TECHNICAL

ANALYSIS

Introduction
Analysis of Markets and investment
decision
Fundamental and Technical analysis

History
Joseph de la Vega 17 th century
Dutch
Homma Munehisa 18th century
candlestick
Dow and Hamilton 20th century
Robert D. Edwards and John Magee
publishedTechnical Analysis of Stock
Trends 1948
Ralph Nelson Elliott,
William Delbert Gannand

 Technical Analysis can be defined as

an art and science of forecasting
future prices based on an
examination of the past price
movements
Statistical analysis of Market activity

The basis of Technical Analysis

Price discounts everything
Price movements are not totally
random
What is more important than why

The basic assumptions

1. The market discounts
everything.
2. Price moves in trends.
3. History tends to repeat itself.

Strengths

Universally applicaple
Focus on price
Faster than Fundamental analysis
Comparison
Entry and exit point

Weaknesses

Open to interpretation
Bias
Late
Always another level
Not works always

Terminology
Bull: An investor who thinks the market, a
specific security or an industry will rise.
Bear: An investor who believes that a
particular security or market is headed
downward is indicative of a bearish trend.
Bears attempt to profit from a decline in
prices. Bears are generally pessimistic
about the state of a given market.

Bull Market
A financial market of a group of
securities in which prices are rising
or are expected to rise. The term
"bull market" is most often used to
refer to the stock market, but can be
applied to anything that is traded,
such as bonds, currencies and
commodities.
Optimism, investor confidence

Bull Market

Bear Market
A market condition in which the
prices of securities are falling, and
widespread pessimism causes the
negative sentiment to be selfsustaining. As investors anticipate
losses in a bear market, selling
continues, which then creates further
pessimism.
Correction is short term bear market
is long term

Dow Theory
Dow and Hamilton
Late 19th to Early 20th century
Editorials
Robert D. Edwards and John Magee
publishedTechnical Analysis of Stock
Trends 1948

3 Types of Price Movements

Primary movement broad underlying trend
bull or bear
few months to few years
Secondary movements counter to primary
few weeks to few months
faster sharper
retracement to primary in some ratio
lower volumes
Daily fluctuations

Trend Identification
Peak and trough analysis (top and
bottom)
trendline

Primary movement

Secondary movements

Daily Fluctuations

Charts
Line Charts
Bar charts
Candlestick charts
Linear charts and Log charts

Line Chart

Bar Chart

Bar Chart

Candlestick

Candlestick

Linear chart

Log chart