Technical Analysis: By: Hardeepika Singh Ahluwalia

TECHNICAL ANALYSIS
By: Hardeepika Singh Ahluwalia

Key Terms
 Opening price
 Highest Price
 Lowest Price
 Closing Price
Importance of closing prices:

• Stock Indices is determined on the basis of closing price of the security.
• Comparison between opening and closing price to understand the price behavior:
Closing price> Opening price : Buying behavior
Opening price> Closing price: Selling behavior
Dow Theory
Charles Dow
 Stock prices do not move randomly rather they follow a

specific trend.
 The past trend is used to predict the behavior of the stock
prices in the future.
Understanding Peak and Trough
Uptrend
DOW Theory
Downtrend
Each new low in the sell-off

must be lower than the previous
sell-off's low and the peak in the
sell-off must be lower then the
peak in the previous sell-off.
Trends explained by Dow Theory
 Primary trend: Long range trend in prices. (Usually depicted by uptrend and
downtrend)
 Secondary trend
 Minor Trend
Elliott Wave Theory
 Stock prices in the market are described by set wave
pattern.
Wave pattern
Bullish Trend Bearish Trend
Wave 1 Upward Downward
Wave 2 Downward Upward
Wave 4 Downward Upward
ABC correction wave A and C will be against the basic direction
B will with the basic direction.
Elliott wave theory: Bull market
Impulsive Waves: Waves that move with the trend

Corrective Waves: Waves that move against the trend
Elliott Wave theory: Bearish Market
Impulsive Waves: Waves that move with the trend

Corrective Waves: Waves that move against the trend
CHARTING
TECHNIQUES
Candlestick Chart
Normal White candle:

•Closing price are
higher than the
opening price
•Buying behavior of
investor
Normal Black candle:

•Closing price are
lower than the
opening price
•selling behavior of
investor
Candlestick chart for five working days
Shaven bottom candle and shaven head candle
Hammer Candle Shooting star Candle
Shaven Head Candle Shaven Bottom Doji Lines

When closing price is Candle When opening and
highest for the day When closing price is closing price are
lowest for the day same
Doji Lines and categories
• Dragonfly Doji: The pattern is found when stocks opening and closing
price are equal and occur at high of the day
•Gravestone doji: Opening and closing price of asset are equal and
happens at low of the day
•Four price Doji: when open,close,high and low all prices are same.
Morning and Evening Star Candle
Spot the Morning Star
Let’s understand the
trend using candle
stick on a Live Chart
Line Chart
What is a Line Chart?
Charting Techniques
BAR CHART High
Open
Close
Low
High
Close
Price and Volume chart:

Prices are categorized into: Open, close, High and Low
Open
Low
Support and Resistance
Pattern Analysis
Trend: Increasing Trend and Decreasing trend
Head and Shoulder
1.Rises to a peak and

subsequently declines.
2. Then, the price rises

above the former peak and
again declines.
3. And finally, rises again,

but not to the second peak,
and declines once more.
Inverse Head and Shoulder
1. The price falls to a trough

and then rises.
2. The price falls below the

former trough and then
rises again.
3. Finally, the price falls

again, but not as far as the
second trough
Double Top Pattern
•The double-top pattern is found

at the peaks of an upward trend
•IT signal that the preceding
upward trend is weakening and
that buyers are losing interest
•. Upon completion of this
pattern, the trend is considered
to be reversed and the security
is expected to move lower.
Double top pattern (Contd.)
 he first stage of this pattern is the creation of a new high
during the upward trend, which, after peaking,
faces resistance and sells off to a level of support. The
next stage of this pattern will see the price start to move
back towards the level of resistance found in the
previous run-up, which again sells off back to the
support level. The pattern is completed when the
security falls below (or breaks down) the support level
that had backstopped each move the security made,
thus marking the beginnings of a downward trend.
Double Bottom Pattern
•The double bottom is formed when a
downtrend sets a new low in the price
movement. This downward move will
find support, which prevents the
security from moving lower.
• Upon finding support, the security
will rally to a new high, which forms
the security's resistance point.
•The next stage of this pattern is
another sell-off that takes the security
down to the previous low.
•These two support tests form the two

bottoms in the chart pattern. But
again, the security finds support and
heads back up. The pattern is
confirmed when the price moves
above the resistance the security
faced on the prior move up.
Ascending Triangles
The ascending triangle is a bullish pattern,
which gives an indication that the price of
the security is headed higher upon
completion.
The pattern is formed by two trend lines:

a flat trend line being a point of resistance
and an ascending trend line acting as a
price support.
Descending triangle
•It gives a bearish signal to chartists
• suggesting that the price will trend

downward upon completion of the pattern.
•The descending triangle is constructed

with a flat support line and a downward-
sloping resistance line.
Mathematical Indicators and Risk
Measurement under technical
analysis
Relative strength index
 Relative strength Analysis:
RSA is based on preposition that some shares
outperform other stocks in the increasing phase
i.e. some shares increases more than that of
market and decrease less than that of market.
 Thus such stocks have greater strength in
relative terms.
Relative strength ratio
 Relative strength Ratio= Stock price of share
X
Stock Index/ Sectoral Index
 If ratio increases over time, it shows shares

are outperforming the market or that sector.
Relative strength index
 RSI is an oscillator which measures the strength of a
particular stock vis-à-vis market.
First Average Gain = Sum of Gains over the past 14 periods / 14.
First Average Loss = Sum of Losses over the past 14 periods / 14
Note: RSI is calculated for a period of 14 days

Range of RSI
 RSI varies from 0 to 100
Moving Average
 Trend (Upward/ Downward)
 Range (Support/ Resistance)
 Direction of Movement and Reversals
Finding support and Resistance
Simple Moving Average
SMA assigns equal weight to each Period

Explain the Trend?
Exponential Moving Average
Thank You!!

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TECHNICAL ANALYSIS

By: Hardeepika Singh Ahluwalia

Importance of closing prices:

 Stock prices do not move randomly rather they follow a

Each new low in the sell-off

Impulsive Waves: Waves that move with the trend

Impulsive Waves: Waves that move with the trend

Normal White candle:

Normal Black candle:

Hammer Candle Shooting star Candle

Shaven Head Candle Shaven Bottom Doji Lines

Price and Volume chart:

1.Rises to a peak and

2. Then, the price rises

3. And finally, rises again,

1. The price falls to a trough

2. The price falls below the

3. Finally, the price falls

•The double-top pattern is found

•These two support tests form the two

The pattern is formed by two trend lines:

•It gives a bearish signal to chartists

• suggesting that the price will trend

•The descending triangle is constructed

 If ratio increases over time, it shows shares

Note: RSI is calculated for a period of 14 days

SMA assigns equal weight to each Period

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