Technical analysis is the forecasting of future financial price movement based on an examination of past price movements. Like weather forecasting, technical analysis does not result in absolute prediction about the future. Instead, technical analysis can help investors anticipate what is “likely” to happen to prices over time. Technical analysis uses a wide variety of charts that show price over time.

Technical analysis is a study of a particular script by historic Rate, volume & quantity. By studying technical analysis we can predict the price movement in market & a particular share. By studying charts we can easily understand the price movement happened in history & we can understand the trend in market. Share price movement at what price the share will move when will it move and when will it fall can be studies through chart analysis. Therefore, chart is the foundation of this market & it will always be there.

          TREND:

1. While trading in stock market understanding trend through technical analysis is important.
2. Trend is a way or a direction which helps in change of rate of shares.
3. There are 3 important parts of trend
4. UP trend
5. DOWN trend
6. SIDEWAYS trend

a.  UP TREND:

• If a particular share is on the verge to go up then it is known as up trend.
• There is huge volume build up in starting. So everyone starts buying so many times scripts intends to have upper circuit.

In this trend, script moves higher high means its beats last high price & higher low means it breaks the low of last low.

b.  DOWN TREND:

• If the price of the a particular script goes down day by day then its called as down trend.
• There is huge selling volume in done trend.
• Lot of traders do short selling in this trend so there are chances of lower circuit.
• In this trend scripts starts making lower rate of high & lower low means last low rate less low.

c.   SIDE WAYS TREND:

• Investors get bored in this trend.
• The stock way is not clear in this trend.
• Volume during sideways market is very less.
• Intraday traders get very less chance to participate there are more possibilities of Stoploss to hit.

VOLUME:

• Volume means in a particular time how much buy-sell happened which produced turnover.
• Volume means number of traded quantity of shares in specified time.
• In share market more volume means the stock is more active & liquid.
• Understanding volume is very important in technical analysis.
• By seeing volume we can easily understand the market trend in advance.
• To see whether the volume is up or down you can see those details at the downside of the chart which is started as volume bars.
• Volume gives signal before the rate, this is the reason that volume plays a very important role in technical analysis.
• In uptrend is the volume starts drying then the understanding become that it is end of uptrend.
• In downtrend is the volume starts drying then the understanding becomes that it is end of downtrend.

SUPPORT:

• Support means, at what rate we can place an idea that the rate will not go down below this rate & there will be an upside from this rate, this particular part is known as support.
• You can draw a support line by joining support point join.
• In support line if we get maximum support points the line becomes stronger.
• At support point huge quantity of shares buying happens & rate starts increasing.
• But if rate falls below support line then the price starts decreasing & then a new support is formed.
• That’s why its suggested that if support is breached then we have to short sell & if rate is above support line then we have to place stop loss.

RESISTANCE:

• Resistance means its that rate where we feel that price will not move above this point & it will fall further this point is known as resistance.
• We can join any 2 Resistance Points & draw Resistance line.
• In resistance line more resistance points means the resistance line becomes stronger.
• Huge selling comes is the rate of stock falls below the resistance point & price starts decreasing.
• But is in situation the rate breaks resistance point & goes up, then the rate starts increasing & new resistance point happens.
• Therefore, if resistance line if breached you have to buy & if you have to keep a stop loss below resistance line.

INDICATOR:

1.MOVING AVERAGES:

• Moving average is the value derived from the particular closing rate for that particular time frame.
• Example if we are discussing on the moving average of 10 days then price is the average of this 10 days.
• Thus, we derive the average price & join points & prepare average lines.
• Now let’s draw moving average lines practically.

a.   SHORT TERM TREND:

• To understand Short term trend we need to understand 10 to 20 days moving average.
• Therefore, is you need to take position for 1-2 days then we need to check moving averages of 10-20 days.
• If price is above moving average of 10 days then it’s a buy & if it is below then it we have to place stop loss.
• Lets see example on chart.

b.  MIDDLE TERM TREND:

• To check middle term trend we study 50 days moving average.
• So if you need to buy a particular shares for 5-6 months then we use 50 days moving average.
• If price is above moving average of 50 days then it’s a buy & if it is below then it we have to place stop loss.
• Similarly if the price is below 50 days moving average then we need to short sell & above the moving average should be our stop loss.

c.   LONG TERM TREND:

• To check long term trend we study 100 days moving average.
• If we need to invest for one year or more than that then we need to study 100 days moving average.
• If the rate is above 100 days moving average then we can buy & below 100 days moving average then we need to put stop loss order or we can create a short sell position.

MACD:

• MACD is an acronym for Moving Average Convergence Divergence.
• MACD is created by Gerald Apple in the late 1970’s.
• This tool is used to identify moving averages that are indicating a new trend, whether its bullish or bearish.
• With an MACD chart, you will usually see three numbers that are used for its setting.
• The first is the number of periods that is used to calculate the faster moving average.
• The second is the number of periods that is used in the slower moving average.
• And the third is the number of bars that is used to calculate the moving average of the difference between the faster & slower moving average.
• Red line is slow moving average & Blue line is fast moving average.
• Blue is a MACD line & Red is a SIGNAL line; vertical line is MACD HISTOGRAM.
• Divergence occurs when the moving averages move away from each other. This is called divergence because the faster moving average is “diverging” or moving away from the slower moving average.
• Convergence occurs when the moving averages move towards each other. This is called convergence because the faster moving average is “converging” or getting closer to the slower moving average.
• CALCULATION:
• MACD = (12day EMA – 26day EMA)
• SIGNAL = 9 days EMA of MACD line
• HISTOGRAM = MACD line – SIGNAL line
• If blue line & red line cross each other above the zero line it’s generate selling call & if blue line or red line cross each other below the zero line that mean’s this indicator show buying call.

RSI:

• Relative Strength Index, or RAI is a popular indicator developed by a technical analyst named Welles Wilder.
• RSI is similar to the Stochastic in that it identifies overbought & oversold conditions in the market.
• It is also scaled from 0 to 100.
• Typically, reading below 30 indicate oversold market conditions.
• Readings over 70 indicate overbought conditions.
• In RSI, line below 50 indicate down trend & line over 50 indicate up trend.
• If RSI line moves downword after crossing or touching 70 then it indicates profit booking time.

TYPES OF CHARTS:

a.  LINE CHART:

• Line chart is a simple methodology of technical analysis.
• Depending upon time & price line is drawn on the chart.
• Line chart will only tell us at what the rate was & we could not see open, close high & low of a particular share.

b.  BAR CHARTS:

• Bar chart is very famous in Technical Analysis.
• We get more detailed information in Bar Chart then line chart.
• We understand time frame, open, close, high & low in bar charts.
• Horizontal line on left indicates open & horizontal line on the right indicates close.
• Upper point of the straight line indicates high & lower point of the straight line indicates low.

c.   CANDLESTICK CHART:

• Candlestick chart plays an very important role in technical analysis. Maximum countries in the world use candlestick chart for studying technical analysis.
• The invention of this chart was done in JAPAN therefore it is also known as JAPANESE CANDLESTICK CHARTS.
• This chart is denoted by various colors.
• The day when the close rate of a particular script is low then the open rate then it is displayed by red color.
• The day when the close rate of a particular script is high then the open rate then it is displayed by green color.
• In candle stick chart above stick shows high & below stick shows us low.

• Now we will take a small test on how candle stick is formed.
• We will share a data with you & you have to draw a candle & show whether it is bullish or bearish.
• Lets note the procedure to draw the candle first.

Step 1 -> Check open rate first & draw a horizontal line.

Step 2 -> Now see the close rate & if close is above then draw horizontal line above the open line & if close is less then open then draw horizontal line below open line.

Step 3 -> Get the candle body ready.

Step 4 -> Is candle bullish (Green) or bearish (Red) write it down.

Step 5 -> If it has shown high then draw stick of high & if it has shown low then draw stick of low.

• This way we can understand how the candle is down which is useful to study chart.