls from this point. Point 3 is the low that is established as the price falls from the high. For
this to remain an uptrend each successive low must not fall below the previous lowest point.

Figure 3.Uptrend

Types of Trend
There are three types of trend:
Uptrends: Trends in when each successive peak and trough is higher.it is referred to as an
upward trend Downtrends: If the peaks and troughs are getting lower than it is a downtrend.
Sideways or Horizontal: When there is little movement up or down in the peaks and troughs
than it is a sideways or horizontal trend.
Trend Lengths

There are three trend classifications
Long term trend
Intermediate trend
Short term trend

5
(Investopedia n.d.) http://www.investopedia.com/university/technical/techanalysis3.asp#ixzz2JvywyG2
5

20 | P a g e


Figure 4.showing three trend lengths

6

.
In Figure-4 all the three trends are shown as describe below.
1. Long Term trend: Any trend more than a period of year is generally categorized in long term
trend. A long-term trend is composed of several intermediate trends or short trends. Weekly
charts or daily charts spanning a five-year period are used for analysis to get a better idea of the
long-term trend
2. Intermediate trend: It is considered to last between one and three months and a near-term
trend is anything less than a month.
3. Short-term trends: are components of both major and intermediate trends. Daily data
charts are best used when analyzing both intermediate and short-term trends.
When analyzing trends, it is important that the chart is constructed to best reflect the type of
trend being analyzed. It is also important to remember that the longer the trend, the more
useful for analysis
Trend lines
A trend line is a simple charting technique that adds a line to a chart for representing a trend in
the market or a stock. It is as simple to draw trend line is as a straight line that follows a general
trend. These lines are used to clearly show the trend and are also used in the identification of
trend reversals.

6
21 | P a g e


As in Figure 5, an upward trend line is drawn at the lows of an upward trend. This line
represents the support stock has every time it moves from a high to a low. This type of trend
line helps in anticipating the point at which a stock's price will begin to move in upwards
direction again. A downward trend line is drawn at the highs of the downward trend. This line
represents the resistance level that a stock faces every time the price moves from a low to a
high.
Figure 5.Uptrend

7

Channels
These are two parallel trend lines that act as strong areas of support and resistance. The upper
trend line connects a series of highs, and the lower trend line connects a series of lows. A
channel can slope upward, downward or sideways but the interpretation of channel remains
the same. The Price of a given security expects to trade between the two levels of support and
resistance until it breaks beyond one of the levels. Channels are mainly used to show important
areas of support and resistance.

Figure 6.Two parallel Line (upper resistance and Lower support)


7
22 | P a g e


Figure 6 shows a descending channel on a stock chart; the upper trend line has been placed on
the highs and the lower trend line is on the lows. The price has bounced off of these lines
several times and it has remained range-bound for several months. As long as the price does
not fall below the lower line or move beyond the upper resistance, the range-bound downtrend
is expected to continue.

Resistance and support
Figure 7.Resistance and support
8

Support is the price level below which a stock or market rarely falls is shown by the blue
arrows. Technician would expect a substantial increase in the demand for a stock. Support is
the price where normally buying of the stocks is done.
Resistance is the price level that a stock or market rarely exceeds shown by the red arrows.
Resistance is the price where normally selling of the stocks is done.

These support and resistance levels are important in market psychology, supply and demand. If
these trend lines are broken, then supply and demand and the psychology behind the stock's
movements are believed to be shifted and new levels of support and resistance will be
established.

8
(Investopedia n.d.) http://www.investopedia.com/university/technical/techanalysis4.asp#ixzz2Jvz6IQOx
23 | P a g e


Role Reversal

Once a resistance or support level is broken then its role is reversed. If the price of a security
falls below a support level than this will become a new resistance level. If the price rises above
a resistance level, it will become support. As the price moves past a level of support or
resistance, it is thought that supply and demand has shifted, causing the breached level to
reverse its role. For a true reversal to occur, however, it is important that the price make a
strong move through either the support or resistance.
Figure 8.Role reversal

9

For example, as shown in Figure 8, the dotted line is shown as a level of resistance that has
prevented the price from heading higher on two previous occasions (Points 1 and 2). But once
the resistance is broken, it becomes a level of support (shown by Points 3 and 4) by propping up
the price and preventing it from heading lower again.
The Importance of Support and Resistance
Support and resistance analysis is an important part of trends because it can be used to make
trading decisions and identify when a trend is reversing.
If the price of security has not broken the resistance and support then profits can be earned by
investing in this security because it is unlikely that it will move past this level.
A break beyond a level of support or resistance does not always have to be a reversal in trend.
The trading of stock should not be done at these major points because at these areas are
usually marked by a lot of volatility. It is important to follow this simple rule that not invest
directly at the support or resistance level. This is because in many cases, the price never
actually reaches the whole number, but moves around this. So if buying decision is to be made
on a stock than buying should be done above the support level, but within a few points.

9
(Investopedia n.d.) http://www.investopedia.com/university/technical/techanalysis4.asp#ixzz2Jvz6IQOx
24 | P a g e


Technical Analysis: Volume Importance
While price is the primary item of concern in technical analysis, volume is also extremely
important.

Volume
Volume is simply the number of shares that has traded over a given period of time, usually a
day. The higher the volume traded, the more active the security.
Why it is Important
For confirmation of trends and chart patterns volume is important. Any price movement up or
down with relatively high volume is seen as a stronger, more relevant move than a similar move
with weak volume. If there is large change in price movement of security then volume should
also be checked for confirmation of trend or change in trend. Volume should also move with
the trend. If prices are moving in an upward trend, volume should increase or vice versa. If the
relationship between volume and price movements starts to decline than it is a sign of
weakness in the trend.
10

Volume and Chart Patterns
Volume is used to confirm chart patterns. Patterns such as head and shoulders, triangles, flags
and other price patterns are confirmed with volume. In most chart patterns, there are several
pivotal points that are vital to what the chart is able to convey to chartists. Basically, if the
volume is not there to confirm the pivotal moments of a chart pattern, the quality of the signal
formed by the pattern will be weak.
Technical Analysis: What Is A Chart?
A chart is simply a graphical representation of information into a pattern that is easy to
understand and grasp rather than numbers or statements. Chart patterns shows all buying and
selling signals that take place in capital market. It provides a pictorial record of all trading
patterns for analyzing the market in terms of single share or of a market. These chart patterns
help to determine that who is dominating the market and investors can make decision about
their investment goal.
11

Short term and long term forecasting can be done on the basis of chart patterns. The data used
may be of intra-day, daily, weekly or monthly. The patterns may be short of intra-day and long
patterns may be many years.

10
(Frank Reilly 2006) page-636
11
(M. Ranganathan 2012) Page : 356
25 | P a g e


Chart Properties

1. Time scale,
2. The price scale and the price point explain the charts.
1. Time Scale
The time scale refers to the range of time period at the bottom of the chart, varies from years
to seconds. The mostly used time periods are intraday, daily, weekly, monthly, quarterly and
yearly. The shorter the time frame, the more detailed the chart. Each data point can represent
the closing price of the period or show the open, the high, the low and the close depending on
the chart used.

The Price Scale and Price Point Properties

The price scale is on the right-hand side of the chart. The price scale shows a stock's current
price and compares it to past data prices. This may seem like a simple concept in that the price
scale goes from lower prices to higher prices as you move along the scale from the bottom to
the top.
The chart may constructed may be linear (arithmetic) or logarithmic and both of these options
are available on most charting services. For long range analysis Logarithmic analysis is more
advantageous than arithmetic.
On arithmetic scale, prices show an equal distances for each unit price of change.
On the logarithmic scale, the percentage increase gets smaller with increase in price scale.
12

Chart Types
There are four main types of charts that are used by investors and traders depending on the
information that they are seeking and their individual skill levels. The chart types are:
The line chart
The bar chart
The candlestick chart
The point and figure chart

12
(M. Ranganathan 2012) Page : 357
26 | P a g e


Line Chart
The most basic of the four charts is the line chart. It represents only the closing prices over a set
period of time. The line is formed by connecting the closing prices over the time frame. Line
charts do not provide visual information of the trading range for the individual points such as
the high, low and opening prices. However, the closing price is often considered to be the most
important price in stock data compared to the high and low for the day and this is why it is the
only value used in line charts.
Figure 9.A line chart

13

Bar Charts
Technicians use charts that show daily, weekly, or monthly time series of stock prices. For a
given interval, the technical analyst plots the high and low prices and connects the two points
vertically to form a bar. Typically, he or she will also draw a small horizontal line across this
vertical bar to indicate the closing price. Finally, almost all bar charts include the volume of
trading at the bottom of the chart so that the technical analyst can relate the price and volume
movements.
The bar chart shows daily, weekly or monthly prices for a given interval of time adding several
more key pieces of information to each data point. The chart is made up of a series of vertical
lines that represent each data point. This vertical line represents the high and low for the
trading period, along with the closing price.
Bar charts also include the volume of trading at the bottom of the chart so that the technical
analyst can relate the price and volume movements.
14

13
(Investopedia n.d.) http://www.investopedia.com/university/technical/techanalysis7.asp#ixzz2Jvzw6zUZ
14
(M. Ranganathan 2012) Page-376
27 | P a g e


Figure 10.Bar chart
15

Candlestick Charts
The candlestick chart is similar to a bar chart, but it reveals extra in-built explanation.
Candlesticks have a vertical rectangle with wicks on both ends. Similar to the bar chart, the
candlestick also has a thin vertical line which shows the period's trading range. The wide bar on
the vertical line shows the difference between the open and close. Colors of candlesticks
explain what has happened during the trading period. There are two color constructs for days
up and one for days that the price falls. White or clear shows that he price of the stock is up and
closes above the opening trade. Red or black color shows that the stock has traded down for
the period and stock's price has closed above the previous days close but below the day's
open
16
.

Figure 11.A candlestick chart

15
16
(M. Ranganathan 2012) page-380
28 | P a g e


17

Point and Figure Charts
Point-and-figure chart shows only significant price changes, irrespective of their timing. The
technician determines, based on the characteristics of the stock, what price interval to record
as significant (one point, two points, and so on) and when to note price reversals. The point and
figure chart removes the noise, or insignificant price movements, in the stock, which can
change the traders' views of the price trends. These types of charts also try to neutralize the
skewing effect that time has on chart analysis.
18

Figure 12.Point and figure chart


17
18
(Frank Reilly 2006) Page-642
29 | P a g e


Conclusion

Charts are one of the most fundamental aspects of technical analysis. It is important to clearly
understand what is being shown on a chart and the information that it provides.
Technical Analysis: Chart Patterns

A chart pattern provides signal of price movements for a security in future. These chart patterns
provides ideas but not with surety about the price movement. There are two types of chart
patterns, reversal and continuation.

Reversal Patterns

Head and Shoulder
Cup and Handle
Rounding Bottom
Double tops and Bottom
Triple top and bottom
Wedge

1. Head and Shoulders
It is a bearish indicator. It is the most reliable and well known chart pattern in technical
analysis. It gets name by having one head and two shoulders. Head and shoulders is a reversal
chart pattern and it indicates that the security is likely to move against the previous trend. As
shown in Figure 13, two types of the head and shoulders chart pattern are shown. The left hand
side chart pattern is formed at the high of an upward movement and signals that the upward
trend is about to end. The right hand side also known as inverse head and shoulders are used to
signal a reversal in a downtrend
19
.

19
30 | P a g e


Figure 13.Head and shoulders top is shown on the left. Head and shoulders bottom, or inverse head and
shoulders, is on the right.

20

2 .Cup and Handle
A cup and handle chart is a bullish pattern in which the upward trend has paused but will
continue in an upward direction once the pattern is confirmed. The cup and handle formation
occurs when a change in trend takes place and after a series of rising peaks and troughs a
reversal in price trend takes place
21
.
Figure 14.Cup and Handle Pattern
22


20
(Investopedia n.d.) http://www.investopedia.com/university/technical/techanalysis8.asp#ixzz2Jw09fIN2
21
22
(Investopedia n.d.) http://www.investopedia.com/university/charts/charts3.asp#axzz2LpW3xnyu

31 | P a g e


As shown in Figure 14, this price pattern forms what looks like a cup, which is preceded by an
upward trend. The handle follows the cup formation and is formed by a generally
downward/sideways movement in the security's price.
3 Rounding Bottom
It is also stated as a saucer bottom, is a long-term reversal pattern that signals a shift from a
downward trend to an upward trend i.e. shifting from bearish market to bull market it. This
pattern is traditionally thought to last anywhere from several months to several years.
23

Figure 15: Rounding bottom
Figure

24

A rounding bottom chart pattern looks similar to a cup and handle pattern but it does not have
handle.
Double Tops and Bottoms
The Double top is a bearish indicator and double bottom is a Bullish indicator. As shown in
Figure 16 on left hand side the price of a security attains a high and pulls back price of security

23
(M. Ranganathan 2012) Page- 361
24
32 | P a g e


again increases but fails to attain the previous high. After two unsuccessful attempts at pushing
the price higher, the trend reverses and the price heads lower.

Figure 16.A double top pattern is shown on the left, while a double bottom pattern is shown on the right.

Source:Investopedia
25

As shown in right hand side of above figure, the price of a security has tried to go lower twice,
but has found support each time and it breaks into a bullish pattern.
26

5. Triple Tops and Bottoms

As shown in figure-17, Triple tops and triple are same in fashion as double tops and bottoms.
Unlike double top and double bottom (double time support and resistance) these two chart
patterns are formed when the price movement tests a level of support or resistance three
times and is unable to break through.
27

25
26
(M. Ranganathan 2012) page 361,365
27
(M. Ranganathan 2012) page 361 ,366
33 | P a g e


Figure 17.A triple top pattern is shown on the left, while a triple bottom pattern is shown on the right.

28

6. Wedge
The wedge is an indicator of both bullish and bearish pattern. The falling wedge is a bullish
indicator and rising wedge is a bearish indicator.
The falling wedge: It begins wide at the top and contracts a price move lower. Falling wedge
shows a determined down slope and leads to a bullish indication.
Figure 18.Falling Wedge

29

28
29
34 | P a g e


Rising wedge:
It indicates that a security price will decrease. It has a wide bottom and contracts a price of a
security moves higher and the trading range narrows down. 30

Figure 19.Rising Wedge
31

Continuation Pattern
1 Triangles
1. Flag and pennants
2. Gaps

1. Triangles

Triangles are one of the most well-known chart patterns used in technical analysis. There are
three types of triangles, which differ in construction and inference. These are the symmetrical
triangle, ascending and descending triangle. Triangle is formed by two trend lines. The upper
trend line is represents as resistance and lower line represents as support. There are at least

30
(M. Ranganathan 2012) page- 367
31
(Investopedia n.d.) http://www.investopedia.com/university/charts/charts7.asp#axzz2LwRWbSMp
35 | P a g e


four reversal points in order to recognize a triangle. These chart patterns are considered to last
anywhere from a couple of weeks to several months
32
.
Figure 20.Triangles
33


The symmetrical triangle is a pattern in which two trend lines converge toward each other in an
ascending triangle, the upper trend line is flat and bottom trend line is upward sloping. This is
generally a bullish pattern I and there is an upside breakout.
In a descending triangle, the lower trend line is flat and the upper trend line is descending. This
is generally a bearish pattern there is a downside breakout.
2. Pennant and Flag
Pennant: the price movement in a pennant is in same direction as the previous trend. The
patterns are generally thought to last from one to three weeks.

32
(M. Ranganathan 2012) page- 368
33
36 | P a g e


Figure 21.Pennant and Flag
34

Flag: It is defined as a parallelogram and forecast the current trend. These normally last for few
weeks. In flag the volume will diminishes dramatically.
35

There is little difference between a pennant and a flag. The main difference between these
price movements is in the middle section of the chart pattern. In a pennant, the middle section
is characterized by converging trend lines and in the flag pattern it shows a channel pattern,
with no convergence between the trend lines. Although In both the cases trend is expected to
continue when the price moves above the upper trend line.
Gaps It is an empty space between a trading period and the following trading period. They
occur when the lowest price traded is above below the previous days low. Gap are detected on
bar charts and candlestick charts but these are not detected on point and figure or basic line
charts.
These show that something of significance has happened in the security.
36

Technical Analysis: Indicators and Oscillators
Indicators are used to provide information in the analysis of securities. Indicators are used to
confirm price movement of a security and to provide buy and sell signals.
The indicators are leading and lagging. A leading indicator precedes price movements, giving
them a predictive quality, while a lagging indicator is a confirmation tool because it follows
price movement. A leading indicator is thought to be the strongest during periods of sideways
or non-trending trading ranges, while the lagging indicators are still useful during trending
periods.

34
35
(M. Ranganathan 2012) Page- 371
36
(M. Ranganathan 2012) Page 374
37 | P a g e


C
CC H
HH A
AA P
PP T
TT E
EE R
RR F
FF o
oo u
uu r
rr

Result And Outcome
38 | P a g e


Comparison of returns
Risk Free Rate
We would be getting fix rate of return from a risk free investment such as Government Treasury
bond, Bank FD, PPF etc. As these investments are risks free. As shown in below mentioned table
no-1 the Risk free return from PPF is given which is 8.6% since Nov-2011.

Table 1.Risk free return for a period of one year. (PPF)
Total Days of
investment 365
1 Year Average Interest
Rate on PPF 8.60%
Possible Risk Free
Return (EAR) 8.60%

Return from Equity Market
What is the return we would have got had an investment be done in Equity Market with the
help of Technical Analysis Tools used below.

Note: In the all charts mentioned below the having buy and sell signal. Black lines indicate a
Buy signal whereas red lines indicates a Sell Signal
FULL STOCHASTIC (FS)
Stochastic Oscillator is a momentum indicator that shows the location of the current close relative to the
high/low range over a range of past periods. Closing prices near the top of the range indicates buying
pressure whereas closing prices near the bottom of the range indicates selling pressure. Stochastic
Oscillator "doesn't follow price, it doesn't follow volume. It follows the speed or the momentum of
price. As a rule, the momentum changes direction before price."

39 | P a g e


Figure 22.Full Stochastic ICICI BANK

Source: NSE37
Formula
For calculating full stochastic, we first calculate %K (fast) as

Full Stochastic Oscillator consists of two lines, %K (full) and %D (Full). These are calculated as

38

Use
Closing levels that are consistently near the top of the range indicate accumulation (buying
pressure) and those near the bottom of the range indicate distribution (selling pressure).
Readings below 20 are considered oversold and readings above 80 are considered overbought.
Buy and sell signals can be given when %K crosses above or below %D

37
(NSE n.d.) http://www.nseindia.com/ChartApp/install/charts/mainpage.jsp
38
(NSE n.d.) http://www.nseindia.com/ChartApp/install/charts/nse_tame_indicators.pdf
40 | P a g e


Interpretation of Full Stochastic Indicator
Following table shows the calculation of change in Net worth had Rs. 100 were invested in ICICI
Bank in equity market (NSE) from a period of 1 years (Jan 2012 to Jan 2013), with an
assumption that investor was aware of Technical Analysis tool and all trading decisions were
governed by the indicators brought out by the tool.

Table 2.Technical Analysis of ICICI Bank by Full Stochastic Indicators
Date Decision Price
Trading
Days
No of share
Total Worth
Begin Value
100 (Rs)
Trading
Profit
2-Feb-12 Buy 899 0.11
21-Feb-12 sell 991.3 19 110.27
6-Mar-12 Buy 870 0.13
14-Mar-12 sell 953.9 8 120.9
30-Mar-12 Buy 864 0.14
19-Apr-12 sell 882 20 123.42
17-May-12 Buy 787.45 0.16
30-May-12 sell 833.9 13 130.7
26-Jun-12 Buy 842.5 0.16
23-Aug-12 sell 853.25 58 132.37
5-Sep-12 Buy 879.65 0.15
4-Oct-12 sell 1083.4 29 163.03
26-Nov-12 Buy 1018.3 0.16
11-Jan-13 sell 1184 46 189.56
Total 193

Trading %
return
89.56%
EAR 235.16%

SIMPLE MOVING AVERAGE (SMA)
An N-day Simple Moving Average is calculated by calculating the average of N most recent
prices

Formula
Simple moving average of N days is calculated as

39

39
41 | P a g e


Use
SMA smoothens the price movements and hence is more helpful to identify trends. Short term
SMAs react faster to prices than longer term SMAs. A cross of short term average over the
longer term one indicates beginning of an uptrend and vice versa.
Figure 23.Simple Moving Average ICICI BANK

Source NSE
40

Interpretation of Simple Moving Average

40
42 | P a g e


Table 3.Technical Analysis of ICICI Bank by SMA Indicators
Date Decision Price Trading Days No of share Total Worth 100 Trading Profit
9-Mar-12 Buy 876.95 0.11
22-Mar-12 Sell 936.05 13 106.74
5-Jun-12 Buy 792.05 0.13
22-Jun-12 Sell 851.7 17 114.78
27-Jun-12 Buy 850.05 0.14
24-Aug-12 Sell 968.9 58 130.83
7-Sep-12 Buy 917.85 0.14
9-Oct-12 Sell 1064.15 32 151.68
1-Nov-12 Buy 1052 0.14
9-Nov-12 Sell 1076.3 8 155.18
27-Nov-12 Buy 1030.4 0.15
21-Dec-12 Sell 1133.9 24 170.77
152
Trading % return 70.77%
EAR 261.49%

PRICE OSCILLATOR (POS)
It is a momentum oscillator with some trend-following characteristics. It expresses the difference
between two moving averages as a percentage value that quantifies where the fast moving average is in
relation to the slow moving average. The Percentage Price Oscillator is very similar to the Moving
Average Convergence/Divergence (MACD), except the MACD expresses the difference of two moving
averages as an absolute value. Expressing the difference as a percentage value makes it easier to
compare trading instruments with difference prices.

Calculation

41

41
43 | P a g e


Figure 24 Figure 24.PRICE OSCILLATOR (POS) ICICI Bank

Source NSE
42

Use
The Price Oscillator is calculated by subtracting the longer moving average from the shorter
moving average. The resulting plot forms an oscillator that fluctuates above and below zero
according to the differences in the moving averages. If the shorter moving average is above the
longer moving average, then the indicator will be positive. If the shorter moving average is
below the longer moving average, then the indicator will be negative. A buy signal is generated
when this crosses above zero and a sell signal is generated when it crosses below zero.

Interpretation of POS


42
44 | P a g e


Table 4.Technical Analysis of ICICI Bank by POS Indicators.
Date Decision Price Trading Days No of share
Total Worth
100.00
Trading Profit
6-Mar-12 Buy 853.25 0.12
30-Mar-12 Sell 890.2 24 104.33
12-Jun-12 Buy 816.75 0.13
29-Jun-12 Sell 899.5 17 114.90
12-Sep-12 Buy 949.1 0.12
4-Oct-12 Sell 1083.4 22 131.16
29-Nov-12 Buy 1050 0.12
11-Jan-13 Sell 1184 43 147.90
106
EAR 284.81%
VOLUME WEIGHTED MOVING AVERAGE (VWMA)

An N-day volume weighted moving average (VWMA) is the average of the past N days closing
prices, each weighted in proportion to the volume on that day.
Calculation

43

Use
This indicator gives buy and sells signals upon crossovers with price or another MA. Thus a buy
signal is generated when a fast moving volume weighted moving average crosses above a slow
moving simple moving average and a sell signal is generated when it crosses below the slow
moving simple moving average.

43
45 | P a g e


Figure 25.VOLUMES WEIGHTED MOVING AVERAGE ICICI BANK

Source NSE
44

Interpretation of VWMA

44
46 | P a g e


Table 5.Technical Analysis of ICICI Bank VWMA Indicators
Total Worth
100.00
Trading
Profit
7-Mar-12 Buy 851 0.12
22-Mar-12 Sell 936.05 15 109.99
2-Apr-12 Buy 881 0.12
19-Apr-12 Sell 883.65 17 110.32
27-Apr-12 Buy 845.5 0.13
3-May-12 Sell 875.1 6 114.19
23-May-12 Buy 793 0.14
30-May-12 Sell 833.9 7 120.08
5-Jun-12 Buy 792.05 0.15
19-Jun-12 Sell 826.8 14 125.34
27-Jun-12 Buy 850.05 0.15
24-Aug-12 Sell 968.9 58 142.870009
6-Sep-12 Buy 891 0.16034793
29-Oct-12 Sell 1077 53 172.69
2-Nov-12 Buy 1072 0.16109583
9-Nov-12 Sell 1076.3 7 173.39
27-Nov-12 Buy 1030.4 0.17
20-Dec-12 Sell 1144.8 23 192.64
200
EAR 230.87%

RELATIVE STRENGTH INDEX (RSI)
RSI is an oscillator, whose value oscillates between 0-100, calculated based on relative strength a
measure of momentum. An N-period relative strength is the ratio of gains in the price in last N days,
divided by the losses in last N days.
Formula
Relative Strength Index is calculated in the following manner:
1. Gains and losses are calculated as
Close (Previous Day)
47 | P a g e


, Loss=0

Otherwise

2. Average gain and average loss are calculated as

3. Relative Strength, RS for the last N days is calculated as

4. Finally, Relative Strength Index is calculated as

45

Use
Higher values of RSI indicate overbought market; whereas low values indicate oversold market.
30 and 70 are usually set as thresholds for a buy and sell signal respectively. Buy/Sell signals are
also generated by observing divergence between security and indicator (A divergence is said to

45
48 | P a g e


exist if the price moves in one direction and the indicator moves in opposite direction).
Underlying security usually reverses the direction and follows the direction of the indicator.
Figure 26.Relative Strength Index ICICI BANK

Source NSE
46

Interpretation of RSI


46
49 | P a g e


Table 6.Technical Analysis of ICICI Bank by RSI Indicators
Total Worth
100.00
Trading
Profit
3-Feb-12 Buy 904 0.11
12-Feb-12 Sell 1128.35 9 124.82
6-Mar-12 Buy 853.25 0.15
14-Mar-12 Sell 870 8 127.27
14-May-12 Buy 800.7 0.16
19-Jun-12 Sell 826.8 36 131.42
5-Sep-12 Buy 906.6 0.14
7-Nov-12 Sell 1086.1 63 157.44
26-Nov-12 Buy 1018.3 0.15
14-Jan-13 Sell 1185.15 49 183.23
165
EAR 281.76%

WILLIAMS %R
William %R shows the relationship of the close relative to the high-low range over a set period of time. A
value of %R close to zero indicates that the closing price is near the top of the range over N-days, where
as a value close to -100 indicates that the closing price is near the bottom of the range. It is a
momentum indicator especially popular for measuring overbought and oversold levels.
Formula
Williams %R is calculated as

Use
It is used for identification of overbought/oversold levels. Low values (usually below -80) are
considered as oversold levels where as values above -20 are considered overbought levels.
47

47
50 | P a g e


Figure 27.William % R ICICI Bank

Source NSE 48
Interpretation of William% R

48
51 | P a g e


Table 7.Technical Analysis of ICICI Bank by William %R Indicators
Date Decision Price Trading Days No of share Total Worth 100
Trading
Profit
27-Feb-12 Buy 887.45 0.11
14-Mar-12 Sell 953.9 16 107.49
29-Mar-12 Buy 851 0.13
17-Apr-12 Sell 885.45 19 111.84
14-May-12 Buy 800.7 0.14
28-May-12 Sell 834.4 14 116.55
28-Jun-12 Buy 856.95 0.14
18-Jul-12 Sell 939.2 20 127.73
27-Jul-12 Buy 928.25 0.14
7-Aug-12 Sell 974.3 11 134.07
5-Sep-12 Buy 879.65 0.15
4-Oct-12 Sell 1083.4 29 165.12
12-Oct-12 Buy 1044.75 0.16
25-Oct-12 Sell 1087.15 13 171.82
31-Oct-12 Buy 1046 0.16
7-Nov-12 Sell 1092.95 7 179.54
16-Nov-12 Buy 1027.3 0.17
4-Dec-12 Sell 1119.35 18 195.62
147
EAR 429.17%

Comparison of NSE and ICICI Bank
In the below mentioned figure-25 a comparison of ICICI Bank stock is done with Nifty. There is
24% increase in Nifty whereas increment in ICICI price is 52.5%. So ICICI Bank stock has
outperformed the NSE and investment decision in ICICI Bank stock is a better choice in
comparison in investment decision in Nifty.

52 | P a g e


Figure 28.Comparison of NSE and ICICI Bank

Source: NSE
49

Analysis of selected Banking stocks with Full Stochastic Indicator
Following charts and tables shows the calculation of change in Net worth had Rs. 100 were
invested in selected Banks in equity market (NSE) from a period of 1 years (Jan 2012 to Jan
2013), with an assumption that investor was aware of Technical Analysis tool and all trading
decisions were governed by the indicators brought out by the tool.
Selected banking stocks analysis by Full Stochastic technical tool shows that these stocks has
outperformed in comparison with risk free investment (e.g. PPF).

51 (NSE n.d.) http://www.nseindia.com/ChartApp/install/charts/mainpage.jsp
53 | P a g e


Figure 29.Full Stochastic SBIN

Source NSE
50

Table 8.Technical Analysis of SBIN Bank by Full Stochastic Indicators
Trading
Profit
2-Feb-12 Buy 1982.3 0.05
21-Feb-12 Sell 2376.65 19 119.89
9-Mar-12 Buy 2188.1 0.05
16-Mar-12 Sell 2354.95 7 129.04
2-Apr-12 Buy 2100 0.06
18-Apr-12 Sell 2339.8 16 143.77
18-May-12 Buy 1820.05 0.08
30-May-12 Sell 2118 12 167.31
29-Jun-12 Buy 2127 0.08
6-Jul-12 Sell 2235.7 7 175.86
31-Aug-12 Buy 1828.65 0.10
5-Oct-12 Sell 2362.55 35 227.20
30-Oct-12 Buy 2065.55 0.11
10-Jan-13 Sell 2551.7 72 280.67
168
EAR 841.40%

50
54 | P a g e


Figure 30.Full Stochastic PNB

Source NSE
51

Table 9.Technical Analysis of PNB Bank by Full Stochastic Indicators
Total Worth
100
Trading
Profit
2/2/2012 Buy 922.7 0.11
2/21/2012 Sell 1090 19 118.13
3/7/2012 Buy 816.2 0.14
3/14/2012 Sell 1035 7 149.80
4/13/2012 Buy 897.75 0.17
4/19/2012 Sell 929 6 155.01
5/23/2012 Buy 703.45 0.22
6/15/2012 Sell 795 23 175.19
5/25/2012 Buy 720 0.24
6/6/2012 Sell 770 12 187.35
6/27/2012 Buy 780.05 0.24
9/21/2012 Sell 842 86 202.23
10/30/2012 Buy 725 0.28
1/4/2013 Sell 910 66 253.84
219
EAR 372.34%

51
55 | P a g e


Figure 31.Full Stochastic AXIS BANK

Source: NSE
Table 10.Technical Analysis of AXIS Bank by Full Stochastic Indicators
Total Worth 100
Trading
Profit
1-Feb-12 Buy 1053.3 0.09
21-Feb-12 Sell 1308.45 20 124.22
7-Mar-12 Buy 1032.95 0.12
14-Mar-12 Sell 1283.7 7 154.38
28-Mar-12 Buy 1108.25 0.14
17-Apr-12 Sell 1225 20 170.64
17-May-12 Buy 951.3 0.18
28-May-12 Sell 1032 11 185.12
1-Jun-12 Buy 957 0.19
11-Jun-12 Sell 1072 10 207.36
28-Jun-12 Buy 968 0.21
10-Jul-12 Sell 1079 12 231.14
27-Jul-12 Buy 991.7 0.23
16-Aug-12 Sell 1122 20 261.51
5-Sep-12 Buy 955 0.27
17-Dec-12 Sell 1365.95 103 374.04
21-Dec-12 Buy 1307 0.29
3-Jan-13 Sell 1396.5 13 399.66
216
EAR 939.30%

56 | P a g e


Figure 32.Full Stochastic Bank Of India

Source NSE 52
Table 11.Technical Analysis of BOI Bank by Full Stochastic Indicators
Trading
Profit
2-Feb-12 Buy 339 0.29
21-Feb-12 Sell 402.8 19 118.82
27-Feb-12 Buy 337.2 0.35
14-Mar-12 Sell 394.7 16 139.08
29-Mar-12 Buy 340.2 0.41
17-Apr-12 Sell 383 19 156.58
26-Apr-12 Buy 326.6 0.48
5-Jul-12 Sell 356.65 70 170.99
6-Sep-12 Buy 253.55 0.67
4-Oct-12 Sell 309.8 28 208.92
30-Oct-12 Buy 272 0.77
9-Jan-13 Sell 372 71 285.727256
223
EAR 457.56%

52
57 | P a g e


Figure 33.Full Stochastic IDBI

Source NSE
53

Table 12.Technical Analysis of IDBI Bank by Full Stochastic Indicators
Total Worth
100
Trading
Profit
2-Feb-12 Buy 97.25 1.03
21-Feb-12 Sell 120 19 123.39
6-Mar-12 Buy 105.5 1.17
14-Mar-12 Sell 117 8 136.84
29-Mar-12 Buy 98.1 1.39
17-Apr-12 Sell 110.8 19 154.56
23-May-12 Buy 85.25 1.81
13-Jun-12 Sell 94.6 21 171.51
27-Jun-12 Buy 91 1.88
4-Oct-12 Sell 105.8 99 199.41
30-Oct-12 Buy 91.4 2.18
15-Nov-12 Sell 107.25 16 233.98
27-Nov-12 Buy 101.8 2.30
10-Dec-12 Sell 114.05 13 262.14
27-Dec-12 Buy 108.5 2.42
10-Jan-13 Sell 117.95 14 284.97
209
EAR 522.69%

53
58 | P a g e


Figure 34. Full Stochastic HDFC

Source NSE
54

Table 13.Technical Analysis of HDFC Bank by Full Stochastic Indicators
Trading
Profit
2-Feb-12 Buy 491.3 0.20
24-Feb-12 Sell 524.65 22 106.79
6-Mar-12 Buy 503.25 0.21
19-Apr-12 Sell 555.6 44 117.90
23-May-12 Buy 482.2 0.24
10-Jul-12 Sell 592.3 4800.00% 144.82
26-Jul-12 Buy 563 0.26
14-Aug-12 Sell 609 19 156.65
3-Sep-12 Buy 588 0.27
30-Nov-12 Sell 705.5 88 187.95
221
EAR 183.54%

54
59 | P a g e


Figure 35.YES BANK Full Stochastic

Source NSE
55

Table 14.Technical Analysis of YES Bank by Full Stochastic Indicators
Trading
Profit
1-Feb-12 Buy 324.4 0.31
21-Feb-12 Sell 370.9 20 114.33
27-Feb-12 Buy 317.1 0.36
14-Mar-12 Sell 388.7 16 140.15
17-May-12 Buy 301 0.47
29-May-12 Sell 340.7 12 158.64
5-Sep-12 Buy 332.5 0.48
5-Oct-12 Sell 401.95 30 191.77
22-Oct-12 Buy 382.2 0.50
10-Jan-13 Sell 515.45 80 258.63
158
EAR 798.12%

55
60 | P a g e


Beta
The Beta factor
56
describes the movement in a stocks or a portfolios returns in relation to that
of the market return. The main purpose of using Slope or Beta is to predict the change in the
market. Beta is a measure of the market or non-divertible risk associated with any given
security in the market.
The formula for predicting Beta is as follows:

Market Value of Beta = P1-P0 / P0*100
Where,
P1: Todays Close.
P0: Previous Close.
Beta = Cov (x,y) / var (x)
Where,
X Market Value of Nifty
Y Market Value of the Stock
The analysis is done based on the following rule:
If the beta is 1: The shares movement will be along with the market.
If the beta is >1: The shares movement will be more volatile than the market.
If the beta is <1: The shares movement will be less than the market.

Figure 36.Beta Calculation of ICICI Bank (Price Data from Jan 2008 to Dec 2012)

Source: Price data on NSE website

56
(Brentani 2004) Page 28, Security Market Line
61 | P a g e


Here beta is more than 1 (1.469). Beta of greater than 1 indicates that the securitys price will
be more volatile than the market. Theoretically 46.9% more volatile than the market
62 | P a g e


Limitations

The study on technical analysis was conducted by taking only selected Banking companies
stock.
The study is confined only for one year and hence the study cannot be used for a period
before and after.
The study is for a limited period; hence the behavior pattern may serve limited purpose.
63 | P a g e


Conclusion

In this project, we have seen that as per technical analysis, investment decision in equity
market with the help of technical tools have given superior return in comparison with RFR (Risk
Free Return). The tools of technical Analysis provide the timing of buy and sell signal of
securities. Timely decision of buy and sell of securities provides better return. However, we
cannot ignore the fact that human beings do not always act rationally. Many a times, it is
evident that Market prices do sometimes deviate from their prices. There are many factors
causing prices to rise or fall due to insider trading, speculation, rumor etc., which are beyond
the reach of Technical Analysis.

Technical Analysis is all about the timing of the decision which covers both buy and sell, so it
provides us the answer to how long to stay in a particular trade. This is proven with the applied
analysis of various tools on past data of few Indian Banking stocks. We have also seen that
return generated by equity market coupled with technical tools analysis has out-performed
returns on Risk Free Investment.
64 | P a g e


Bibliography

Brentani, Christine. Portfolio Management in Practice. Elsevier, 2004.
Frank Reilly, Keith Brown. Investment Analysis and Portfolio Management. South-
Western/Thomson learning, 2003.
"Technical Analysis Predicting price action in the market." By Elli Gifford. U.K.: FT Pitman
Publishing, 1995.
Investopedia. n.d. http://www.investopedia.com/university/technical (accessed Feb 4,
2013).
M. Ranganathan, R. Madhumathi. Security analysis and Portfolio Management. Pearson,
2012.
NSE. http://www.nseindia.com/. n.d.
http://www.nseindia.com/ChartApp/install/charts/nse_tame_help.htm (accessed
febuary 4, 2013).

Technical Analysis of Stocks

Hochgeladen von

Dokumentinformationen

Originaltitel

Copyright

Verfügbare Formate

Dieses Dokument teilen

Dokument teilen oder einbetten

Freigabeoptionen

Stufen Sie dieses Dokument als nützlich ein?

Sind diese Inhalte unangemessen?

Copyright:

Verfügbare Formate

Technical Analysis of Stocks

Hochgeladen von

Copyright:

Verfügbare Formate

1 | P a g e

TECHNICAL ANALYSIS | Lalit Kumar | MBA 14

Das könnte Ihnen auch gefallen