Descriptive and Inferential Statistics

Descriptive Statistics
The descriptive statistics is concerned with describing or summarising the
numerical properties of data. The methodology of descriptive statistics includes
classification, tabulation, graphical representation and calculation of certain
indicators such as mean, median, range, etc. which summarise certain important
features of data. It restricts to generalisation and to specifically a particular group of
individuals being observed. No conclusion can be drawn beyond this group. The data
describe only one group on which these have been collected. Many such action
researches involve descriptive analysis. These researches provide worthy
information’s regarding the nature of a specific group of individuals.
Inferential Statistics
Inferential statistics, which is also referred to as statistical inference, is
concerned with derivation of scientific inference about generalisation of results from
the study of a few particular cases. Technically speaking, the methods of statistical
inference help in generalising the results of a sample to the entire population from
which the sample is drawn. It should be kept in mind while selecting a sample that it
should approximately represent the larger group of population. Thus the
characteristics of the sample will represent the characteristics of the total groups.
The nature of inference is inductive in the sense that we make general statements
from the study of a few cases. Inferential statistics provides us the tools of making
inductive inference scientific and rigorous. In such inference, it is presumed that the
generalization cannot be made with certainty.
Some uncertainty is inevitable since in some cases the inference drawn from
the data of a sample survey or an experiment can be wrong. However, the degree of
uncertainty is itself measurable and one can make rigorous statements about the
uncertainty (or the chance of being wrong) associated with a particular inference.
This uncertainty in inference is dealt with by applying the theory of probability, which
is the backbone of statistical inference. It is a branch of mathematical statistics that
deals with measurement of the extent of certainty of events whose occurrence
depends on chance.
 Measures of Central Tendency
Mean:
Mean = Sum of all values / number of values.
Mean is typically the best measure of central tendency because it takes all
values into account. But it is easily affected by any extreme value/outlier. Note that
Mean can only be defined on interval and ratio level of measurement
Merits of mean:

1. Arithmetic mean rigidly defined by algebraic formula

2. It is easy to calculate and simple to understand

3. It based on all observations and it can be regarded as representative of the

given data

4. It is capable of being treated mathematically and hence it is widely used in

statistical analysis.

5. Arithmetic mean can be computed even if the detailed distribution is not

known but some of the observation and number of the observation are known.

6. It is least affected by the fluctuation of sampling

Demerits of arithmetic mean:

1. It can neither be determined by inspection or by graphical location

2. Arithmetic mean cannot be computed for qualitative data like data on

intelligence honesty and smoking habit etc

3. It is too much affected by extreme observations and hence it is not adequately

represent data consisting of some extreme point

4. Arithmetic mean cannot be computed when class intervals have open ends
Median
The median is that value of the series which divides the group into two equal
parts, one part comprising all values greater than the median value and the other part
comprising all the values smaller than the median value.
Merits of Median:
Simplicity:- It is very simple measure of the central tendency of the series. I the case
of simple statistical series, just a glance at the data is enough to locate the median
value.
Free from the effect of extreme values: - Unlike arithmetic mean, median value is not
destroyed by the extreme values of the series.
Certainty: - Certainty is another merits is the median. Median values are always a
certain specific value in the series.
Real value: - Median value is real value and is a better representative value of the
series compared to arithmetic mean average, the value of which may not exist in the
series at all.
Graphic presentation: - Besides algebraic approach, the median value can be
estimated also through the graphic presentation of data.
Possible even when data is incomplete: - Median can be estimated even in the case of
certain incomplete series. It is enough if one knows the number of items and the
middle item of the series.
Demerits of median:
Following are the various demerits of median:
Lack of representative character: - Median fails to be a representative measure in
case of such series the different values of which are wide apart from each other. Also,
median is of limited representative character as it is not based on all the items in the
series.
Unrealistic:- When the median is located somewhere between the two middle values,
it remains only an approximate measure, not a precise value.
Lack of algebraic treatment: - Arithmetic mean is capable of further algebraic
treatment, but median is not. For example, multiplying the median with the number
of items in the series will not give us the sum total of the values of the series.
However, median is quite a simple method finding an average of a series. It is quite a
commonly used measure in the case of such series which are related to qualitative
observation as and health of the student.
Mode
The value of the variable which occurs most frequently in a distribution is called the
mode.
Merits of Mode:
Simple and popular: - Mode is very simple measure of central tendency. Sometimes,
just at the series is enough to locate the model value.
Because of its simplicity, it s a very popular measure of the central tendency.
Less effect of marginal values: - Compared top mean, mode is less affected by
marginal values in the series. Mode is determined only by the value with highest
frequencies.
Graphic presentation:- Mode can be located graphically, with the help of histogram.
Best representative: - Mode is that value which occurs most frequently in the series.
Accordingly, mode is the best representative value of the series.
No need of knowing all the items or frequencies: - The calculation of mode does not
require knowledge of all the items and frequencies of a distribution. In simple series,
it is enough if one knows the items with highest frequencies in the distribution.
Demerits of mode:
Following are the various demerits of mode:
Uncertain and vague: - Mode is an uncertain and vague measure of the central
tendency.
Not capable of algebraic treatment: - Unlike mean, mode is not capable of further
algebraic treatment.
Difficult: - With frequencies of all items are identical, it is difficult to identify the
modal value.
Complex procedure of grouping:- Calculation of mode involves cumbersome procedure
of grouping the data. If the extent of grouping changes there will be a change in the
model value.
Ignores extreme marginal frequencies:- It ignores extreme marginal frequencies. To
that extent model value is not a representative value of all the items in a series.
Besides, one can question the representative character of the model value as its
calculation does not involve all items of the series
 Measures of Dispersion
As the name suggests, the measure of dispersion shows the scatterings of the data. It
tells the variation of the data from one another and gives a clear idea about the
distribution of the data. The measure of dispersion shows the homogeneity or the
heterogeneity of the distribution of the observations.
Suppose you have four datasets of the same size and the mean is also same, say, m. In
all the cases the sum of the observations will be the same. Here, the measure of
central tendency is not giving a clear and complete idea about the distribution for the
four given sets.
Can we get an idea about the distribution if we get to know about the dispersion of
the observations from one another within and between the datasets? The main idea
about the measure of dispersion is to get to know how the data are spread. It shows
how much the data vary from their average value.
Characteristics of Measures of Dispersion

 A measure of dispersion should be rigidly defined

 It must be easy to calculate and understand

 Not affected much by the fluctuations of observations

 Based on all observations

 Classification of Measures of Dispersion

The measure of dispersion is categorized as:
An absolute measure of dispersion: The measures which express the scattering of
observation in terms of distances i.e., range, quartile deviation. The measure which
expresses the variations in terms of the average of deviations of observations like
mean deviation and standard deviation.
(ii) A relative measure of dispersion: We use a relative measure of dispersion for
comparing distributions of two or more data set and for unit free comparison. They
are the coefficient of range, the coefficient of mean deviation, the coefficient of
quartile deviation, the coefficient of variation, and the coefficient of standard
deviation.
Range
A range is the most common and easily understandable measure of dispersion.
It is the difference between two extreme observations of the data set. If X max and X
min are the two extreme observations then
Range = X max – X min
Merits of Range

 It is the simplest of the measure of dispersion

 Easy to calculate

 Easy to understand

 Independent of change of origin

Demerits of Range

 It is based on two extreme observations. Hence, get affected by fluctuations

 A range is not a reliable measure of dispersion

 Dependent on change of scale

Quartile Deviation
The quartiles divide a data set into quarters. The first quartile, (Q1) is the
middle number between the smallest number and the median of the data. The second
quartile, (Q2) is the median of the data set. The third quartile, (Q3) is the middle
number between the median and the largest number.
Quartile deviation or semi-inter-quartile deviation is
Q = ½ × (Q3 – Q1)
Merits of Quartile Deviation

 All the drawbacks of Range are overcome by quartile deviation

 It uses half of the data

 Independent of change of origin

 The best measure of dispersion for open-end classification

Demerits of Quartile Deviation
  It ignores 50% of the data

 Dependent on change of scale

 Not a reliable measure of dispersion

Mean Deviation
Mean deviation is the arithmetic mean of the absolute deviations of the
observations from a measure of central tendency. If x1, x2, … , xn are the set of
observation, then the mean deviation of x about the average A (mean, median, or
mode) is
Mean deviation from average A = 1⁄n [∑i|xi – A|]
For a grouped frequency, it is calculated as:
Mean deviation from average A = 1⁄N [∑i fi |xi – A|], N = ∑fi
Here, xi and fi are respectively the mid value and the frequency of the ith class
interval.
Merits of Mean Deviation

 Based on all observations

 It provides a minimum value when the deviations are taken from the median

 Independent of change of origin

Demerits of Mean Deviation

 Not easily understandable

 Its calculation is not easy and time-consuming

 Dependent on the change of scale

 Ignorance of negative sign creates artificiality and becomes useless for further
mathematical treatment
Standard Deviation
A standard deviation is the positive square root of the arithmetic mean of the
squares of the deviations of the given values from their arithmetic mean. It is denoted
by a Greek letter sigma, σ. It is also referred to as root mean square deviation. The
standard deviation is given as
σ = [(Σi (yi – ȳ) ⁄ n] ½ = [(Σ i yi 2 ⁄ n) – ȳ 2] ½
For a grouped frequency distribution, it is
σ = [(Σi fi (yi – ȳ) ⁄ N] ½ = [(Σi fi yi 2 ⁄ n) – ȳ 2] ½
The square of the standard deviation is the variance. It is also a measure of
dispersion.
σ 2 = [(Σi (yi – ȳ ) / n] ½ = [(Σi yi 2 ⁄ n) – ȳ 2]
For a grouped frequency distribution, it is
σ 2 = [(Σi fi (yi – ȳ ) ⁄ N] ½ = [(Σ i fi xi 2 ⁄ n) – ȳ 2].
If instead of a mean, we choose any other arbitrary number, say A, the standard
deviation becomes the root mean deviation.
Variance of the Combined Series
If σ1, σ2 are two standard deviations of two series of sizes n1 and n2 with means ȳ1
and ȳ2. The variance of the two series of sizes n1 + n2 is:
σ 2 = (1/ n1 + n2) ÷ [n1 (σ1 2 + d1 2) + n2 (σ2 2 + d2 2)]
where, d1 = ȳ 1 − ȳ , d2 = ȳ 2 − ȳ , and ȳ = (n1 ȳ 1 + n2 ȳ 2) ÷ ( n1 + n2).
Merits of Standard Deviation

 Squaring the deviations overcomes the drawback of ignoring signs in mean

deviations

 Suitable for further mathematical treatment

 Least affected by the fluctuation of the observations

 The standard deviation is zero if all the observations are constant

 Independent of change of origin

Demerits of Standard Deviation

 Not easy to calculate

 Difficult to understand for a layman

 Dependent on the change of scale

 Coefficient of Dispersion
 Correlation Analysis
Definition:
The Correlation Analysis is the statistical tool used to study the closeness of the
relationship between two or more variables. The variables are said to be correlated
when the movement of one variable is accompanied by the movement of another
variable. The correlation analysis is used when the researcher wants to determine the
possible association between the variables and to begin with; the following steps are
to be followed:
Determining whether the relation exists and then measuring it (The measure of
correlation is called as the Coefficient of Correlation).
Testing its significance
Establishing the cause-and-effect relation if any. In the correlation analysis,
there are two types of variables- Dependent and Independent. The purpose of such
analysis is to find out if any change in the independent variable results in the change
in the dependent variable or not. Now the question arises that what is the need to
study the correlation? The study of correlation is very useful in the practical life due
to the following reasons:

1. Several variables show some kind of relationship, such as income and

expenditure, demand and sales, etc. and hence, with the help of correlation
analysis the degree of relationship between these variables can be measured in
one figure.

2. Once the closeness of variables is determined, we can estimate the value of

unknown variable provided the value of another variable is given. This can be
done using the regression analysis.

3. The correlation analysis helps the manufacturing firm in estimating the price,
cost, sales of its product on the basis of the other variables that are
functionally related to it.

4. It contributes towards the economic behavior as it helps an economist in

identifying the critically important variables on which several other economic
variables depend on.
 5. The correlation analysis is the most widely used method and is often the most
abused statistical measures. This is because the researcher may overlook the
fact that the correlation only measures the strength of linear relationships and
does not necessarily imply a relationship between the variables.
Types of Correlation

1. Positive and Negative Correlation: Whether the correlation between the

variables is positive or negative depends on its direction of change. The
correlation is positive when both the variables move in the same direction, i.e.
when one variable increases the other on an average also increases and if one
variable decreases the other also decreases.The correlation is said to be
negative when both the variables move in the opposite direction, i.e. when one
variable increases the other decreases and vice versa.

2. Simple, Partial and Multiple Correlation: Whether the correlation is simple,

partial or multiple depends on the number of variables studied. The correlation
is said to be simple when only two variables are studied.The correlation is
either multiple or partial when three or more variables are studied. The
correlation is said to be Multiple when three variables are studied
simultaneously. Such as, if we want to study the relationship between the yield
of wheat per acre and the amount of fertilizers and rainfall used, then it is a
problem of multiple correlations.

3. Whereas, in the case of a partial correlation we study more than two variables,
but consider only two among them that would be influencing each other such
that the effect of the other influencing variable is kept constant. Such as, in
the above example, if we study the relationship between the yield and
fertilizers used during the periods when certain average temperature existed,
then it is a problem of partial correlation.

4. Linear and Non-Linear (Curvilinear) Correlation: Whether the correlation

between the variables is linear or non-linear depends on the constancy of ratio
of change between the variables. The correlation is said to be linear when the
amount of change in one variable to the amount of change in another variable
 tends to bear a constant ratio.

5. The correlation is called as non-linear or curvilinear when the amount of

change in one variable does not bear a constant ratio to the amount of change
in the other variable. For example, if the amount of fertilizers is doubled the
yield of wheat would not be necessarily be doubled.
Thus, these are three most important types of correlation classified on the basis of
movement, number and the ratio of change between the variables. The researcher
must study these carefully to determine the correlation methods to be used to
identify the extent to which the variables are correlated.
Regression Analysis
Regression analysis refers to a method of mathematically sorting out which
variables may have an impact. The importance of regression analysis for a small
business is that it helps determine which factors matter most, which it can ignore,
and how those factors interact with each other. The importance of regression analysis
lies in the fact that it provides a powerful statistical method that allows a business to
examine the relationship between two or more variables of interest.
The benefits of regression analysis are manifold:

 The regression method of forecasting is used for, as the name implies,

forecasting and finding the causal relationship between variables. An important
related, almost identical, concept involves the advantages of linear regression,
which is the a procedure for modeling the value of one variable on the value(s)
of one or more other variables.

 Understanding the importance of regression analysis, the advantages of linear

regression, as well as the benefits of regression analysis and the regression
method of forecasting can help a small business, and indeed any business, gain
a far greater understanding of the variables (or factors) that can impact its
success in the coming weeks, months and years into the future.
Why Regression Analysis Is Important
The importance of regression analysis is that it is all about data: data means
numbers and figures that actually define your business. The advantages of regression
analysis is that it can allow you to essentially crunch the numbers to help you make
better decisions for your business currently and into the future. The regression
method of forecasting means studying the relationships between data points, which
can help you to:

 Predict sales in the near and long term.

 Understand inventory levels.

 Understand supply and demand.

 Review and understand how different variables impact all of these things.

 Companies might use regression analysis to understand

 Predict what sales will look like in the next six month.

 Whether to choose one marketing promotion over another.

 Whether to expand the business or create and market a new product.

The benefit of regression analysis is that it can be used to understand all kinds of
patterns that occur in data. These new insights may often be very valuable in
understanding what can make a difference in your business.
How Is Regression Analysis Used in Forecasting
The regression method of forecasting involves examining the relationship
between two different variables, known as the dependent and independent variables.
Suppose that you want to forecast future sales for your firm and you've noticed that
sales rise or fall, depending on whether the gross domestic product goes up or down.
(The gross domestic product, or GDP, is the sum of all goods and services produced
within a nation's borders. In the U.S., it is calculated quarterly by the Commerce
Department.)
Your sales, then, would be the dependent variable, because they "depend" on the
GDP, which is the independent variable. (An independent variable is the variable
against which you are measuring something by comparison – your sales in this case.)
You would need to figure out how closely these two variables - sales and GDP - are
related. If the GDP goes up 2 percent, how much do your sales rise?
Regression Analysis Example

 Though this sounds complicated, it's actually fairly simple. You could simply
look back at the activity of the GDP in the last quarter or in the last three-
month period, and compare it to your sales figure. In reality, the government
reported that the GDP grew 2.6 percent in the fourth quarter of 2018. If your
sales rose 5.2 percent during that same period, you'd have a pretty good idea
that your sales generally rise at twice the rate of GDP growth because:

o percent (your sales) / 2.6 percent = 2

 The "2" means that your sales are rising at twice the rate of the GDP. You might
want to go back a couple of more quarters to be sure this trend continues, say
for an entire year. Suppose you sell car parts, wheat, or forklifts. It would be
the same regardless of the products or services you sell. Since you know that
your sales are increasing at twice the rate of GDP growth, then if the GDP
increases 4 percent the next quarter, your sales will likely rise 8 percent. If the
GDP goes up 3 percent, your sales would likely rise 6 percent, and so on.

 In this way, regression analysis can be a valuable tool for forecasting sales and
help you determine whether you need to increase supplies, labor, production
hours, and any number of other factors.
Using Regression Analysis to Formulate Strategies

 It's important to understand that a regression analysis is, essentially, a

statistical problem. Businesses have adopted many concepts from statistics
because they can prove valuable in helping a company determine any number
of important things and then make informed, well-studied decisions based on
various aspects of data. And data, according to Merriam-Webster, is merely
factual information (such as measurements or statistics) used as a basis for
reasoning, discussion, or calculation.
  Regression analysis uses data, specifically two or more variables, to provide
some idea of where future data points will be. The benefit of regression
analysis is that this type of statistical calculation gives businesses a way to see
into the future. The regression method of forecasting allows businesses to use
specific strategies so that those predictions, such as future sales, future needs
for labor or supplies, or even future challenges, will yield meaningful
information.
The Five Applications of Regression Analysis
The regression analysis method of forecasting generally involves five basic
applications. There are more, but businesses that believe in the advantages of
regression analysis generally use the following:

1. Predictive analytics: This application, which involves forecasting future

opportunities and risks, is the most widely used application of regression
analysis in business. For example, predictive analytics might involve demand
analysis, which seeks to predict the number of items that consumers will
purchase in the future. Using statistical formulas, predictive analytics might
predict the number of shoppers who will pass in front of a given billboard and
use then use that information to place billboards where they will be the most
visible to potential shoppers. And, insurance companies use predictive analysis
to estimate the credit standing of policyholders and a possible number of
claims in a given time period.

2. Operation efficiency: Companies use this application to optimize the business

process. For example, a factory manager might use regression analysis to see
what the impact of oven temperature will be on loaves of bread baked in those
ovens, such as how long their shelf life might be. Or, a call center can use
regression analysis to see the relationships between wait times of callers and
the number of complaints they register. This kind of data-driven decision-
making can eliminate guesswork and make the process of creating optimum
efficiency less about gut instinct and more about using well-crafted predictions
based on real data.
 3. Supporting decisions: Many companies and their top managers today are using
regression analysis (and other kinds of data analytics) to make an informed
business decision and eliminate guesswork and gut intuition. Regression helps
businesses adopt a scientific angle in their management strategies. There is
actually, often, too much data literally bombarding both small and large
businesses. Regression analysis helps managers sift through the data and pick
the right variables to make the most informed decisions

4. Correcting errors: Even the most informed and careful managers do make
mistakes in judgment. Regression analysis helps managers, and businesses in
general, recognize and correct errors. Suppose, for example, a retail store
manager feels that extending shopping hours will increase sales. Regression
analysis may show that the modest rise in sales might not be enough to offset
the increased cost for labor and operating expenses (such as using more
electricity, for example). Using regression analysis could help a manager
determine that an increase in hours would not lead to an increase in profits.
This could help the manager avoid making a costly mistake

5. New Insights: Looking at the data can provide new and fresh insights. Many
businesses gather lots of data about their customers. But that data is
meaningless without proper regression analysis, which can help find the
relationship between different variables to uncover patterns. For example,
looking at the data through regression analysis might indicate a spike in sales
during certain days of the week and a drop in sales on others. Managers could
then make adjustments to compensate, such as making sure to maintain stock
on those days, bringing in extra help, or even ensuring that the best sales or
service people are working on those days.
What Is the Significance of Regression Analysis in Business?
Regression analysis, then, is clearly a significant factor in business because it is
a statistical method that allows firms, and their managers, to make better-informed
decisions based on hard numbers. As Amy Gallo notes in the Harvard Business Review:
"In order to conduct a regression analysis, you gather the data on the variables in
question....You take all of your monthly sales numbers for, say, the past three years
and any data on the independent variables you’re interested in. So, in this case, let’s
say you find out the average monthly rainfall for the past three years. . . Glancing at
this data, you probably notice that sales are higher on days when it rains a lot. That’s
interesting to know - but by how much? If it rains 3 inches, do you know how much
you’ll sell? What about if it rains 4 inches?". Regression analysis is significant, then,
because it forces you, or any business, to take a look at the actual data, rather than
simply guessing. In Gallo's example, a business would plot the points showing monthly
rainfall for the past three years. That would be the independent variable. Then, you
would look at the monthly sales figures for the business for the past three years,
which is the depending variable: In essence, you're saying rising or falling sales
depend on the amount of rainfall in a given month.
Rain vs. Sales
Suppose your business is selling umbrellas, winter jackets, or spray-on waterproof
coating. You might find that sales rise a bit when there are 2 inches of rain in a
month. But you might also see that sales rise 25 percent or more during months of
heavy rainfall, where there are more than 4 inches of rain. You could, then, be sure
to stock up on umbrellas, winter jackets or spray-on waterproof coating during those
heavy-rain months. You might also extend business hours during those months and
possibly bring in more help.
Moving Averages:
Mean of time series data (observations equally spaced in time) from several
consecutive periods. Called 'moving' because it is continually recomputed as new data
becomes available, it progresses by dropping the earliest value and adding the latest
value. For example, the moving average of six-month sales may be computed by
taking the average of sales from January to June, then the average of sales from
February to July, then of March to August, and so on. Moving averages (1) reduce the
effect of temporary variations in data, (2) improve the 'fit' of data to a line (a process
called 'smoothing') to show the data's trend more clearly, and (3) highlight any value
above or below the trend.
Moving Averages in Technical Analysis explained
Perhaps one of the most commonly used tools for technical analysis is moving
averages. It does not predict the price direction, but defines the current direction
with a lag. That’s why they are called ‘’lagging’’ indicator.
Perhaps one of the most commonly used tools for technical analysis is moving
averages. It does not predict the price direction, but defines the current direction
with a lag. That’s why they are called ‘’lagging’’ indicator. Moving averages works
well when prices are in trend. However, one needs to cautious as the tool can give
false signal when prices are not trending.
For Short term Trend, one can use 5, 11 & 21-day moving averages, while for the
Medium/Intermediate term, 21 to 100 days is generally consider as a good measure.
Finally, any moving average that use 100 days or more, can be consider measuring
long term momentum. The shorter the MA the more sensitive is the signal.
Types of Moving Averages:
Simple Moving Average (SMA) and the Exponential Moving Average (EMA) are the
most popular types of moving averages. These moving averages can be used to spot
the direction of the trend or to identify potential support and resistance levels.
Simple Moving Average (SMA)
A simple moving average is computed by taking the average price of a security
over a certain number of periods. Simple Moving averages are usually constructed
using the closing price, while it it is also possible to calculate it from the open, the
high and the low data points.. For example: a 5-day SMA is calculated by adding the
closing price for the last 5 days and dividing the total by 5.
Daily closing price 5, 6, 7, 8, 9 & 10
First day of 5-day SMA: (5+6+7+8+9)/5 =7
Second day of 5-day SMA: (6+7+8+9+10)/5 =8
Whether you choose a 21-day average or a 52-week average the calculation is same
instead of adding five days you add 21-day or 52 weeks and divide by the same,
respectively.
Exponential Moving Average:
Exponential moving average is used to reduce lag in simple moving average. It
reduces the lag by applying more weight to recent prices relative to older prices, and
so it will react immediately to a recent price change than a SMA. For example: a 5
period exponential moving average weighs the most recent price 33.33%
The formula for an exponential moving average is
EMA= (Closing price –EMA (previous day)) * (Multiplier) + EMA (previous day)
A 5-period EMA’s Multiplier is calculated as below:
2/(Time period+1)= 2/(5+1) = 33.33%
Role Of Moving Average In Determining Market Trends:

 Moving average can be utilized to determine the trends,. For instance, if the
moving average is rising, then the trend is considered up. On the other hand, if
the moving average is falling, the trend is considered to be down. It also helps
in identifying supports & resistance.

 As seen in the following chart of Reliance capital, 100 day medium term
moving average which was previously acting as resistance level is now acting as
a strong support. Stock also broke 20-day short term moving average several
occasions but able to sustain above 100 day moving average, which indicates
that the medium term trend of the stock is very strong. An investor can gain
insights from the two moving averages in order to make their buy or sell
decisions depending upon time horizon to hold.