1. Munjal Mehta

2.  One assumption ◦ HISTORY REPEATS ITSELF  One rule ◦ REWARD:RISK should always be 2:1  Two learnings ◦ Technical analysis is SUBJECTIVE ◦ It should be used alongwith FUNDAMENTAL ANALYSIS to give the best results

3.  It assumes that the previous price levels shown will act as support and resistances  Supports will become resistances if broken  Resistances will become supports if broken

6.  Example ◦ One stock worth 10rs. ◦ The analyst is bullish about the stock at 10rs. ◦ He issues a BUY call with TGT. Of 12rs. And SL of 9rs. ◦ Out of 10 such buy calls given in the month, he succeeds in only 4 (i.e. 40% accuracy) ◦ Still he manages to make money

8.  Technical analysis cannot be a self fulfilling phenomenon  The entire world watches the same charts and the same levels  But still half of them make money and half of them loose  This is because Technical analysis is subjective  The same chart could look bearish to one analyst and bullish to the other

9.  Technical analysis should only be used as a guiding tool  The main use of technical analysis is affirm when to enter the stock  Whether to enter the stock or not is a call to be taken on the basis of fundamental analysis

10.  Take the example of Tata Motors  At levels of 140rs stock was highly undervalued according to fundamentals  Then at these levels, even if the technical indicators might show weakness in the stock, it might not be advisable to issue a sell call

11.  Trends  Moving Averages  Candlestick Patterns  Oscillators (RSI, MACD, Stochastic, etc.)  Bollinger bands  Pivot points  Elliot wave patterns  And many more….

12.  Most commonly used tool  Uses the previous day’s levels to generate support and resistance levels for today  Ignores the open price of the stock, because it is subject to bias  Mainly used for intraday trading

13.  Pivot point = Yesterday’s (High+Low+Close)/3  S1 = (Pivot point*2) – Yesterday’s High  R1 = (Pivot point*2) - Yesterday’s Low  S2 = Pivot point – Yesterday’s High + Yesterday’s Low  R2 = Pivot point + Yesterday’s High - Yesterday’s Low

15.  Trends are a consistent pattern of highs and lows  Can be bullish as well as bearish  A series of higher tops and higher bottoms signifies a bullish trend  A series of lower tops and lower bottoms signifies a bearish trend

22.  A very simple tool in analyzing a particular stock  An ‘n’ day simple moving average, simply calculates the average of the closing prices of the last ‘n’ days  Used to define support and resistance levels  Moving average crossovers are very important in gauging the trend

23.  The larger the value of ‘n’ the more important is the level  I have used the 8, 13 and 21 days moving average alongwith the 50 day moving average  On careful analysis of the chart, you will see that the 50 day moving average has acted as a major support and resistance level in the past

24.  Commonly known as momentum indicators  Used to gauge three things:- ◦ Overbought or Oversold conditions ◦ Possibility of a Trend Reversal ◦ Increase or Decrease in Momentum  Should never be used in Isolation, should always be used alongwith the price chart

25.  An overbought condition is such that the probability of a downmove is quite high  An oversold condition is such that the probability of a upmove or a rally is high

26.  Can be found out by spotting a divergence between price action and the oscillator readings  Divergence means when the scrip and the oscillator moves in the opposite direction  Divergences occurring at the bottom are termed as positive divergences, and vice versa  They are useful only if they occur in overbought or oversold conditions

27.  Rate Of Change (ROC)  Relative Strength Index (RSI)  Moving Average Convergence Divergence (MACD)  Stochastic

28.  Measures the rate of change between the current price and the price ‘n’ days in the past

31.  The RSI indicates the strength of the scrip relative to itself  RSI = 100 – 100/(1+Rs)  Where Rs = Avg. daily gain / Avg. daily loss  The time period normally selected is 14 days

33.  This indicator measures plots the difference between a short term moving avg. and a long term moving avg.  If the short term avg. is higher than the long term avg., the indicator is positive  If the indicator is positive and moves below the zero level, It indicates a possible change in trend

35.  The stochastic oscillator works on the principle that the stock prices close near the high price of the day when the trend is bullish and vice versa  It consists of 2 components:- ◦ %K = 100 (C-L5)/(H5-L5) ◦ %D = moving average of the %K line