Complete Information about Stock Market Analysis

2. Introduction • Analysis of statistics generated by market activity such as past price and volume to come up with reasonable outcome in future using charts as a primary tool. • Should I take a long position? Should I take a short position? What is going to be the price tomorrow, next week or next year?

3. Assumptions • The market discounts everything • Prices move in trends • History tends to repeat itself

4. Type of Charts • Line chart

5. Type of Charts • Bar Chart

6. Type of Charts • Volume Bar Chart

7. Type of Charts • Candlestick Chart

8. Trends • The meaning of trend in finance isn't all that different from the general definition of the term - a trend is really nothing more than the general direction. • A trend represents a consistent change in prices (i.e. a change in investor’s expectations)‏ • A trendline is a simple charting technique that adds a line to a chart to represent the trend in the market or a stock.

9. Types of Trend • Uptrends

10. Types of Trend • Downtrend

11. Types of Trend • Sideways Trend

12. Support and Resistance • Support level is a price level where the price tends to find support as it is going down

13. Support and Resistance • Resistance Level is a price level where the price tends to find resistance as it is going up

14. 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

15. Aware: Support and Resistance levels • Support and Resistance levels are highly volatile • Traders should not buy and sell directly at these points as there may be breakout also

16. Breakout • The penetration of support and resistance level is called breakout

17. Trader’s Remorse • Returning to the level of support or resistance after a breakout is called trader’s remorse.

18. Trader’s Remorse

19. Resistance <-> Support

20. Indicators • A mathematical tool that can be applied on security’s price giving a result that can be used to anticipate trends, volatility and price • Indicators are used in two main ways: to confirm price movement and to form buy and sell signals

21. Types of Indicator • Lagging • This indicator simply tells you what prices are doing, they don’t warn you of upcoming changes • Leading • This indicators attempt to make investment calls on securities prior to actual price confirmation

22. Moving Averages • A simple moving average is calculated by taking average of most recent closing prices of n time period • Exponential Moving average applies weighting factors which decrease exponentially

23. Moving Averages

24. Moving Averages Convergence Divergence • MACD is calculated by subtracting 26 days moving average from moving average of 12 days

25. Trading using MACD • A 9 day moving average of MACD is plotted along with MACD

26. Bollinger Bands • Bollinger bands are the envelopes plotted at standard deviations above and below the moving average • Bollinger Bands can be used to measure the highness or lowness of the price relative to previous trades

27. Bollinger Bands

28. Bollinger Bands

29. Elliot Wave Theory • Elliot stated that stock market moves in repetitive cycles

30. Impulse and Corrective Patterns • The impulse pattern consists of five waves, the five waves can be in either direction, up or down • Corrective patterns can be grouped into two different categories: • Simple Correction( Zig-Zag ) • Complex correction (Flat, Irregular, Triangle)

31. Fractal Structure • The structures Elliott described meet the common definition of a fractal ( self-similar patterns appearing at every degree of trend) • Elliott Wave patterns that show up on long term charts are identical to, and will also show up on short term charts

32. Fractal Structure

33. Fibonacci Retracement Patterns • Stocks often pull back or retrace a percentage of the previous move before reversing • Retracement percentages follow a Fibonacci ratio pattern, the key Fibonacci ratios are 23.6, 38.2, 50, 61.8

34. Fibonacci Retracement Patterns

35. Linear Regression Lines • When prices are below the Linear Regression Line, this could be viewed as a good time to buy, and when prices are above the Linear Regression Line, a trader might sell

36. Linear Regression Channel • A Linear Regression trendline shows where equilibrium exists but Linear Regression Channels show the range prices can be expected to deviate from a trendline

37. Relative Strength Index • It compares the magnitude of recent gains to recent losses in an attempt to determine overbought and oversold conditions of an asset RSI= 100- 100/ (1+RS) RS=EMA[U]/EMA[D] EMA- exponential moving average U= Sig (close (today)-close (yesterday)) D= Sig(close(yesterday)-close(today))

38. Relative Strength Index Relative Strength Index

39. Stochastic Oscillator • Compares where a security’s price closed relative to its price range over a given time period Fast oscillator Slow oscillator %D = SMA(%K, N)

40. Stochastic Oscillator • Buy when the Oscillator (either %K or %D) falls below a specific level (e.g., 20) and then rises above that level. Sell when the Oscillator rises above a specific level (e.g., 80) and then falls below that level; • Buy when the %K line rises above the %D line and sell when the %K line falls below the %D line

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