Technical Analysis & Its Relevance

TECHNICAL ANALYSIS AND ITS RELEVANCE
IN INVESTING
A Dissertation Submitted in partial fulfillment of the requirements of the
M.B.A Degree Course of Bangalore University
Submitted By
DIVYASINDHU.K
Registration No: 06XQCM6024
2006-2008
Under the Guidance and Supervision of
DR. NAGESH S MALAVALLI

M.P.BIRLA INSTITUTE OF MANAGEMENT
Associate Bharathiya Vidya Bhavan
#43, Race Course Road
BANGALORE-560001
CERTIFICATE FROM THE PRINCIPAL
I hereby certify that this dissertation is an offshoot of the research work
undertaken and completed by DivyaSindhu K under my Guidance.
PLACE: Bangalore Dr Nagesh S

Malavalli
DATE: (Principal)
CERTIFICATE FROM THE GUIDE
I hereby certify that the research work embodied in the dissertation titled,
“TECHNICAL ANALYSIS AND ITS RELEVANCE IN INVESTING” has been undertaken
under my guidance and supervision by DivyaSindhu K with Registration Number
06XQCM6024 during the academic year 2006 – 2008 in partial fulfillment of
requirements for the award of MBA degree by Bangalore University. To the best
of my knowledge this report has not formed the basis for the award of any other
degree or diploma.
PLACE: Bangalore Dr. Nagesh S
Malavalli
DATE: (Principal)
DECLARATION
I hereby declare that the research work embodied in the dissertation titled,
“TECHNICAL ANALYSIS AND ITS RELEVANCE IN INVESTING” is a record of
independent work carried out by me towards the partial fulfillment of

requirements of the MBA course of Bangalore University at M.P.Birla Institute of
Management. The report has not been submitted in part or full towards any
other degree or diploma.
Place: Bangalore
Date:
DivyaSindhu K
Reg. No. 06XQCM6024

ACKNOWLEDGEMENT
The immense gratification of this project work does not lead to a sense of
fulfillment unless I express my boundless gratitude to all those who made this work
successful. I do recognize that mere thanksgiving does not redeem me of my
indebtedness for all the timely help, support and guidance I received.
I script on this page my sincere thanks to each one of them:
Dr. Nagesh S Malavalli – Principal, M. P. Birla Institute of Management and my
guide for this project to whom I am deeply grateful for his constant support and
guidance at every stage of the project.
My family and friends for always having stood by my convictions and
encouraging me to perform better.

Thank You DivyaSindhu K
Sl. No. Content Page No.
1 RESEARCH EXTRACT 2
2 INTRODUCTION 4
INTRODUCTION TO TECHNICAL
3 10
ANALYSIS
4 REVIEW OF LITERATURE 22
5 PROBLEM STATEMENT 23
6 OBJECTIVES OF THE RESEARCH 25
7 RESEARCH METHODOLOGY 36
DATA ANALYSIS &

8 46
INTERPRETATION
9 SUMMARY AND FINDINGS 67
CONCLUSION &
10 69
RECOMMENDATIONS
11 BIBLIOGRAPHGY 73
12 ANNEXURES 74
Relevance Of Technical Analysis
LIST OF TABLES AND CHARTS
SL NO. PARTICULARS PAGE NO.
1 20 DAYS DAY MOVING AVERAGES 46
2 RELATIVE STRENGTH INDEX 50
3 RATE OF CHANGE METHOD 53
4 PRICE MOMENTUM 56
5 BUY / HOLD STRATEGY 60
6 % OF RETURNS FOR TECHNICAL ANALYSIS TOOLS 62

FOR THREE YEARS
7 CHART SHOWING THE RETURNS IN TERMS OF % 63
8 RANKINGS OF TOOLS OF TECHNICAL ANALYSIS 64
9 CHART SHOWING THE RANKINGS OF TOOLSOF 64

TECHNICAL ANALYSIS
10 RETURNS AND RANKINGS 65
11 CHART SHOWING RETURNS AND RANKINGS 65
M.P.Birla Institute of Management Page 10
RESEARCH EXTRACT
RESEARCH EXTRACT
The following research has been carried out in order to check the relevance of the use
of Technical analysis in investing i.e. does the use of technical analysis while
investing really gets the investors maximum returns possible.
In this research the sensex closing price for three years from 2005 to 2007 is
considered. Here sensex itself is assumed as a stock.
Days Moving Averages method, Relative Strength Index method, Rate of Change
method, Price Momentum method are the tools employed. These tools are analyzed
and the charts were plotted based on the analysis.
From the charts the stock was bought and sold as and when the signals were given
respectively for each year separately.
The profits or loss hence made from these predictions has been used to analyze the
percentage of returns each tool generates.
The returns thus obtained are compared with one another and also with the returns
obtained through buy and hold strategy where the sensex is bought at that year’s
closing price of first working day’ price and held till year end and sold at the closing
price of the last working day of the sensex.
It has been found from the analysis that Relative Strength Index method ranks FIRST
in terms of returns and it also shows that investors will be able to make maximum
benefit by employing tools of Technical Analysis than by simple Buy and Hold
strategy. Thus this research shows that Technical Analysis does have relevance in
generating profits or returns to its investors.
INTRODUCTION
EVOLUTION OF INDIAN STOCK MARKET
Indian Stock Markets are one of the oldest in Asia. Its history dates back to nearly 200
years ago. The earliest records of security dealings in India are meager and obscure.
The East India Company was the dominant institution in those days and business in its
loan securities used to be transacted towards the close of the eighteenth century.
By 1830's business on corporate stocks and shares in Bank and Cotton presses took
place in Bombay. Though the trading list was broader in 1839, there were only half a
dozen brokers recognized by banks and merchants during 1840 and 1850.
The 1850's witnessed a rapid development of commercial enterprise and brokerage

business attracted many men into the field and by 1860 the number of brokers
increased into 60.In 1860-61 the American Civil War broke out and cotton supply
from United States of Europe was stopped; thus, the 'Share Mania' in India begun. The
number of brokers increased to about 200 to 250. However, at the end of the American
Civil War, in 1865, a disastrous slump began (for example, Bank of Bombay Share
which had touched Rs 2850 could only be sold at Rs. 87).
At the end of the American Civil War, the brokers who thrived out of Civil War in
1874, found a place in a street (now appropriately called as Dallal Street) where they
would conveniently assemble and transact business. In 1887, they formally established
in Bombay, the "Native Share and Stock Brokers' Association" (which is alternatively
known as “The Stock Exchange "). In 1895, the Stock Exchange acquired a premise in
the same street and it was inaugurated in 1899. Thus, the Stock Exchange at Bombay
was consolidated.
Trading Pattern of the Indian Stock Market
Trading in Indian stock exchanges is limited to listed securities of public limited

companies. They are broadly divided into two categories, namely, specified securities
(forward list) and non-specified securities (cash list). Equity shares of dividend
paying, growth-oriented companies with a paid-up capital of at least Rs.50 million and
a market capitalization of at least Rs.100 million and having more than 20,000
shareholders are, normally, put in the specified group and the balance in non-specified
group.
Two types of transactions can be carried out on the Indian stock exchanges:
1. Spot delivery transactions "for delivery and payment within the time or on the
date stipulated when entering into the contract which shall not be more than 14
days following the date of the contract”
2. Forward transactions "delivery and payment can be extended by further period
of 14 days each so that the overall period does not exceed 90 days from the
date of the contract". The latter is permitted only in the case of specified
shares. The brokers who carry over the outstanding pay carry over charges (can
tango or backwardation) which are usually determined by the rates of interest
prevailing.
A member broker in an Indian stock exchange can act as an agent, buy and sell
securities for his clients on a commission basis and also can act as a trader or dealer as
a principal, buy and sell securities on his own account and risk, in contrast with the
practice prevailing on New York and London Stock Exchanges, where a member can
act as a jobber or a broker only.
The nature of trading on Indian Stock Exchanges are that of age old conventional style
of face-to-face trading with bids and offers being made by open outcry. However,
there is a great amount of effort to modernize the Indian stock exchanges in the very
recent times.
National Stock Exchange (NSE)
With the liberalization of the Indian economy, it was found inevitable to lift the Indian
stock market trading system on par with the international standards. On the basis of
the recommendations of high powered Pherwani Committee, the National Stock
Exchange was incorporated in 1992 by Industrial Development Bank of India,
Industrial Credit and Investment Corporation of India, Industrial Finance Corporation
of India, all Insurance Corporations, selected commercial banks and others.
Trading at NSE can be classified under two broad categories:
¾ Wholesale debt market and

¾ Capital market.
Wholesale debt market operations are similar to money market operations -

institutions and corporate bodies enter into high value transactions in financial
instruments such as government securities, treasury bills, public sector unit bonds,
commercial paper, certificate of deposit, etc.
There are two kinds of players in NSE:
¾ Trading members
¾ Participants.
Recognized members of NSE are called trading members who trade on behalf of
themselves and their clients. Participants include trading members and large players
like banks who take direct settlement responsibility.
Trading at NSE takes place through a fully automated screen-based trading

mechanism which adopts the principle of an order-driven market. Trading members
can stay at their offices and execute the trading, since they are linked through a
communication network. The prices at which the buyer and seller are willing to
transact will appear on the screen. When the prices match the transaction will be
completed and a confirmation slip will be printed at the office of the trading member.
NSE has several advantages over the traditional trading exchanges. They are as
follows:
¾ NSE brings an integrated stock market trading network across the nation.
¾ Investors can trade at the same price from anywhere in the country since inter-
market operations are streamlined coupled with the countrywide access to the
securities.
¾ Delays in communication, late payments and the malpractice’s prevailing in

the traditional trading mechanism can be done away with greater operational
efficiency and informational transparency in the stock market operations, with
the support of total computerized network.
Unless stock markets provide professionalized service, small investors and foreign
investors will not be interested in capital market operations. And capital market being
one of the major sources of long-term finance for industrial projects, India cannot
afford to damage the capital market path. In this regard NSE gains vital importance in
the Indian capital market system.
Bombay Stock Exchange (BSE)
The Stock Exchange, Mumbai, popularly known as "BSE" was established in 1875 as
"The Native Share and Stock Brokers Association". It is the oldest one in Asia, even
older than the Tokyo Stock Exchange, which was established in 1878. It is a voluntary
non-profit making Association of Persons (AOP) and is currently engaged in the
process of converting itself into demutualised and corporate entity.
It has evolved over the years into its present status as the premier Stock Exchange in
the country. It is the first Stock Exchange in the Country to have obtained permanent
recognition in 1956 from the Govt. of India under the Securities Contracts
(Regulation) Act, 1956.
The Exchange, while providing an efficient and transparent market for trading in
securities, debt and derivatives upholds the interests of the investors and ensures
reprisal of their grievances whether against the companies or its own member-
brokers. It also strives to educate and enlighten the investors by conducting investor
education programmers and making available to them necessary informative inputs.
A Governing Board having 20 directors is the apex body, which decides the policies
and regulates the affairs of the Exchange. The Governing Board consists of 9
elected directors, who are from the broking community (one third of them
retire ever year by rotation), three SEBI nominees, six public representatives and an
Executive Director & Chief Executive Officer and a Chief Operating Officer.
The Executive Director as the Chief Executive Officer is responsible for the day-to-
day administration of the Exchange and he is assisted by the Chief Operating Officer
and other Heads of Departments.
The Exchange has inserted new Rule No.126 A in its Rules, Bye-laws & Regulations
pertaining to constitution of the Executive Committee of the Exchange.
Accordingly, an Executive Committee, consisting of three elected directors, three

SEBI nominees or public representatives, Executive Director & CEO and Chief
Operating Officer has been constituted.
The Committee considers judicial & quasi matters in which the Governing Board has
powers as an Appellate Authority, matters regarding annulment of transactions,
admission, continuance and suspension of member-brokers, declaration of a member-
broker as defaulter, norms, procedures and other matters relating to arbitration, fees,
deposits, margins and other monies payable by the member-brokers to the Exchange,
etc.
INTRODUCTION TO TECHNICAL ANALYSIS
It is important to form a view on the likely trend of the overall market, and it is helpful
to have some idea of how to go about selecting individual stocks. Naturally, all
investors would like their investments to appreciate rapidly in price, but stocks, which
may satisfy this wish, tend to be accompanied by a substantially greater amount of risk
than many investors are normally willing to accept. However, it is important to
understand that investors can be very conscious when it comes to stock ownership.
Technical analysis is the use of numerical series generated by market activity, such as
price and volume, to predict future price trends. The techniques applied to any market
with a comprehensive price history.
Primarily, but not exclusively, technical analysis is conducted by studying charts of

past price movement. Many different methods and tools are used in technical analysis,
but they all rely on the assumption that price patterns and trends exist in markets, and
that they can be identified and exploited. Technical analysis does not try to analyze the
financial data of a company such as cash flow, dividends and projection of future
dividends. That type of analysis is called Fundamental analysis. Nor does it claim to
be 100% accurate. It attempts to give the "most likely" outcome.
Some speculators combine elements from both technical and fundamental analysis.
Technical analysis is viewed by many of its practitioners as more of art than science.
Many academic studies conclude that technical analysis has little, if any, predictive
power. However, the practice has a dedicated following especially among active
traders and does have support amongst the academic community.
As an example of the debate regarding the efficacy of technical analysis, Peter Lynch,
a very well-known and successful fundamental analyst, once commented, "Charts are
great for predicting the past." On the other hand, the U.S. Federal Reserve once
published a study saying that certain element of technical analysis was effective in
price forecasting.
The premises of technical analysis were derived from empirical observations of

financial markets over hundreds of years. Perhaps the oldest branch of technical
analysis is the use of candlestick techniques by Japanese traders at least as early as the
18th century, and still very popular today.
Dow Theory, a theory based on the collected writings of Dow Jones co-founder and
editor Charles Dow, inspired the increasingly widespread use and development of
technical analysis from the end of the 19th century. Modern technical analysis
considers Dow Theory its cornerstone.
New tools and theories have been produced and existing tools have been enhanced at a
rapid rate in recent decades, with an increasing emphasis on computer-assisted
techniques.
Technical analysis is not concerned with why a price is moving but rather whether it is
moving in a particular direction or in a particular chart pattern. Technical analysts
believe that profits can be made by "trend following." In other words if a particular
stock price is steadily rising (trending upward) then a technical analyst will look for
opportunities to buy this stock. Until the technical analyst is convinced this uptrend
has reversed or ended, all else equal, he will continue to own this security.
Additionally, technical analysts look for various price patterns to form on a price chart
and will take positions in anticipation of the expected move following that pattern.
The various tools of technical analysis assist the technician in determining when
trends have formed, ended, etc. and when particular patterns are unfolding.
Technical analysis may be at odds with fundamental analysis. Fundamental analysis

maintains that markets may misprice a security and, through various methods of
fundamental analysis, the "correct" price can be calculated. Profits can be made by
trading the mispriced security and then
waiting for the market to recognize its "mistake" and reprise the security. In contrast, a
technical analyst is not interested in a security's "correct" price, but only in price
movement.
The beauty of technical analysis lies in its versatility. Because the principles of
technical analysis are universally applicable, each of the analysis steps above can be
performed using the same theoretical background. One does not need an economics
degree to analyze a market index chart. One doesn’t need to be a specialist to analyze
a stock chart. It does not matter if the time frame is 2 days or 2 years. It does not
matter if it is a stock, market index or commodity.
The technical principles of support, resistance, trend, trading range and other aspects
can be applied to any chart. While this may sound easy, technical analysis is by no
means easy. Success requires serious study, dedication and an open mind.
One of the forecasting tools very popular among practitioners is technical analysis.
Technical analysis is the examination of past price movements in order to forecast
future price movements. Technical analysis is open to interpretation. Many times two
technicians will look at the same chart and paint two different scenarios or see
different patterns. Both would be able to come up with logical support to justify their
position.
In addition, even if stock prices completely followed a random walk, people would be
able to convince themselves that there are patterns having a predictive value. It has
become more and more popular, as it offered an unlimited set of tools and signals and
seemed to be an interesting method of market analysis. It has been proven that stock
prices most of the time approximately follow a random walk pattern.
Psychologists have described a number of ways in which people deal with

randomness. Additionally, market participants may be subject to herd behavior.
Technical analysis is applicable to stocks, indices, commodities, futures or any

tradable instrument where the price is influenced by the forces of supply and demand.
Price refers to any combination of the open, high, low, or closes for a given security
over a specific time frame. The time frame can be based on intraday (1-minute, 5-
minutes, 10-minutes, 15-minutes, 30-minutes or hourly), daily, weekly or monthly
price data and last a few hours or many years.
In addition, some technical analysts include volume or open interest figures with their
study of price action.
Technical analysts believe that their methods will permit them to beat the market.
Economists have traditionally been skeptical of the value of technical analysis,
affirming the theory of efficient markets that holds no strategy should allow investors
and traders to make unusual returns except by taking excessive risk.
Three Beliefs of Technical Analysis
1. Price Action In The Market Discounts Everything
Technical analysis holds that because every possible bit of information is immediately
included in the price of a security, it is not necessary to explicitly analyze the
fundamental, economic, political, etc. factors that might influence that price. Because
all possible information is reflected in the price, only a study of the price movement is
required.
This theorem is similar to the strong and semi-strong forms of market efficiency.
Technical analysts believe that the current price fully reflects all information. Because
all information is already reflected in the price, it represents the fair value, and should
form the basis for analysis. After all, the market price reflects the sum knowledge of
all participants, including traders, investors, portfolio managers, buy-side analysts,
sell-side analysts, market strategist, technical analysts, fundamental analysts and many
others.
It would be folly to disagree with the price set by such an impressive array of people
with impeccable credentials. Technical analysis utilizes the information captured by
the price to interpret what the market is saying with the purpose of forming a view on
the future.
2. Prices Move In Trends
Most technicians agree that prices trend. However, most technicians also acknowledge
that there are periods when prices do not trend. If prices were always random, it would
be extremely difficult to make money using technical analysis. A technician believes
that it is possible to identify a trend, invest or trade based on the trend and make
money as the trend unfolds. Because technical analysis can be applied to many
different time frames, it is possible to spot both short-term and long-term trends.
While it cannot be shown that prices must trend, technical analysis relies on While it
cannot be shown that prices must trend, technical analysis relies on empirical evidence
and common sense to assert that prices do trend. To a technician, markets are trending
up, trending down, or trending sideways (flat). This definition of a price trend is
essentially the one put forward by Dow Theory. A person who does not believe that
prices move in trends will find little use for technical analysis. The assumption that
prices must trend is probably the most important concept in technical analysis.
3. History Tends To Repeat Itself
To a technical analyst, the human characteristics of the market might be irrational, but
they exist. Because investors' attitudes often repeat, investors' actions in the
marketplace often repeat as well i.e., patterns of price movement will develop on a
chart that a technical analyst believes have predictive qualities.
Technical analysis is not limited to charting. Technical analysis is always primarily

concerned with price trends. Anything that can influence the price trend is of interest
to a technical analyst.
As an example, many technical analysts monitor surveys of investor enthusiasm.

These surveys attempt to gauge the general attitude of the investment community to
determine whether investors are bearish or bullish. Technical analysts use these
surveys to help determine whether a trend will reverse or whether a new trend will
develop. A technical analyst will be alerted that a trend might change when these
surveys report extreme investor reactions. When surveys are overly bullish, for
example, a technical analyst will look for evidence that an uptrend will reverse.
The logic being that is if most investors are bullish, then they would have already
bought the market (anticipating that the market will move higher). But because most
investors are bullish and have invested, it is safe to assume that there are few buyers
remaining in the market. With most investors long, there are more potential sellers in
the market than buyers despite the fact that the overall attitude of investors is bullish.
Weakness of Technical Analysis
Analyst Bias
Just as with fundamental analysis, technical analysis is subjective and our personal
biases can be reflected in the analysis. It is important to be aware of these biases when
analyzing a chart. If the analyst is a perpetual bull, then a bullish bias will overshadow
the analysis. On the other hand, if the analyst is a disgruntled eternal bear, then the
analysis will probably have a bearish tilt.
Open to Interpretation
Furthering the bias argument is the fact that technical analysis is open to
interpretation. Even though there are standards, many times two technicians will look
at the same chart and paint two different scenarios or see different patterns. Both will
be able to come up with logical support and resistance levels as well as key breaks to
justify their position. While this can be frustrating, it should be pointed out that
technical analysis is more like an art than a science, somewhat like economics. Is the
cup half-empty or half-full? It is in the eye of the beholder.
Too Late
Technical analysis has been criticized for being too late. By the time the trend is
identified, a substantial portion of the move has already taken place. After such a large
move, the reward to risk ratio is not great. Lateness is a particular criticism of Dow
Theory.
Always another Level
Even after a new trend has been identified, there is always another "important" level
close at hand. Technicians have been accused of sitting on the fence and never taking
an unqualified stance. Even if they are bullish, there is always some indicator or some
level that will qualify their opinion.
Trader's Remorse
Not all technical signals and patterns work. When one begins to study technical
analysis, one will come across an array of patterns and indicators with rules to match.
For instance: A sell signal is given when the neckline of a head and shoulders pattern
is broken. Even though this is a rule, it is not steadfast and can be subject to other
factors such as volume and momentum. In that same vein, what works for one
particular stock may not work for another. A 50-day moving average may work great
to identify support and resistance for SBI, but a 70-day moving average may work
better for Infosys. Even though many principles of technical analysis are universal,
each security will have its own idiosyncrasies.
Lack of evidence
Although chartists assert that their techniques provide excess returns over time, this
assertion is controversial. Many academics believe that technical analysis has no
predictive power. Burton Malkiel in his book "A Random Walk Down Wall Street"
(8th edition, 2003) and Eugene Fama in "Efficient Capital Markets: A Review of
Theory and Empirical Work," May 1970 Journal of Finance summarize many early
studies, conducted from the 1950s-70s, that show that after trading costs are
considered, the returns generated by many technical strategies under perform a simple
buy and hold strategy.
Critics of technical analysis include well known fundamental analysts. Warren Buffett
has exclaimed, "I realized technical analysis didn't work when I turned the charts
upside down and didn't get a different answer" and "If past history was all there was to
the game, the richest people would be librarians."
Inconsistencies with Other Market Hypotheses
The Efficient Market Hypothesis
The efficient market hypothesis concludes that technical analysis cannot be effective.
According to this hypothesis, all relevant information is quickly reflected in a
security's price through the actions of traders who have that information. Thus, it is
impossible to "beat the market," and technical analysis cannot work. News events and
new fundamental developments which influence prices occur randomly and are
unknowable in advance. Advocates of EMH have produced many studies that reject
the efficacy of technical analysis.
Proponents of technical analysis counter that technical analysis does not completely
contradict the efficient market hypothesis. Technicians agree with EMH and that they
believe that all available information is reflected within a security's price; that is why
technicians say a study of the price movement is necessary. Technicians argue that
EMH ignores the realities of the market place, namely that many investors base their
future expectations on past earnings, track records, etc. Because future stock prices
can be strongly influenced by investor expectations, technicians claim it only follows
that past prices can influence future prices.
Technicians point to the new field of behavioral finance. Behavioral finance

essentially says that people are not the rational participants EMH makes them out to
be. Market participants can and do act irrationally. Technicians have long held that
irrational human behavior influences stock prices and claim to have ways of predicting
probable outcomes based on this behavior.
The Random Walk Hypothesis
The random walk hypothesis is also at odds with technical analysis and charting.
Essentially, the hypothesis claims that stock price moments either independent or
uncorrelated increments. In this model, future stock prices are not dependent on past
stock prices, so trends cannot exist and technical analysis has no basis. Again,
proponents of this theory have generated substantial research in support of the
hypothesis.
Technical analysts maintain that trends are identifiable in the market and that it is
impractical to believe that market prices move in a random fashion. To a technician,
over time prices will trend in a direction until supply equals demand. Therefore, there
cannot be any pure random price movement.
As stated earlier, one of the cornerstones of technical analysis is that prices trend. If
one does not believe this concept, one will not agree with technical analysis.
Also, with regards to EMH and Random Walk Theory, technicians claim that both
theories ignore the realities of the marketplace. To a technician, the market is neither
composed of completely rational participants as EMH assumes (participants can be
greedy, overly risky, etc. at any given time) nor is its stock price movement
completely independent of its prior movement.
Proponents of Technical Analysis

To many traders, trading in the direction of the trend is the most effective means to be
profitable in financial or commodities markets. John Henry, Larry Hite, Ed Seykota
Richard Dennis, Bruce kovner, and Michael Marcus have each amassed massive
fortunes through the use of technical analysis and its concepts. George Lane, a
technical analyst, coined one of the most popular phrases on Wall Street, "The trend is
your friend!"
Many non-arbitrage algorithmic trading systems rely on the idea of trend-following, as

do many hedge funds. A relatively recent trend, both in research and industrial
practice, has been the development of increasingly sophisticated automated trading
strategies. These often rely on underlying technical analysis principles.
REVIEW OF LITERATURE
PROBLEM STATEMENT
An investor may be an active trader or a passive trader. An active trader is one

who constantly checks for the right time to enter and exit the market in order to
make profit as much as possible. He does so by relying on reports generated by
analysts or even he by himself may use different tools of technical analysis.
While an active trader is constantly hooked to the daily happenings of the

market a passive trader buys particular scrip and holds for a long period
without worrying so much about the daily happenings of the market in order to
make money.
Although the interest of both the type of investors is to make profits the
method followed varies a lot.
The study is aimed at to find how relevant technical analysis is in influencing

active trader to make profits.
The study also tries to capture the contradicting views of different tools used in
technical analysis.
This creates a need to check who makes more profits i.e. is it the active trader
who enters and exits the market to make profits or is it the passive trader who
buys and holds a scrip for a particular period and then sells it to make profit.
This study aims in the exploration of the topic “RELEVANCE OF

TECHNICAL ANALYSIS”.
SCOPE OF THE STUDY:
Technical analysis of market data has long been a pervasive activity in both
security and future markets.
Technical analysts believe that price and volume data provide indicators of
future price movements, and that by examining these data, information may be
extracted on the fundamentals driving returns.
If markets are efficient in the sense that the current price impounds all
information then such activity is clearly pointless. But if the process by which
prices adjust to information is not immediate, then the market statistics may
impound information that is not yet incorporated in to the current market price.
Technical analysis is very useful because it provides tools that allow investors
to identify the signs that new information is being priced into a stock before
news is released.
Stocks that trade abnormally often do so because of significant new

information, both positive and negative. In this way, technical analysis helps to
reveal fundamental changes in the company before the broader market is aware
of it.
OBJECTIVES OF THE RESEARCH:
To find out the relevance of technical analysis in market analysis that helps in
profit making in terms of returns.
To find out the relevance of the tools used in technical analysis in the
assessment of the market.
The study tries to capture the contradicting views of different tools used in
technical analysis.
To find the returns provided by each method for a period of three years
LITERATURE REVIEW
Literature review has been under taken to analyze various literature and research
papers available in the related field. Further research can be undertaken where
sufficient study is not done in particular field. Various sources of information have
been used in this review include technical analysis books, financial journals, articles
and research papers.
Research papers
1. TECHNICAL ANALYSIS AND TYPICAL COGNITIVE
BIASES
Piotr Zielonka, Warsaw University SGGW and Leon Kozminski Academy of
Entrepreneurship and Management, Poland
ABSTRACT
The paper describes a study carried out on a group of 24 Polish financial analysts. The
analysts responded to a questionnaire with 24 items (signals). They were asked to rate
the predictive value of different signals for the movements of stock prices. The signals
were of three types:
(a) Regular technical analysis signals, representing some common psychological

biases
(Gambler’s fallacy, ignoring the principle of regression to mean, anchoring effect and
herd behavior)
(b) technical-like signals created by the author of the research that imitated technical
signals and represented the same types of biases as real technical signals,
(c) other technical-like signals that did not represent any biases.
It turned out that the analysts tended to ascribe high predictive value to the
questionnaire items associated with psychological biases (either technical or technical-
like signals). At the same time, these items were rated very similarly by different
analysts. On the other hand, the technical-like signals not related to any biases were
given very low predictive values by the analysts. These results suggest that popularity
of technical analysis is associated with its relation to the typical cognitive biases of
humans.
METHODOLOGY
The study was carried out in Warsaw in January-February 2002. The participants were
24 financial analysts or dealers employed by banks and Polish capital market
institutions. The sample was not random. Each participant was administered a 24–item
questionnaire. There were three groups of items within the questionnaire. Each group
consisted of 8 items. The first group consisted of regular technical analysis signals
representing four common psychological inclinations. Each inclination was
represented by two signals. Usually one from a pair of signals was a predictor of a
stock fall (-), whereas the other signal was a predictor of a stock rise (+). The group
consisted of technical-like signals, created by the author of the questionnaire that did
not represent any psychological inclinations.
- Drop of chemical companies' prices,
- Horizontal, typically sinusoidal WIG index movement,
- Rising WIG index creates longer and longer horizontal shelves,
- A fan formation support line moves upward,
- Diminishing dynamics of price rise in textile branch,
- An alternate large and small daily trade volume,
- Second MACD derivative goes negative,
- WIG index creates horizontal small amplitude sinusoid curve.
The cover page of the questionnaire stated that the survey was designed to better
understand the opinions of experts on implementation of technical analysis. This
remark allowed the participants to feel more like experts whose opinion is needed for
some further research rather than merely the persons to be examined. Respondents
were assured of confidentiality.
CONCLUSION
The present research shows that many technical analysis signals represent common
psychological biases such as the gambler’s fallacy, anchoring effect or herd behavior.
All real technical analysis signals were assigned a high predictive value by the
financial analysts who responded to the questionnaire.
The “technical” signals created by the author of the research either represented
psychological biases or not. If they did, they received high scores from respondents as
good predictors the of stock market behavior. If they did not, the respondents
estimated them as bad predictors. In addition, the respondents were in general
agreement about their judgments. These results confirm both hypotheses of this
research: technical analysis signals represent some common psychological biases and
financial analysts are subject to these biases.
2. Technical Analysis in the Foreign Exchange Market: A Co-

integration-
Based Approach.
Nobert Fiess, University of Strathclyde and U. K. Ronald MacDonald, University

of strathclyde, U. K.
Most technical analysis studies are concerned with the profitability of technical trading
rules and almost all of them focus exclusively on trend following patterns. In this
paper they examine a different kind of technical indicator which suggests a structural
relationship between High, Low, and Close prices of daily exchange rates. Since, for a
given exchange rate, it can be shown that these prices have different time series
properties, it is possible to explore the structural relationships between them using
multivariate co-integration methods. This methodology facilitates the construction of
dynamic structural econometric models, which are used to derive dynamic out of-
sample forecasts over different time horizons. Compared to standard benchmarks, it
turns out that these models have extremely good forecasting properties, even when
allowance has been made for transactions costs and risk premium.
Methods and Results
A. Structural Econometric Modeling
Their modeling strategy follows recent developments in the econometric literature, in

particular the work of Clements and Mizon (1991), Hendry and Mizon (1993) and
Johansen (1988), and they label it structural econometric modeling 6 via a series of
testable restrictions and reductions, and this modeling strategy transforms an initial
vector autoregressive model (VAR) in levels into a set of linear structural equations
that incorporate both long and short-run dynamics. Starting from an unrestricted VAR,
the hypothesis of co integration is formulated as a hypothesis of reduced rank of the
long-run impact matrix. The VAR is generated by the vector, which defines the
potential endogenous variables of the model.
B. Co integration and the Stochastic
The Stochastic establish a structural relationship between the Close of today and the
Maximum and Minimum price of a moving period, measured as the highest High and
the lowest Low. Specifying a VAR with the data vector testing for co-integration
between the three variables should reveal if, when using the Stochastic, an investor is
intuitively exploiting Granger causality among the three series. Each VAR included a
constant in the co integration space and 15 lags of each of the variables, which was
sufficient to produce random errors
CONCLUSION
The forecasting models were estimated over the first 2500 data observations, thus
sparing roughly 10% of the total sample for forecasting. Since the classic paper of
Meese and Rogoff (1983), the crucial factor in determining the worth of an exchange
rate model is how well it forecasts in an out-of-sample context relative to a random
walk, using the metric of the root mean square error (RMSE) criterion. In table 5, their
statistics are calculated as the ratio of the RMSE of the forecasting model over the
RMSE of a drift less random walk; a value.
3. Market Efficiency and the Returns to Technical Analysis

Hendrik Bessembinder and Kalok Chan, Department of Finance, College of
Business,
Arizona State University
ABSTRACT
They investigate and provide interpretation for the intriguing Brock, Lakonishok, and
LeBaron (1992) finding that simple forms of technical analysis contain significant
forecast power for U.S. equity index returns. They document that the forecast ability is
partially, but not solely,
Attributable to return measurement errors arising from non synchronous trading. They
argue that the evidence of technical forecast power need not be inconsistent with
market efficiency. "Breakeven" one-way trading costs are computed to be 0.39% for
the full sample and 0.22% since 1975, which are small compared to recent estimates
of actual trading costs. Further, they test but fail to reject a key restriction that most
equilibrium models place on return forecast ability: that the technical rules should not
reliably identify periods of negative market risk premium.
METHODOLOGY
A. Description of the Rules.
Brock et. al. emphasize the danger of obtaining spurious empirical results if
trading rules are both discovered and tested in the same data set. They note that
there is no complete remedy for “data snooping” biases, but attempt to mitigate
the problem by using a long data series and by reporting results for all rules
evaluated. To avoid compounding the dangers of data snooping biases, they
evaluate precisely the same set of twenty six technical rules as Brock et. al.
These include ten Variable Length Moving Average (VMA) rules, ten Fixed
Length Moving Average (FMA) rules, and six Trading Range Break (TRB)
rules.
B. Measuring Returns
The results reported by Brock et al. are based on percentage changes in the
DJIA, data on which was available for a long time horizon. However, some
limitations of the Dow Jones data potentially affect the interpretation of their
evidence. First, changes in the [stock index] understate actual returns due to
the omission of dividends.
They do not expect this omission to have much effect on measures of

differences between mean returns during technical buy signals and mean
returns during technical sell signals, or on tests of whether the technical rules
possess forecast power. However, the omission of dividends will introduce
bias to tests of whether mean returns during periods of technical sell signals
differ significantly from zero (or any other specific benchmark).
CONCLUSION
Brock, et. al. (1992) demonstrate that a set of relatively simple technical trading rules
possess statistically significant forecast power for changes in the Dow Jones Industrial
Average over a long sample period. They extend their analysis to ascertain whether
this evidence can be reconciled with market efficiency.
4. The use of fundamental and technical analysis by foreign exchange

dealers: Hong Kong evidence.
David Mole, Department of economics and finance, City university of Hong Kong.
ABSTRACT
This article reports the results of a questionnaire survey conducted in February 1995
on the use by foreign exchange dealers in Hong Kong of fundamental and technical
analyses to form the forecasts of exchange rate movements. Findings of this study
reveal that > 85% of respondents rely on both fundamental and technical analysis for
predicting future price at different time horizons. At shorter horizons, there exists a
skew towards reliance on technical analysis as opposed to fundamental analysis, but
the skew becomes steadily reversed as the length of horizon considered is extended.
METHODOLOGY
To prepare the survey, they concluded dealers at the Hong Kong monetary Authority
and most of the major banks. After consultation, they designed a questionnaire
investigating the following.
1. The usefulness of fundamental and technical analysis is forecasting trends

and turning points.
2. Dealers give personal importance to fundamental and technical analyses

over seven forecasting horizons.
3. Dealers views of the complimentarily of fundamental and technical analyses

in exchange rate forecasting.
4. The usefulness of central bank intervention in influencing exchange rates

over the horizons of intraday, intra-month and month.
The Hong Kong Forex Association with its membership list as of September 1994
provided them. A total of 153 fully completed questionnaires were returned. A
response rate of 19%. Most respondents firms are active participants in the market,
with over 60% in number having a daily average turnover greater than US $ 100
million.
CONCLUSION:
At all the time horizons, a very high proportion of respondents place some weight on
both fundamental and technical analysis when forming views. Dealers perceive value
in using both fundamental and technical analysis to predict both trends. Technical
analysis is considered only slightly more useful than fundamental analysis.
RESEARCH
METHODOLOGY
DESIGN OF THE STUDY
Capital market comprising the new issues market and secondary markets or stock
exchanges, is one of the most sensitive markets in the whole economy. The secondary
market enables investors to continuously rearrange their assets if they so desire by
divesting themselves of such assets while others can use their surplus funds to acquire
them. This rearrangement is not a product of instant decisions but a thorough research.
The major tools used for this are Fundamental analysis and technical analysis. Of
which fundamental analysis requires a large amount of inside data regarding the
companies concerned and also requires lot of calculations and deep knowledge.
Whereas technical analysis is comparatively a simpler tool for an investor to decide
his short/medium term investment decisions. By closely watching the price changes,
its trend can be analyzed and the timings of entry and exit can be decided.
And this method is used in this research where different tools of technical analysis are
selected and based on the signals given by the charts plotted with the calculation
obtained the sensex which has been considered as a stock is bought on that day’s
closing price and is sold at the next signal as plotted by the graph. The profits or loss
so obtained is checked for the percentage of returns and the tools are ranked based on
the returns, higher the return higher the rank.
For the sake of convenience the stock gas been bought and sold for that particular year
based on the predications made by only one indicator and its return is calculated. But
in reality predications made by all the indicators are considered and decisions are
made
DATA:
The data collected for the research purpose are secondary data. Index prices
were collected through Bombay Stock Exchange website and through
Capitaline website. The data employed in this study comprises of three year
observations on the SENSEX stock index Closing price.
Daily data are preferred in this study as daily closing price is realistic and is
helpful to calculate and in testing the results in technical analysis.
DATABASE:
The data relating to the study is taken from CAPITALINE PLUS database.
The data regarding index share price was also taken from website:
www.bseindia.com.
THE SUPPLEMENTARY SOURCES OF DATA:
th
Technical analysis of stock trends, 8 Edition, Robert D. Edwards, and John
Magee.
Technical analysis of stock trends by Martin Pring.
Financial journals, dailies like capital market, dalal street, and Economic times
are also used.
SAMPLE SIZE:
Three year closing price of SENSEX INDEX from1st January 2005 to 31st
December 2007 has been taken for testing the relevance of technical analysis.
TECHNICAL ANALYSIS TOOLS TESTED:
Day Moving Average.
Relative strength index.
Rate of change method.
The Momentum.
Buy and hold Strategy.
DAY MOVING AVERAGE
Day Moving averages are one of the most popular and easy to use tools available to
the technical analyst. They smooth a data series and make it easier to spot trends,
something that is especially helpful in volatile markets. They also form the building
blocks for many other technical indicators and overlays.
The two most popular types of moving averages are the daily Moving Average (SMA)
and the Exponential moving Average (EMA). In this study day moving average has
taken.
For example: a 5-day simple moving average is calculated by adding the closing prices
for the last 5 days and dividing the total by 5.
10 + 11 + 12 + 13 + 14 = 60
60 ÷ 5 = 12
The calculation is repeated for each price bar on the chart. The averages are then
joined to form a smooth curving line - the moving average line. Continuing the
example, if the next closing price in the average is 15, then this new period would be
added and the oldest day, which is 10, would be dropped. The new 5-day simple
moving average would be calculated as follows:
11 + 12 + 13 + 14 + 15 = 65
65 ÷ 5 = 13
The averaging process then moves on to the next day where the 10-day SMA for day
12 is calculated by adding the prices of day 3 through day 12 and dividing by 10.
How Are Moving Averages Used
The primary purpose of moving averages is to "smooth" data so that trends are more
discernable. They are used to construct market indicators and to assist in interpretation
of price charts.
Moving average crossovers can also be used as signals to buy and sell. This is
normally done in two ways:
(1) by watching for price to cross whatever moving average one may be using, or
(2) running two moving averages of the same price or index, one faster than the other,
and buying or selling when the faster average crosses the slower.
The weakness of moving average buy and sell systems is that they will most likely
become unprofitable when the stock or index begins moving sideways in a narrow
trading range. Under these circumstances price never moves above or below the
average far enough to become profitable.
Usage of pure moving average systems for timing purposes may not be recommended,
but, in spite of their weaknesses, if one is trying to develop their own system of
timing, the use of moving averages is a good place to start with.
RATE OF CHANGE (ROC)
The Rate of Change (ROC) indicator is a very simple yet effective oscillator that
measures the percent change in price from one period to the next. The ROC
calculation compares the current price with the price n periods ago.
ROC = ((Today’s Close-Close n periods ago) / (Close n periods ago)) * 100
The plot forms an oscillator that fluctuates above and below the zero line as the Rate
of Change moves from positive to negative. The oscillator can be used as any other
momentum oscillator by looking for higher lows, lower highs, positive and negative
divergences, and crosses above and below zero for signals.
ROC can be plotted using different periods such as 10 days or 30 days by changing the
value. The longer the time span used, the greater the fluctuation in the indicator (in
terms of both magnitude and duration).
Rate of Change (ROC) vs. the "Momentum" Indicator
There is another popular indicator called "Momentum" that is almost identical to the
Rate of Change indicator. The only difference is that the Rate of Change indicator
adds 100 to the ROC's value. Momentum also uses 100 as its center line instead of
zero like the ROC. Because both indicators give identical signals, StockCharts.com
has chosen to only implement the Rate of Change version. People who are used to
using the Momentum indicator can simply replace that with the ROC indicator on their
charts.
RELATIVE STRENGTH INDEX (RSI)
The Relative Strength Index (RSI) is an extremely useful and popular momentum
oscillator. The RSI compares the magnitude of a stock's recent gains to the magnitude
of its recent losses and turns that information into a number that ranges from 0 to 100.
It takes a single parameter, the number of time periods to use in the calculation.
Calculation:
Relative Strength Index = 100 – 100 / (1+ RS)
Average gain = (Total gains / n)
Average loss = (Total loss / n)
Relative Strength = Average gain / Average loss
N = number of RSI periods.
To simplify the formula, the RSI has been broken down into its basic components
which are the Average Gain, the Average Loss, the First RS, and the subsequent
Smoothed RS's.
For a 20 -period RSI, the Average Gain equals the sum total all gains divided by 20.
Even if there are only 5 gains (losses), the total of those 5 gains (losses) is divided by
the total number of RSI periods in the calculation (20 in this case). The Average Loss
is computed in a similar manner.
Calculation of the First RS value is straightforward: divide the Average Gain by the
Average Loss. All subsequent RS calculations use the previous period's Average Gain
and Average Loss for smoothing purposes.
THE MOMENTUM
The momentum is certainly the easiest one to compute. The momentum is the
difference between today's price and the one of n days before.
Where P today's price.

t
P the price at the date t-n

t-n
The momentum is:
MO = P - P
t t t-n
The most often used are 5, 10, 20, 25 and 28 days. Here 20 days momentum is used to
find out the short term appliance of the momentum.
BUY AND HOLD STRATEGY
Buy and Hold Strategy is in fact the easiest method that can be followed without much
hassle and it is tension free as it does not look for right time to entry and exit the
market now and then.
It actually follows a scheme of buying the stock and holding it for a period of time and
selling the same at the end of the tome period..
LIMITATIONS OF THE RESEARCH
Sample is restricted only to daily closing price of SENSEX INDEX for a

period of three years only i.e. from 1st January 2005 to 31st December 2007.
It is assumed that Sensex closing price is an individual stock which can be

bought and sold at its closing price for various periods of time.
Transaction cost involved in the trading of stock has been considered nil.
The research has been conducted for a period of three years only.
Only a selected few tools of technical analysis like Days Moving Average,
Relative Strength Index, Rate of change method and Price Momentum has
been used from numerous tools available.
DATA ANALYSIS
&
INTERPRETATION
20 DAYS DAY MOVING AVERAGE
PROFIT/ RETURNS IN
DATE BUY SELL LOSS TERMS OF %
17.02.2005 6460
28.02.2005 6595 135
17.03.2005 6727
04.05.2005 6326 -401
23.08.2005 7707
01.09.2005 7727 20
06.10.2005 8438
07.11.2005 8121 -317 -2.95
-563
17.02.2006 9981
21.02.2006 10168 187
15.05.2006 11822
19.06.2006 9998 -1824
17.07.2006 10293
26.07.2006 10617 324
11.09.2006 11551
12.09.2006 11661 110
08.12.2006 13799
15.12.2006 13615 -184
19.12.2006 13382
26.12.2006 13708 326 -3.51
-1061
05.01.2007 13861
02.02.2007 14404 543
02.03.2007 12886
30.05.2007 14411 1525
06.06.2007 14256
19.07.2007 15550 1294
14.08.2007 15001
29.10.2007 19978 4977
08.11.2007 19059
13.11.2007 19035 -24
19.11.2007 19633
11.12.2007 20291 658 0.72
8973
TOTAL
PROFIT 7349 RETURNS -5.75
INTERPRETATION OF DAY MOVING AVERAGE
A Daily Moving Average is an indicator that shows the average value of a security's
price over a period of time. When calculating a daily moving average, a mathematical
analysis of the security's average value over a predetermined time period is made. As
the security's price changes, its average price moves up or down.
It is evident from the plotted graphs that trends in stock prices can be very volatile.
One technique for dealing with volatile stock price is day moving average. It is
constructed by totaling a set of data and dividing the sum by the number of
observation. Here in this study 20 day moving average is constructed for the Sensex
index price of 2007. The actual closing price and the calculated DMA are plotted in
the same graph monthly vice basis. A rising DMA indicates market strength and a
declining one denotes weakness. Changes in the price trend are identified by the price
itself crossing its day moving average.
The most popular method of interpreting a daily moving average is to compare the
relationship between a daily moving average of the security's closing price and the
security's closing price itself. A sell signal is generated when the security's price falls
below its daily moving average and a buy signal is generated when the security's price
rises above its moving average. This type of daily moving average trading system is
not intended to get in at the exact bottom and out at the exact top. Rather, it is
designed to keep in line with the security's price trend by buying shortly after the
security's price bottoms and selling shortly after it tops.
The critical element in a daily moving average is the number of time periods used in
calculating the average. When using hindsight, one can always find a moving average
that would have been profitable. The key is to find a moving average that will be
consistently profitable. Here 20-day moving average has been used to find out the
significance of moving average in short term trading.
A change from a rising trend to declining price is signaled when the price moves
below its day moving average. A bullish signal is given when the price goes above the
DMA. The technicians gets the sell signal at the point where declining DMA
crossover the price line. Traders will buy the share at the point where rising trend
crosses the actual price line.
The calculations were done as mentioned above for 20 days DMA and the
corresponding chart was made in order to find out the various timings to enter and exit
the market.
As indicated by the chart the stock was bought and sold every year for a period of
three years.
It was bought and sold 4 times during 2005, 6 times in the year 2006 and around 6
times in 2007.
On 17.02.2005 DMA technique gave a buy signal and the stock (sensex closing price)
was bought for a price of 6460 and similarly a sell signal was given by the same
method around 20.02.2005 where it was sold at 6595 by making a profit of about 135.
Similarly the process was followed for that whole year and was able to make a profit
of -563.
The technique was employed during 2006 and 2007. During 2006 DMA was able to
generate a profit of -1061 and 8973 respectively.
A total profit of 7349 has been made for three years.
Once this has been done the returns DMA made for every year was calculated as
follows
(The price stock was sold at the year end – The price brought at the beginning)
_______________________________________________________________
Profit or loss made at the year end
For 2005,
8121 – 6460 1661
___________ = _____________ = - 2.95
-563 - 563
Similarly it was found that year 2006 gave a return of about -3.513 and during 2007
about 0.717
And Using DMA as a tool to aid in investing one was able to make returns of -5.75
for three years .
RELATIVE STRENGTH INDEX

PROFIT/ RETURNS IN
01.02.2005 6552
10.02.2005 6578 26
28.02.2005 6714
04.03.2005 6849 135
18.04.2005 6157
13.05.2005 6452 295
19.07.2005 7347
16.09.2005 8381 1034
28.10.2005 7686
23.11.2005 8638 952
2442 0.85
02.02.2006 9844
10.02.2006 10111 267
07.03.2006 10726
13.03.2006 10804 78
12.04.2006 11356
07.07.2006 10510 -846
20.07.2006 10353
11.08.2006 11192 839
11.09.2006 11551
20.09.2006 12010 459
03.10.2006 12366
09.10.2006 12366 0
11.12.2006 13399
14.12.2006 20031 6632
7429 1.37
28.02.2007 12938
17.04.2007 13607 669
18.06.2007 14080
05.07.2007 14862 782
21.08.2007 13988
13.09.2007 15614 1626
12.11.2007 18737
16.11.2007 19698 961
28.11.2007 18938
11.12.2007 20291 1353
5391 1.36
TOTAL
PROFIT 15262 RETURNS 3.59
A popular method of analyzing the RSI is to look for a divergence in which the market
index is making a new high, but the RSI is failing to surpass its previous high. This
divergence would be an indication of an impending reversal. When the RSI then turns
down and falls below its most recent trough, it is said to have completed a failure
swing. The failure swing would be considered a confirmation of an impending
reversal.
If the RSI goes above 70 the shares are overbought, and one should consider selling at
that price level. If the RSI goes below 30 the shares are oversold, and one should be
looking for buying opportunities. The neutral position of this oscillator is at 50; if it
rises above 50, the instrument is becoming overbought, if it falls below it is becoming
oversold. Critical levels exist at 75 and 25. An RSI above or below these levels
indicates the instrument is overbought or oversold.
The calculations were done as mentioned above for 20 days RSI and the
corresponding chart was made in order to find out the various timings to enter and exit
the market.
As indicated by the chart the stock was bought and sold every year for a period of
three years.
It was bought and sold 5 times during 2005, 7 times during 2006 and 5 times in 2007.
On 01.02.2005 RSI technique gave a buy signal and the stock (sensex closing price)
of 2518.
The same technique was employed during 2006 and 2007. During 2006 RSI was able
to generate a profit of 7429 and 5391 respectively.
A total of 15262 of profit has been made for three years.
Once this has been done the returns RSI made for every year was calculated as follows
_______________________________________________________________
For 2005,
8638 – 6552 2086
___________ = _____________ = 0.85
2442 2442
Similarly it was found that year 2006 gave a return of about 1.37 and during 2007
about 1.36.
And Using RSI as a tool to aid in investing one was able to make returns of 3.59 for
three years .
RATE OF CHANGE METHOD

PROFIT/ RETURNS IN
01.02.2005 6552
14.02.2005 6679 127
18.04.2005 6157
26.05.2005 6671 514
29.08.2005 7634
21.09.2005 8487 853
19.10.2005 7971
28.11.2005 8995 1024
2518 0.97
03.02.2006 9920
16.02.2006 10124 204
24.02.2006 10201
05.04.2006 11747 1546
13.04.2006 11237
10.05.2006 12612 1375
15.05.2006 11822
17.05.2006 12218 396
08.06.2006 9296
09.06.2006 9810 514
13.06.2006 9063
10.07.2006 10684 1621
19.07.2006 10007
16.08.2006 11448 1441
12.09.2006 11661
21.11.2006 13617 1956
12.12.2006 12995
29.12.2006 13787 792
9845 0.39
04.04.2007 12787
25.07.2007 15699 2912
18.09.2007 15669
31.10.2007 19784 4115
7027 1.00
TOTAL
PROFIT 19390 RETURNS 2.359
The Rate of Change indicator (ROC) is a way of showing how rapidly the price of a
particular share (or other financial instrument) is moving. The theory is that if a price
is rising (or falling) very quickly there will soon come a time when it is thought to be
overbought (or oversold). When this occurs the price may still continue to rise (or
fall), but not as rapidly as it was before.
This oscillator always has a value between 0 and 10 and is calculated from the average
of all price rises in a given period divided by the average of all price falls in the same
period. Again the choice of period is arbitrary and dependent on one’s position in the
markets.
The major use of this oscillator is to identify the overbought and oversold zones. To
identify the overbought zone, look at the historic high values on the ROC chart for the
scrip that is been studied. If one finds that the current value is in the peak of the
historic high values, the scrip can be said to have entered the overbought zone. On the
same count, if the ROC touches the historic low values, the scrip can be said to have
entered the oversold zone.
The Rate of change indicator is not necessarily same with the other indicators.
It was bought and sold 4 times during 2005, 9 times during 2006 and twice in 2007.
On 01.02.2005 ROC technique gave a buy signal and the stock (sensex closing price)
of 2518.
The same technique was employed during 2006 and 2007. During 2006 DMA was
able to generate a profit of 9845 and 7027 respectively.
A total of 19390 of profit in three years.
Once this has been done the returns ROC made for every year was calculated as
follows
_______________________________________________________________
For 2005,
8995 – 6552 2443
___________ = _____________ = 0.97
2518 2518
about 1.00.
And Using RSI as a tool to aid in investing one was able to make returns of 2.359 for
three years .
THE MOMENTUM
PROFIT RETURNS IN
DATE BUY SELL /LOSS TERMS OF %
03.01.2005 6679
12.01.2005 6103 -576
31.01.2005 6221
08.02.2005 6545 324
21.03.2005 6657
19.04.2004 6135 -522
25.04.2005 6378
02.05.2005 6195 -183
24.06.2005 7149
07.07.2005 7145 -4
12.07.2005 7304
14.07.2005 7188 -116
01.08.2005 7669
23.08.2005 7616 -53
21.09.2005 8487
28.09.2005 8606 119
29.11.2005 8931
30.12.2005 9398 467
-544 -5.00
16.02.2006 10124
24.02.2006 10201 77
03.03.2006 10595
08.03.2006 10509 -86
05.04.2006 11747
13.04.2006 11237 -510
21.04.2006 12030
05.05.2006 12360 330
10.05.2006 12612
16.05.2006 11874 -738
10.07.2006 10684
19.07.2006 10007 -677
26.07.2006 10617
01.08.2006 10752 135
03.08.2006 10623
18.09.2006 12071 1448
23.10.2006 12623
22.11.2006 13707 1084
12.12.2006 12995
29.01.2006 13787 792
1855 1.97
05.03.2007 12415
16.04.2007 13696 1281
15.06.2007 14163
23.07.2007 15732 1569
21.08.2007 13989
19.09.2007 16232 2243
08.10.2007 17491
15.10.2007 19059 1568
22.10.2007 17614
29.10.2007 19978 2364
09.11.2007 18908
15.11.2007 19785 877
22.11.2007 18526
07.12.2007 19966 1440
17.12.2007 19261
27.12.2007 20287 1026 12368 0.64
TOTAL
PROFIT 13679 RETURNS -2.39
The Momentum indicator measures the amount that a security's price has changed
over a given time span.
INTERPRETATION:
The interpretation of the Momentum indicator is identical to the interpretation of the

Price ROC. Both indicators display the rate-of-change of a security's price. However,
the Price ROC indicator displays the rate-of-change as a percentage whereas the
Momentum indicator displays the rate-of-change as a ratio.
There are basically two ways to use the Momentum indicator: You can use the
Momentum indicator as a trend-following oscillator similar to the MACD. Buy when
the indicator bottoms and turns up and sell when the indicator peaks and turns down
(this is the method preferred in this study).
If the Momentum indicator reaches extremely high or low values (relative to its
historical values), one should assume a continuation of the current trend. For example,
if the Momentum indicator reaches extremely high values and then turns down, one
should assume prices will probably go still higher. In either case, only trade after
prices confirm the signal generated by the indicator (e.g., if prices peak and turn down,
wait for prices to begin to fall before selling).
One can also use the Momentum indicator as a leading indicator. This method
assumes that market tops are typically identified by a rapid price increase (when
everyone expects prices to go higher) and that market bottoms typically end with rapid
price declines (when everyone wants to get out).
As a market peaks, the Momentum indicator will climb sharply and then fall off-
diverging from the continued upward or sideways movement of the price.
Similarly, at a market bottom, Momentum will drop sharply and then begin to climb
well ahead of prices.
Both of these situations result in divergences between the indicator and prices.
It was bought and sold 9 times during 2005, 10 times during the year 2006 and about 8
times in 2007.
On 03.01.2005 MOMENTUM technique gave a buy signal and the stock (sensex
closing price) was bought for a price of 6679 and similarly a sell signal was given by
the same method around 12.01.2005 where it was sold at 6103 by making a loss of
about 576.
Similarly the process was followed for that whole year and was able to make a loss of
544.
The same technique was employed during 2006 and 2007. During 2006
MOMENTUM was able to generate a profit of 1855 and 12368 respectively.
A total of 13679 as profits in three years.
Once this has been done, the returns MOMENTUM made for every year was
calculated as follows
_______________________________________________________________
For 2005,
9398 – 6679 2719
___________ = _____________ = - 4.998 ~ -5.00
-544 -544
about 0.64.
And Using RSI as a tool to aid in investing one was able to make returns of - 2.39 for
three years .
BUY AND HOLD STRATEGY
DATE BUY SELL PROFIT/LOSS RETURNS IN TERMS OF %
03.01.2005 6679
30.12.3005 9398 2719 0.41
02.01.2006 9390
29.12.2006 13789 4399 0.47
02.01.2007 13942
31.12.2007 20287 6345 0.46
PROFIT 13463 TOTAL 1.33
In this method the stock is bought at the beginning of the year i.e. on 03.01.2005 for
6679 and sold at the yearend for 9398 on 30.12.2005 and a profit of about 2719 has
been made.
And during 2006 , the stock was bought on 02.01.2006 for 9390 and sold at
29.12.2006 for 13789 with a profit of 4399
And during 2007, it was bought at 13942 on 02.01.2007 and sold for 20287 on
31.12.2007 with a profit of 6345.
For a period of three years this strategy made a profit of 13463.
In terms of returns,
_______________________________________________________________
The price stock was brought at the beginning
For 2005,
9398 – 6679 2719
___________ = _____________ = 0.41
6679 6679
Similarly returns for 2006 and 2007 are 0.47 and 0.46 respectively with a total of 1.33
for three years.
RETURNS OF VARIOUS TOOLS OF TECHNICAL ANALYSIS

FOR THREE YEARS.
METHOD 2005 2006 2007 TOTAL RETURNS
DMA -2.95 -3.51 0.72 -5.74
RSI 0.85 1.37 1.36 3.59
MOMENTUM -5 1.97 0.64 -2.39
ROC 0.97 0.39 1 2.36
BUY/HOLD 0.41 0.47 0.46 1.33
RANKINGS OF DIFFERENT TOOLS
2007
METHOD 2005 RANK 2006 RANK
RANK
DMA 5 5 3
RSI 2 2 1
MOMENTUM 4 1 4
ROC 1 4 2
BUY/HOLD 3 3 5
THE RETURNS AND RANKINGS OF THE VARIOUS TOOLS OF

TECHNICAL ANALYSIS FOR THREE YEARS.
METHOD 2005 RANK 2006 RANK 2007 RANK TOTAL RANK
DMA -2.95 5 -3.51 5 0.72 3 -5.75 5
RSI 0.85 2 1.37 2 1.36 1 3.59 1
MOMENTUM -5 4 1.97 1 0.64 4 -2.39 4
ROC 0.97 1 0.39 4 1 2 2.36 2
BUY/HOLD 0.41 3 0.47 3 0.46 5 1.33 3
RETURNS & RANKINGS
SUMMARY
&
CONCLUSION
SUMMARY
With the use of various tools of technical analysis like DMA, RSI, ROC and
MOMENTUM the profits and the returns are calculated and it is found that
In 2005 by using DMA alone as an indicator one will be able to make a loss of
563 with about -2.95 returns and in the year 2006 loss of 1061 with -3.51 as
returns but in the year 2007 a profit of 8973 with 0.72 as returns could be
made totaling to about 7349 as profit with a total of about -5.75 returns at the
end of three years. Although DMA has a negative returns of 5.75 was able to
make profit of 7349 as a whole.
In 2005 when Relative Strength Index alone used as indicator was able to
make a profit of 2422 with 0.85 as returns and in 2006 about 7429 as profit
with 1.29 as returns and in the year 2007 was able to make a profit of 5391
with 1.36 as returns totaling to a profit of about 15262 with 3.59 as returns.
By using Rate of Change Method alone as an indicator a profit of 2518 with

0.97 as returns in 2005 was possible and about a profit of 9845 with 0.39 as
returns during 2006 and a profit of 7027 with 1.00 returns. Totaling to a profit
of 19390 with 2.359 as returns.
By using Momentum as an indicator alone one will be able to make a loss of

544 with negative returns of -5.00 in 2005, profit of 1855 with 1.97 returns in
2006 and profits with 0.69 returns in 2007 totaling to around 13679 as profits
with a negative return of 2.39.
Instead of using any of the tools of technical analysis if one simply buys and
holds will be able to make a profit of 2719 with 0.41 returns in 2005 and a
profit of 4399 with 0.47 returns in 2006 and a profit of about 6345 with 0.46
returns in 2007 totaling to about 13463 of profits with 1.33 returns for three
Years.
When ranks were graded to these tools based on the returns they made it could be seen
that
Rate of Change Method ranked first for two years in 2005 and 2006 and
ranked second in 2007 and ranks second as whole in three years.
Relative Strength Index ranked first in 2007 and second in the years 2005 and
2006 and ranks first as a whole for three years.
Buy and Hold Strategy ranks third for 2005 and 2006 and the last rank i.e. fifth
rank in 2007 and ranks three as a whole for three years.
Although Momentum ranks first in 2006 it takes the fourth place in 2005 and
2007 and ranks fourth as a whole for three years
Days Moving Average ranks fifth in 2005 and 2006 but ranks third in 2007.
But it takes the last rank i.e. fifth rank as a whole for three years.
FINDINGS
Tools of Technical analysis were able to make more profits when compared to
buy and hold strategy in this study.
Not all the tools used here gave the same result for the same period.
Relative Strength Index is the most appropriate tool to predict the stock price
movement to make profits in terms of returns for three year period.
Rate of Change Method is the second best method in terms of returns though it
was able to generate more profits than Relative Strength Index.
Day Moving Average and Momentum which is usually considered to be more

efficient has given negative returns in this study.
CONCLUSION
Technical analysis can offer great insight, but if used improperly, they can also
produce false signals. While trend lines have become a very popular aspect of
technical analysis, they are merely one tool for establishing, analyzing, and confirming
a trend. Trend lines should not be the final arbiter, but should serve merely as a
warning that a change in trend may be very useful.
The price set by the market reflects the sum knowledge of all participants, and one is
not dealing with lightweights here. These participants have considered (discounted)
everything under the sun and settled on a price to buy or sell. These are the forces of
supply and demand at work.
By examining price action to determine which force is prevailing, technical analysis

focuses directly on the bottom line: What is the price? Where has it been? Where is it
going?
Even though there are some universal principles and rules that can be applied, it must
be remembered that technical analysis is more an art form than a science. As an art
form, it is subject to interpretation. However, it is also flexible in its approach and
each investor should use only that which suits his or her style. Developing a style
takes time, effort and dedication, but the rewards can be significant.
The result of this study shows that Relative Strength Index is the most reliable tool of
technical analysis in terms of returns and next comes Rate of Change Method.
It may not be 100% true, because the tools and the software used in the chart here are
not very advanced one as traders use in their analysis.
Which technical analysis tool one uses will depend on one’s trading and investing
style and preferences. Some traders prefer to use Relative Strength Index for shorter
time periods to capture changes quicker. Some investors prefer simple moving
averages over long time periods to identify long-term trend changes. The day moving
average also has a lag, but the other tools which are used here also are prone to
quicker breaks.
In addition, much will depend on the individual security in question. The technical
chart type and length of time will depend greatly on the individual security and how it
has reacted in the past.
The initial thought for some is that greater sensitivity and quicker signals are bound to
be beneficial. This is not always true and brings up a great dilemma for the technical
analyst: the tradeoff between sensitivity and reliability. The more sensitive an
indicator is the more signals that will be given. These signals may prove timely, but
with increased sensitivity comes an increase in false signals.
The less sensitive an indicator is the fewer signals that will be given. However, less
sensitivity leads to fewer and more reliable signals. Sometimes these signals can be
late as well.
Technical analysis can offer great insight, but if used improperly, they can also
produce false signals. While trend lines have become a very popular aspect of
technical analysis, they are merely one tool for establishing, analyzing, and confirming
a trend. Trend lines should not be the final arbiter, but should serve merely as a
warning that a change in trend may be very useful.
The price set by the market reflects the sum knowledge of all participants, and one is
not dealing with lightweights here.
These participants have considered (discounted) everything under the sun and settled
on a price to buy or sell. These are the forces of supply and demand at work.
By examining price action to determine which force is prevailing, technical analysis

focuses directly on the bottom line: What is the price? Where has it been? Where is it
going?
Even though there are some universal principles and rules that can be applied, it must
be remembered that technical analysis is more an art form than a science. As an art
form, it is subject to interpretation. However, it is also flexible in its approach and
each investor should use only that which suits his or her style. Developing a style
takes time, effort and dedication, but the rewards can be significant.
And it can be said that based on this study Technical Analysis does has relevance in
aiding investors to make maximum profits rather than the simple buy and hold
strategy and it can be said that the profits are worth the effort one puts in to make
profits than Buy and Hold Strategy .
SUGGESTION FOR FURTHER RESEARCH
As the research has been done by taking only the closing price of the Sensex index for
a period of three years, further research could be done by considering sector wise
closing price of the stocks and/or by selecting few stocks from Large Cap, Mid Cap
and Small Cap stocks for a long periods of time and can be back tested by applying
various tools of Technical Analysis and its relevance could be found for the same.
BIBLIOGRAPHY
TEXT BOOKS:
th
1. Technical analysis of stock trends, 8 Edition, Robert D. Edwards, John Magee.
2. Technical analysis of stock trends by Martin Pring.
ARTICLES:
1. MARKET EFFICIENCY AND THE RETURNS TO TECHNICAL
ANALYSIS (Article published in December 1997)
Hendrik Bessembinder and Kalok Chan, Department of Finance, College of Business,
Arizona State University.
2. THE USE OF FUNDAMENTAL AND TECHNICAL ANALYSES BY
FOREIGN EXCHANGE DEALERS: hong kong evidence.
Journal of international money and finance, 1998.
David Mole, Department of economics and finance, City university of Hong Kong.
3. TECHNICAL ANALYSIS IN THE FOREIGN EXCHANGE MARKET: A
Co-integration-Based Approach (Article in Multinational finance journal, 1999).
Nobert Fiess, University of Strathclyde and U. K. Ronald MacDonald, University of
strathclyde,
4. TECHNICAL ANALYSIS AND TYPICAL COGNITIVE BIASES
(Article in journal of finance 2001)
Piotr Zielonka, Warsaw University SGGW and Leon Kozminski Academy of
Entrepreneurship and Management, Poland.
WEBSITES:
www.capitaline.com
www.google.com
www.investopedia.com
www.bseindia.com
www.valuenotes.com
www.yahoofinance.com
www.rediffmail.com.
ANNEXURES
TABLE FOR DAY MOVING AVERAGES CALCULATION FOR 2007
Date Closing Price 20 DMA
02.01.2007 13942.24 0
03.01.2007 14014.92 0
04.01.2007 13871.71 0
05.01.2007 13860.52 0
08.01.2007 13652.15 0
09.01.2007 13566.33 0
10.01.2007 13362.16 0
11.01.2007 13630.71 0
12.01.2007 14056.53 0
15.01.2007 14129.64 0
16.01.2007 14114.73 0
17.01.2007 14131.34 0
18.01.2007 14217.75 0
19.01.2007 14182.71 0
22.01.2007 14209.24 0
23.01.2007 14041.24 0
24.01.2007 14110.46 0
25.01.2007 14282.72 0
29.01.2007 14211.96 0
31.01.2007 14090.92 13984
01.02.2007 14267.18 14000
02.02.2007 14403.77 14020
05.02.2007 14515.90 14052
06.02.2007 14478.19 14083
07.02.2007 14643.13 14132
08.02.2007 14652.09 14187
09.02.2007 14538.90 14245
12.02.2007 14190.70 14273
13.02.2007 14090.98 14275
14.02.2007 14009.90 14269
15.02.2007 14355.55 14281
19.02.2007 14402.90 14295
20.02.2007 14253.38 14297
21.02.2007 14188.49 14297
22.02.2007 14021.31 14287
23.02.2007 13632.53 14267
26.02.2007 13649.52 14244
27.02.2007 13478.83 14204
28.02.2007 12938.09 14140
01.03.2007 13159.55 14094

02.03.2007 12886.13 14024
05.03.2007 12415.04 13925
06.03.2007 12697.09 13834
07.03.2007 12579.75 13739
08.03.2007 13049.35 13660
09.03.2007 12884.99 13571
12.03.2007 12902.63 13489
13.03.2007 12982.98 13429
14.03.2007 12529.62 13351
15.03.2007 12543.85 13278
16.03.2007 12430.40 13181
19.03.2007 12644.99 13093
20.03.2007 12705.94 13016
21.03.2007 12945.88 12954
22.03.2007 13308.03 12918
23.03.2007 13285.93 12901
26.03.2007 13124.32 12875
28.03.2007 12884.34 12845
29.03.2007 12979.66 12847
30.03.2007 13072.10 12843
02.04.2007 12455.37 12821
03.04.2007 12624.58 12832
04.04.2007 12786.77 12836
05.04.2007 12856.08 12850
09.04.2007 13177.74 12856
10.04.2007 13189.54 12872
11.04.2007 13183.24 12886
12.04.2007 13113.81 12892
13.04.2007 13384.08 12935
16.04.2007 13695.58 12992
17.04.2007 13607.04 13051
18.04.2007 13672.19 13103
19.04.2007 13619.70 13148
20.04.2007 13897.41 13196
23.04.2007 13928.33 13227
24.04.2007 14136.72 13269
25.04.2007 14217.77 13324
26.04.2007 14228.88 13391
27.04.2007 13908.58 13438
30.04.2007 13872.37 13478
03.05.2007 14078.21 13559
04.05.2007 13934.27 13624
07.05.2007 13879.25 13679
08.05.2007 13765.46 13725
09.05.2007 13781.51 13755
10.05.2007 13771.23 13784
11.05.2007 13796.16 13814
14.05.2007 13965.86 13857

15.05.2007 13929.33 13884
16.05.2007 14127.31 13906
17.05.2007 14299.71 13941
18.05.2007 14303.41 13972
21.05.2007 14418.60 14012
22.05.2007 14453.72 14040
23.05.2007 14363.26 14062
24.05.2007 14218.11 14066
25.05.2007 14338.45 14072
28.05.2007 14397.89 14080
29.05.2007 14508.21 14110
30.05.2007 14411.38 14137
31.05.2007 14544.46 14160
01.06.2007 14570.75 14192
04.06.2007 14495.77 14223
05.06.2007 14535.01 14262
06.06.2007 14255.93 14285
07.06.2007 14186.18 14306
08.06.2007 14063.81 14319
11.06.2007 14083.41 14325
12.06.2007 14130.95 14335
13.06.2007 14003.03 14329
14.06.2007 14203.72 14324
15.06.2007 14162.71 14317
18.06.2007 14080.14 14300
19.06.2007 14295.50 14292
20.06.2007 14411.95 14295
21.06.2007 14499.24 14309
22.06.2007 14467.36 14315
25.06.2007 14487.72 14320
26.06.2007 14501.08 14320
27.06.2007 14431.06 14320
28.06.2007 14504.57 14318
29.06.2007 14650.51 14322
02.07.2007 14664.26 14331
03.07.2007 14806.51 14344
04.07.2007 14880.24 14376
05.07.2007 14861.89 14409
06.07.2007 14964.12 14454
09.07.2007 15045.73 14503
10.07.2007 15009.88 14547
11.07.2007 14910.62 14592
12.07.2007 15092.04 14636
13.07.2007 15272.72 14692
16.07.2007 15311.22 14753
17.07.2007 15289.82 14803
18.07.2007 15301.17 14848
19.07.2007 15550.13 14900

20.07.2007 15565.55 14955
23.07.2007 15732.20 15017
24.07.2007 15794.92 15082
25.07.2007 15699.33 15145
26.07.2007 15776.31 15209
27.07.2007 15234.57 15238
30.07.2007 15260.91 15268
31.07.2007 15550.99 15305
01.08.2007 14935.77 15308
02.08.2007 14985.70 15314
03.08.2007 15138.40 15323
06.08.2007 14903.03 15316
07.08.2007 14932.77 15312
08.08.2007 15307.98 15332
09.08.2007 15100.15 15332
10.08.2007 14868.25 15312
13.08.2007 15017.21 15297
14.08.2007 15000.91 15283
16.08.2007 14358.21 15236
17.08.2007 14141.52 15165
20.08.2007 14427.55 15108
21.08.2007 13989.11 15021
22.08.2007 14248.66 14944
23.08.2007 14163.98 14867
24.08.2007 14424.87 14800
27.08.2007 14842.38 14780
28.08.2007 14919.19 14763
29.08.2007 14993.04 14735
30.08.2007 15121.74 14744
31.08.2007 15318.60 14761
03.09.2007 15422.05 14775
04.09.2007 15465.40 14803
05.09.2007 15446.15 14829
06.09.2007 15616.31 14844
07.09.2007 15590.42 14869
10.09.2007 15596.83 14905
11.09.2007 15542.77 14931
12.09.2007 15505.36 14957
13.09.2007 15614.44 15020
14.09.2007 15603.80 15093
17.09.2007 15504.43 15146
18.09.2007 15669.12 15230
19.09.2007 16322.75 15334
20.09.2007 16347.95 15443
21.09.2007 16564.23 15550
24.09.2007 16845.83 15651
25.09.2007 16899.54 15750
26.09.2007 16921.39 15846

27.09.2007 17150.56 15947
28.09.2007 17291.10 16046
01.10.2007 17328.62 16141
03.10.2007 17847.04 16260
04.10.2007 17777.14 16377
05.10.2007 17773.36 16485
08.10.2007 17491.39 16580
09.10.2007 18280.24 16714
10.10.2007 18658.25 16870
11.10.2007 18814.07 17035
12.10.2007 18419.04 17175
15.10.2007 19058.67 17348
16.10.2007 19051.86 17526
17.10.2007 18715.82 17678
18.10.2007 17998.39 17762
19.10.2007 17559.98 17822
22.10.2007 17613.99 17875
23.10.2007 18492.84 17957
24.10.2007 18512.91 18038
25.10.2007 18770.89 18130
26.10.2007 19243.17 18235
29.10.2007 19977.67 18369
30.10.2007 19783.51 18492
31.10.2007 19837.99 18592
01.11.2007 19724.35 18689
02.11.2007 19976.23 18799
05.11.2007 19590.78 18904
06.11.2007 19400.67 18960
07.11.2007 19289.83 18992
08.11.2007 19058.93 19004
09.11.2007 18907.60 19028
12.11.2007 18737.27 19012
13.11.2007 19035.48 19011
14.11.2007 19929.06 19072
15.11.2007 19784.89 19161
16.11.2007 19698.36 19268
19.11.2007 19633.36 19369
20.11.2007 19280.80 19409
21.11.2007 18602.62 19413
22.11.2007 18526.32 19401
23.11.2007 18852.87 19381
26.11.2007 19247.54 19345
27.11.2007 19127.73 19312
28.11.2007 18938.87 19267
29.11.2007 19003.26 19231
30.11.2007 19363.19 19200
03.12.2007 19603.41 19201
04.12.2007 19529.50 19208

05.12.2007 19738.07 19230
06.12.2007 19795.87 19267
07.12.2007 19966.00 19320
10.12.2007 19930.68 19379
11.12.2007 20290.89 19442
12.12.2007 20375.87 19465
13.12.2007 20104.39 19480
14.12.2007 20030.83 19497
17.12.2007 19261.35 19479
18.12.2007 19079.64 19468
19.12.2007 19091.96 19493
20.12.2007 19162.57 19525
24.12.2007 19854.12 19575
26.12.2007 20192.52 19622
27.12.2007 20216.72 19676
28.12.2007 20206.95 19740
31.12.2007 20286.99 19804
TABLE FOR CALCULATION OF RELATIVE STRENGTH INDEX FOR 2007
Date Closing Price Gain Loss RS 1+RS RSI
02.01.2007 13942 13942.24 0.0

03.01.2007 14015 72.68 0.0
04.01.2007 13872 0.00 143.2
05.01.2007 13861 0.00 11.2
08.01.2007 13652 0.00 208.4
09.01.2007 13566 0.00 85.8
10.01.2007 13362 0.00 204.2
11.01.2007 13631 268.55 0.0
12.01.2007 14057 425.82 0.0
15.01.2007 14130 73.11 0.0
16.01.2007 14115 0.00 14.9
17.01.2007 14131 16.61 0.0
18.01.2007 14218 86.41 0.0
19.01.2007 14183 0.00 35.0
22.01.2007 14209 26.53 0.0
23.01.2007 14041 0.00 168.0
24.01.2007 14110 69.22 0.0
25.01.2007 14283 172.26 0.0
29.01.2007 14212 0.00 70.8
31.01.2007 14091 0.00 121.0 14.428 15.428 93.518
01.02.2007 14267 176.26 0.0 1.434 2.434 58.922
02.02.2007 14404 136.59 0.0 1.472 2.472 59.539
05.02.2007 14516 112.13 0.0 1.634 2.634 62.031
06.02.2007 14478 0.00 37.7 1.827 2.827 64.632
07.02.2007 14643 164.94 0.0 2.356 3.356 70.202
08.02.2007 14652 8.96 0.0 2.272 3.272 69.434
09.02.2007 14539 0.00 113.2 1.912 2.912 65.655
12.02.2007 14191 0.00 348.2 1.456 2.456 59.289
13.02.2007 14091 0.00 99.7 0.957 1.957 48.907
14.02.2007 14010 0.00 81.1 1.207 2.207 54.696
15.02.2007 14356 345.65 0.0 1.268 2.268 55.911
19.02.2007 14403 47.35 0.0 1.100 2.100 52.374
20.02.2007 14253 0.00 149.5 0.977 1.977 49.426
21.02.2007 14188 0.00 64.9 0.886 1.886 46.990
22.02.2007 14021 0.00 167.2 0.681 1.681 40.525
23.02.2007 13633 0.00 388.8 0.761 1.761 43.229
26.02.2007 13650 16.99 0.0 0.652 1.652 39.451
27.02.2007 13479 0.00 170.7 0.429 1.429 30.005
28.02.2007 12938 0.00 540.7 0.539 1.539 35.022
01.03.2007 13160 221.46 0.0 0.505 1.505 33.566
02.03.2007 12886 0.00 273.4 0.363 1.363 26.616
05.03.2007 12415 0.00 471.1 0.413 1.413 29.216
06.03.2007 12697 282.05 0.0 0.360 1.360 26.451
07.03.2007 12580 0.00 117.3 0.521 1.521 34.274
08.03.2007 13049 469.60 0.0 0.442 1.442 30.647

09.03.2007 12885 0.00 164.4 0.445 1.445 30.779
12.03.2007 12903 17.64 0.0 0.488 1.488 32.781
13.03.2007 12983 80.35 0.0 0.471 1.471 32.036
14.03.2007 12530 0.00 453.4 0.491 1.491 32.953
15.03.2007 12544 14.23 0.0 0.486 1.486 32.719
16.03.2007 12430 0.00 113.5 0.444 1.444 30.733
19.03.2007 12645 214.59 0.0 0.448 1.448 30.945
20.03.2007 12706 60.95 0.0 0.553 1.553 35.610
21.03.2007 12946 239.94 0.0 0.692 1.692 40.905
22.03.2007 13308 362.15 0.0 0.729 1.729 42.169
23.03.2007 13286 0.00 22.1 0.796 1.796 44.313
26.03.2007 13124 0.00 161.6 0.720 1.720 41.844
28.03.2007 12884 0.00 240.0 0.805 1.805 44.593
29.03.2007 12980 95.32 0.0 1.066 2.066 51.608
30.03.2007 13072 92.44 0.0 0.733 1.733 42.283
02.04.2007 12455 0.00 616.7 0.889 1.889 47.067
03.04.2007 12625 169.21 0.0 1.197 2.197 54.479
04.04.2007 12787 162.19 0.0 1.084 2.084 52.019
05.04.2007 12856 69.31 0.0 1.338 2.338 57.220
09.04.2007 13178 321.66 0.0 1.079 2.079 51.903
10.04.2007 13190 11.80 0.0 1.185 2.185 54.230
11.04.2007 13183 0.00 6.3 1.125 2.125 52.952
12.04.2007 13114 0.00 69.4 1.238 2.238 55.324
13.04.2007 13384 270.27 0.0 1.948 2.948 66.081
16.04.2007 13696 311.50 0.0 1.807 2.807 64.369
17.04.2007 13607 0.00 88.5 2.031 3.031 67.005
18.04.2007 13672 65.15 0.0 1.775 2.775 63.968
19.04.2007 13620 0.00 52.5 1.948 2.948 66.076
20.04.2007 13897 277.71 0.0 1.781 2.781 64.048
23.04.2007 13928 30.92 0.0 1.659 2.659 62.394
24.04.2007 14137 208.39 0.0 1.754 2.754 63.695
25.04.2007 14218 81.05 0.0 2.029 3.029 66.985
26.04.2007 14229 11.11 0.0 1.888 2.888 65.371
27.04.2007 13909 0.00 320.3 1.750 2.750 63.639
30.04.2007 13872 0.00 36.2 1.845 2.845 64.856
03.05.2007 14078 205.84 0.0 3.062 4.062 75.382
04.05.2007 13934 0.00 143.9 2.625 3.625 72.412
07.05.2007 13879 0.00 55.0 2.105 3.105 67.790
08.05.2007 13765 0.00 113.8 2.044 3.044 67.154
09.05.2007 13782 16.05 0.0 1.662 2.662 62.436
10.05.2007 13771 0.00 10.3 1.677 2.677 62.642
11.05.2007 13796 24.93 0.0 1.879 2.879 65.270
14.05.2007 13966 169.70 0.0 1.951 2.951 66.119
15.05.2007 13929 0.00 36.5 1.867 2.867 65.122
16.05.2007 14127 197.98 0.0 1.705 2.705 63.029
17.05.2007 14300 172.40 0.0 1.906 2.906 65.589
18.05.2007 14303 3.70 0.0 1.971 2.971 66.343
21.05.2007 14419 115.19 0.0 2.165 3.165 68.402

22.05.2007 14454 35.12 0.0 1.578 2.578 61.204
23.05.2007 14363 0.00 90.5 1.304 2.304 56.607
24.05.2007 14218 0.00 145.2 1.212 2.212 54.791
25.05.2007 14338 120.34 0.0 1.189 2.189 54.323
28.05.2007 14398 59.44 0.0 1.294 2.294 56.399
29.05.2007 14508 110.32 0.0 1.690 2.690 62.832
30.05.2007 14411 0.00 96.8 1.971 2.971 66.344
31.05.2007 14544 133.08 0.0 1.712 2.712 63.124
01.06.2007 14571 26.29 0.0 1.901 2.901 65.532
04.06.2007 14496 0.00 75.0 2.154 3.154 68.299
05.06.2007 14535 39.24 0.0 1.669 2.669 62.531
06.06.2007 14256 0.00 279.1 1.504 2.504 60.062
07.06.2007 14186 0.00 69.8 1.320 2.320 56.891
08.06.2007 14064 0.00 122.4 1.314 2.314 56.783
11.06.2007 14083 19.60 0.0 1.180 2.180 54.137
12.06.2007 14131 47.54 0.0 1.073 2.073 51.766
13.06.2007 14003 0.00 127.9 1.076 2.076 51.828
14.06.2007 14204 200.69 0.0 0.869 1.869 46.502
15.06.2007 14163 0.00 41.0 0.802 1.802 44.520
18.06.2007 14080 0.00 82.6 0.891 1.891 47.120
19.06.2007 14296 215.36 0.0 0.963 1.963 49.059
20.06.2007 14412 116.45 0.0 1.131 2.131 53.069
21.06.2007 14499 87.29 0.0 1.269 2.269 55.929
22.06.2007 14467 0.00 31.9 1.161 2.161 53.728
25.06.2007 14488 20.36 0.0 1.111 2.111 52.638
26.06.2007 14501 13.36 0.0 0.923 1.923 47.986
27.06.2007 14431 0.00 70.0 1.104 2.104 52.462
28.06.2007 14505 73.51 0.0 1.118 2.118 52.783
29.06.2007 14651 145.94 0.0 1.104 2.104 52.470
02.07.2007 14664 13.75 0.0 1.377 2.377 57.927
03.07.2007 14807 142.25 0.0 1.419 2.419 58.655
04.07.2007 14880 73.73 0.0 2.075 3.075 67.476
05.07.2007 14862 0.00 18.4 2.574 3.574 72.023
06.07.2007 14964 102.23 0.0 3.641 4.641 78.455
09.07.2007 15046 81.61 0.0 3.273 4.273 76.597
10.07.2007 15010 0.00 35.9 2.538 3.538 71.737
11.07.2007 14911 0.00 99.3 3.874 4.874 79.482
12.07.2007 15092 181.42 0.0 3.821 4.821 79.258
13.07.2007 15273 180.68 0.0 4.399 5.399 81.477
16.07.2007 15311 38.50 0.0 5.371 6.371 84.304
17.07.2007 15290 0.00 21.4 4.634 5.634 82.250
18.07.2007 15301 11.35 0.0 5.113 6.113 83.640
19.07.2007 15550 248.96 0.0 4.853 5.853 82.914
20.07.2007 15566 15.42 0.0 6.165 7.165 86.044
23.07.2007 15732 166.65 0.0 6.338 7.338 86.373
24.07.2007 15795 62.72 0.0 4.519 5.519 81.882
25.07.2007 15699 0.00 95.6 5.974 6.974 85.661
26.07.2007 15776 76.98 0.0 1.899 2.899 65.503

27.07.2007 15235 0.00 541.7 1.752 2.752 63.657
30.07.2007 15261 26.34 0.0 2.092 3.092 67.656
31.07.2007 15551 290.08 0.0 1.091 2.091 52.166
01.08.2007 14936 0.00 615.2 1.074 2.074 51.781
02.08.2007 14986 49.93 0.0 1.196 2.196 54.468
03.08.2007 15138 152.70 0.0 0.963 1.963 49.054
06.08.2007 14903 0.00 235.4 0.931 1.931 48.222
07.08.2007 14933 29.74 0.0 1.185 2.185 54.240
08.08.2007 15308 375.21 0.0 1.110 2.110 52.615
09.08.2007 15100 0.00 207.8 0.885 1.885 46.955
10.08.2007 14868 0.00 231.9 0.869 1.869 46.493
13.08.2007 15017 148.96 0.0 0.842 1.842 45.714
14.08.2007 15001 0.00 16.3 0.640 1.640 39.018
16.08.2007 14358 0.00 642.7 0.586 1.586 36.962
17.08.2007 14142 0.00 216.7 0.600 1.600 37.483
20.08.2007 14428 286.03 0.0 0.514 1.514 33.937
21.08.2007 13989 0.00 438.4 0.542 1.542 35.165
22.08.2007 14249 259.55 0.0 0.510 1.510 33.762
23.08.2007 14164 0.00 84.7 0.606 1.606 37.716
24.08.2007 14425 260.89 0.0 0.711 1.711 41.552
27.08.2007 14842 417.51 0.0 0.883 1.883 46.885
28.08.2007 14919 76.81 0.0 0.900 1.900 47.379
29.08.2007 14993 73.85 0.0 0.840 1.840 45.663
30.08.2007 15122 128.70 0.0 1.185 2.185 54.225
31.08.2007 15319 196.86 0.0 1.210 2.210 54.759
03.09.2007 15422 103.45 0.0 1.158 2.158 53.654
04.09.2007 15465 43.35 0.0 1.292 2.292 56.377
05.09.2007 15446 0.00 19.3 1.368 2.368 57.769
06.09.2007 15616 170.16 0.0 1.150 2.150 53.487
07.09.2007 15590 0.00 25.9 1.296 2.296 56.453
10.09.2007 15597 6.41 0.0 1.450 2.450 59.188
11.09.2007 15543 0.00 54.1 1.318 2.318 56.858
12.09.2007 15505 0.00 37.4 1.404 2.404 58.400
13.09.2007 15614 109.08 0.0 2.404 3.404 70.624
14.09.2007 15604 0.00 10.6 2.771 3.771 73.479
17.09.2007 15504 0.00 99.4 2.613 3.613 72.322
18.09.2007 15669 164.69 0.0 8.044 9.044 88.943
19.09.2007 16323 653.63 0.0 7.337 8.337 88.005
20.09.2007 16348 25.20 0.0 10.733 11.733 91.477
21.09.2007 16564 216.28 0.0 10.817 11.817 91.537
24.09.2007 16846 281.60 0.0 9.341 10.341 90.330
25.09.2007 16900 53.71 0.0 9.119 10.119 90.117
26.09.2007 16921 21.85 0.0 9.748 10.748 90.696
27.09.2007 17151 229.17 0.0 9.796 10.796 90.738
28.09.2007 17291 140.54 0.0 9.150 10.150 90.148
01.10.2007 17329 37.52 0.0 10.833 11.833 91.549
03.10.2007 17847 518.42 0.0 8.304 9.304 89.251
04.10.2007 17777 0.00 69.9 8.730 9.730 89.723

05.10.2007 17773 0.00 3.8 4.216 5.216 80.829
08.10.2007 17491 0.00 282.0 5.828 6.828 85.354
09.10.2007 18280 788.85 0.0 6.495 7.495 86.658
10.10.2007 18658 378.01 0.0 7.503 8.503 88.239
11.10.2007 18814 155.82 0.0 4.385 5.385 81.431
12.10.2007 18419 0.00 395.0 5.002 6.002 83.338
15.10.2007 19059 639.63 0.0 5.024 6.024 83.400
16.10.2007 19052 0.00 6.8 3.937 4.937 79.744
17.10.2007 18716 0.00 336.0 2.286 3.286 69.570
18.10.2007 17998 0.00 717.4 1.550 2.550 60.785
19.10.2007 17560 0.00 438.4 1.563 2.563 60.981
22.10.2007 17614 54.01 0.0 1.857 2.857 65.003
23.10.2007 18493 878.85 0.0 1.741 2.741 63.519
24.10.2007 18513 20.07 0.0 1.832 2.832 64.689
25.10.2007 18771 257.98 0.0 2.032 3.032 67.021
26.10.2007 19243 472.28 0.0 2.257 3.257 69.295
29.10.2007 19978 734.50 0.0 2.020 3.020 66.887
30.10.2007 19784 0.00 194.2 2.027 3.027 66.963
31.10.2007 19838 54.48 0.0 1.734 2.734 63.425
01.11.2007 19724 0.00 113.6 1.884 2.884 65.328
02.11.2007 19976 251.88 0.0 1.633 2.633 62.027
05.11.2007 19591 0.00 385.5 1.688 2.688 62.791
06.11.2007 19401 0.00 190.1 1.350 2.350 57.439
07.11.2007 19290 0.00 110.8 1.128 2.128 53.018
08.11.2007 19059 0.00 230.9 1.029 2.029 50.705
09.11.2007 18908 0.00 151.3 1.104 2.104 52.483
12.11.2007 18737 0.00 170.3 0.992 1.992 49.809
13.11.2007 19035 298.21 0.0 1.289 2.289 56.307
14.11.2007 19929 893.58 0.0 1.376 2.376 57.904
15.11.2007 19785 0.00 144.2 1.767 2.767 63.862
16.11.2007 19698 0.00 86.5 2.125 3.125 68.003
19.11.2007 19633 0.00 65.0 1.759 2.759 63.760
20.11.2007 19281 0.00 352.6 1.038 2.038 50.937
21.11.2007 18603 0.00 678.2 1.005 2.005 50.113
22.11.2007 18526 0.00 76.3 1.028 2.028 50.685
23.11.2007 18853 326.55 0.0 1.001 2.001 50.037
26.11.2007 19248 394.67 0.0 0.723 1.723 41.965
27.11.2007 19128 0.00 119.8 0.724 1.724 42.007
28.11.2007 18939 0.00 188.9 0.728 1.728 42.115
29.11.2007 19003 64.39 0.0 0.878 1.878 46.740
30.11.2007 19363 359.93 0.0 0.874 1.874 46.628
03.12.2007 19603 240.22 0.0 0.977 1.977 49.413
04.12.2007 19530 0.00 73.9 1.138 2.138 53.223
05.12.2007 19738 208.57 0.0 1.216 2.216 54.883
06.12.2007 19796 57.80 0.0 1.431 2.431 58.856
07.12.2007 19966 170.13 0.0 1.514 2.514 60.221
10.12.2007 19931 0.00 35.3 1.853 2.853 64.953
11.12.2007 20291 360.21 0.0 1.736 2.736 63.453

12.12.2007 20376 84.98 0.0 1.084 2.084 52.011
13.12.2007 20104 0.00 271.5 1.122 2.122 52.867
14.12.2007 20031 0.00 73.6 0.838 1.838 45.605
17.12.2007 19261 0.00 769.5 0.804 1.804 44.559
18.12.2007 19080 0.00 181.7 0.924 1.924 48.012
19.12.2007 19092 12.32 0.0 1.313 2.313 56.761
20.12.2007 19163 70.61 0.0 1.775 2.775 63.959
24.12.2007 19854 691.55 0.0 1.782 2.782 64.049
26.12.2007 20193 338.40 0.0 1.565 2.565 61.020
27.12.2007 20217 24.20 0.0 1.673 2.673 62.586
28.12.2007 20207 0.00 9.8 1.953 2.953 66.131
31.12.2007 20287 80.04 0.0 1.907 2.907 65.601
CALCULATION OF RATE OF CHANGE METHOD FOR 2007
Date Closing Price ROC
02.01.2007 13942
03.01.2007 14015
04.01.2007 13872
05.01.2007 13861
08.01.2007 13652
09.01.2007 13566
10.01.2007 13362
11.01.2007 13631
12.01.2007 14057
15.01.2007 14130
16.01.2007 14115
17.01.2007 14131
18.01.2007 14218
19.01.2007 14183
22.01.2007 14209
23.01.2007 14041
24.01.2007 14110
25.01.2007 14283
29.01.2007 14212
31.01.2007 14091 1.1
01.02.2007 14267 1.8
02.02.2007 14404 3.8
05.02.2007 14516 4.7
06.02.2007 14478 6.1
07.02.2007 14643 7.9
08.02.2007 14652 9.7
09.02.2007 14539 6.7
12.02.2007 14191 1.0
13.02.2007 14091 -0.3
14.02.2007 14010 -0.7
15.02.2007 14356 1.6
19.02.2007 14403 1.3
20.02.2007 14253 0.5
21.02.2007 14188 -0.1
22.02.2007 14021 -0.1
23.02.2007 13633 -3.4
26.02.2007 13650 -4.4
27.02.2007 13479 -5.2
28.02.2007 12938 -8.2
01.03.2007 13160 -7.8
02.03.2007 12886 -10.5
05.03.2007 12415 -14.5
06.03.2007 12697 -12.3
07.03.2007 12580 -14.1
08.03.2007 13049 -10.9

09.03.2007 12885 -11.4
12.03.2007 12903 -9.1
13.03.2007 12983 -7.9
14.03.2007 12530 -10.6
15.03.2007 12544 -12.6
16.03.2007 12430 -13.7
19.03.2007 12645 -11.3
20.03.2007 12706 -10.4
21.03.2007 12946 -7.7
22.03.2007 13308 -2.4
23.03.2007 13286 -2.7
26.03.2007 13124 -2.6
28.03.2007 12884 -0.4
29.03.2007 12980 -1.4
30.03.2007 13072 1.4
02.04.2007 12455 0.3
03.04.2007 12625 -0.6
04.04.2007 12787 1.6
05.04.2007 12856 -1.5
09.04.2007 13178 2.3
10.04.2007 13190 2.2
11.04.2007 13183 1.5
12.04.2007 13114 4.7
13.04.2007 13384 6.7
16.04.2007 13696 10.2
17.04.2007 13607 7.6
18.04.2007 13672 7.6
19.04.2007 13620 5.2
20.04.2007 13897 4.4
23.04.2007 13928 4.8
24.04.2007 14137 7.7
25.04.2007 14218 10.3
26.04.2007 14229 9.6
27.04.2007 13909 6.4
30.04.2007 13872 11.4
03.05.2007 14078 11.5
04.05.2007 13934 9.0
07.05.2007 13879 8.0
08.05.2007 13765 4.5
09.05.2007 13782 4.5
10.05.2007 13771 4.5
11.05.2007 13796 5.2
14.05.2007 13966 4.3
15.05.2007 13929 1.7
16.05.2007 14127 3.8
17.05.2007 14300 4.6
18.05.2007 14303 5.0
21.05.2007 14419 3.8

22.05.2007 14454 3.8
23.05.2007 14363 1.6
24.05.2007 14218 0.0
25.05.2007 14338 0.8
28.05.2007 14398 3.5
29.05.2007 14508 4.6
30.05.2007 14411 2.4
31.05.2007 14544 4.4
01.06.2007 14571 5.0
04.06.2007 14496 5.3
05.06.2007 14535 5.5
06.06.2007 14256 3.5
07.06.2007 14186 2.8
08.06.2007 14064 0.7
11.06.2007 14083 1.1
12.06.2007 14131 0.0
13.06.2007 14003 -2.1
14.06.2007 14204 -0.7
15.06.2007 14163 -1.8
18.06.2007 14080 -2.6
19.06.2007 14296 -0.5
20.06.2007 14412 1.4
21.06.2007 14499 1.1
22.06.2007 14467 0.5
25.06.2007 14488 -0.1
26.06.2007 14501 0.6
27.06.2007 14431 -0.8
28.06.2007 14505 -0.5
29.06.2007 14651 1.1
02.07.2007 14664 0.9
03.07.2007 14807 3.9
04.07.2007 14880 4.9
05.07.2007 14862 5.7
06.07.2007 14964 6.3
09.07.2007 15046 6.5
10.07.2007 15010 7.2
11.07.2007 14911 5.0
12.07.2007 15092 6.6
13.07.2007 15273 8.5
16.07.2007 15311 7.1
17.07.2007 15290 6.1
18.07.2007 15301 5.5
19.07.2007 15550 7.5
20.07.2007 15566 7.4
23.07.2007 15732 8.5
24.07.2007 15795 9.5
25.07.2007 15699 8.2
26.07.2007 15776 7.7

27.07.2007 15235 3.9
30.07.2007 15261 3.1
31.07.2007 15551 4.5
01.08.2007 14936 0.5
02.08.2007 14986 0.1
03.08.2007 15138 0.6
06.08.2007 14903 -0.7
07.08.2007 14933 0.1
08.08.2007 15308 1.4
09.08.2007 15100 -1.1
10.08.2007 14868 -2.9
13.08.2007 15017 -1.8
14.08.2007 15001 -2.0
16.08.2007 14358 -7.7
17.08.2007 14142 -9.1
20.08.2007 14428 -8.3
21.08.2007 13989 -11.4
22.08.2007 14249 -9.2
23.08.2007 14164 -10.2
24.08.2007 14425 -5.3
27.08.2007 14842 -2.7
28.08.2007 14919 -4.1
29.08.2007 14993 0.4
30.08.2007 15122 0.9
31.08.2007 15319 1.2
03.09.2007 15422 3.5
04.09.2007 15465 3.6
05.09.2007 15446 0.9
06.09.2007 15616 3.4
07.09.2007 15590 4.9
10.09.2007 15597 3.9
11.09.2007 15543 3.6
12.09.2007 15505 8.0
13.09.2007 15614 10.4
14.09.2007 15604 8.2
17.09.2007 15504 10.8
18.09.2007 15669 10.0
19.09.2007 16323 15.2
20.09.2007 16348 13.3
21.09.2007 16564 11.6
24.09.2007 16846 12.9
25.09.2007 16900 12.7
26.09.2007 16921 11.9
27.09.2007 17151 12.0
28.09.2007 17291 12.1
01.10.2007 17329 12.0
03.10.2007 17847 15.5
04.10.2007 17777 13.8

05.10.2007 17773 14.0
08.10.2007 17491 12.1
09.10.2007 18280 17.6
10.10.2007 18658 20.3
11.10.2007 18814 20.5
12.10.2007 18419 18.0
15.10.2007 19059 22.9
16.10.2007 19052 21.6
17.10.2007 18716 14.7
18.10.2007 17998 10.1
19.10.2007 17560 6.0
22.10.2007 17614 4.6
23.10.2007 18493 9.4
24.10.2007 18513 9.4
25.10.2007 18771 9.4
26.10.2007 19243 11.3
29.10.2007 19978 15.3
30.10.2007 19784 10.9
31.10.2007 19838 11.6
01.11.2007 19724 11.0
02.11.2007 19976 14.2
05.11.2007 19591 7.2
06.11.2007 19401 4.0
07.11.2007 19290 2.5
08.11.2007 19059 3.5
09.11.2007 18908 -0.8
12.11.2007 18737 -1.7
13.11.2007 19035 1.7
14.11.2007 19929 10.7
15.11.2007 19785 12.7
16.11.2007 19698 11.8
19.11.2007 19633 6.2
20.11.2007 19281 4.1
21.11.2007 18603 -0.9
22.11.2007 18526 -3.7
23.11.2007 18853 -5.6
26.11.2007 19248 -2.7
27.11.2007 19128 -3.6
28.11.2007 18939 -4.0
29.11.2007 19003 -4.9
30.11.2007 19363 -1.2
03.12.2007 19603 1.0
04.12.2007 19530 1.2
05.12.2007 19738 3.6
06.12.2007 19796 4.7
07.12.2007 19966 6.6
10.12.2007 19931 4.7
11.12.2007 20291 1.8

12.12.2007 20376 3.0
13.12.2007 20104 2.1
14.12.2007 20031 2.0
17.12.2007 19261 -0.1
18.12.2007 19080 2.6
19.12.2007 19092 3.1
20.12.2007 19163 1.6
24.12.2007 19854 3.2
26.12.2007 20193 5.6
27.12.2007 20217 6.7
28.12.2007 20207 6.3
31.12.2007 20287 4.8
CALCULATION OF PRICE MOMENTUM FOR 2007
Date Closing Price Momentum
02.01.2007 13942
03.01.2007 14015
04.01.2007 13872
05.01.2007 13861
08.01.2007 13652
09.01.2007 13566
10.01.2007 13362
11.01.2007 13631
12.01.2007 14057
15.01.2007 14130
16.01.2007 14115
17.01.2007 14131
18.01.2007 14218
19.01.2007 14183
22.01.2007 14209
23.01.2007 14041
24.01.2007 14110
25.01.2007 14283
29.01.2007 14212
31.01.2007 14091 149
01.02.2007 14267 252
02.02.2007 14404 532
05.02.2007 14516 655
06.02.2007 14478 826
07.02.2007 14643 1077
08.02.2007 14652 1290
09.02.2007 14539 908
12.02.2007 14191 134
13.02.2007 14091 -39
14.02.2007 14010 -105
15.02.2007 14356 224
19.02.2007 14403 185
20.02.2007 14253 71
21.02.2007 14188 -21
22.02.2007 14021 -20
23.02.2007 13633 -478
26.02.2007 13650 -633
27.02.2007 13479 -733
28.02.2007 12938 -1153
01.03.2007 13160 -1108
02.03.2007 12886 -1518
05.03.2007 12415 -2101
06.03.2007 12697 -1781
07.03.2007 12580 -2063
08.03.2007 13049 -1603

09.03.2007 12885 -1654
12.03.2007 12903 -1288
13.03.2007 12983 -1108
14.03.2007 12530 -1480
15.03.2007 12544 -1812
16.03.2007 12430 -1973
19.03.2007 12645 -1608
20.03.2007 12706 -1483
21.03.2007 12946 -1075
22.03.2007 13308 -325
23.03.2007 13286 -364
26.03.2007 13124 -355
28.03.2007 12884 -54
29.03.2007 12980 -180
30.03.2007 13072 186
02.04.2007 12455 40
03.04.2007 12625 -73
04.04.2007 12787 207
05.04.2007 12856 -193
09.04.2007 13178 293
10.04.2007 13190 287
11.04.2007 13183 200
12.04.2007 13114 584
13.04.2007 13384 840
16.04.2007 13696 1265
17.04.2007 13607 962
18.04.2007 13672 966
19.04.2007 13620 674
20.04.2007 13897 589
23.04.2007 13928 642
24.04.2007 14137 1012
25.04.2007 14218 1333
26.04.2007 14229 1249
27.04.2007 13909 836
30.04.2007 13872 1417
03.05.2007 14078 1454
04.05.2007 13934 1148
07.05.2007 13879 1023
08.05.2007 13765 588
09.05.2007 13782 592
10.05.2007 13771 588
11.05.2007 13796 682
14.05.2007 13966 582
15.05.2007 13929 234
16.05.2007 14127 520
17.05.2007 14300 628
18.05.2007 14303 684
21.05.2007 14419 521

22.05.2007 14454 525
23.05.2007 14363 227
24.05.2007 14218 0
25.05.2007 14338 110
28.05.2007 14398 489
29.05.2007 14508 636
30.05.2007 14411 333
31.05.2007 14544 610
01.06.2007 14571 692
04.06.2007 14496 730
05.06.2007 14535 754
06.06.2007 14256 485
07.06.2007 14186 390
08.06.2007 14064 98
11.06.2007 14083 154
12.06.2007 14131 4
13.06.2007 14003 -297
14.06.2007 14204 -100
15.06.2007 14163 -256
18.06.2007 14080 -374
19.06.2007 14296 -68
20.06.2007 14412 194
21.06.2007 14499 161
22.06.2007 14467 69
25.06.2007 14488 -20
26.06.2007 14501 90
27.06.2007 14431 -113
28.06.2007 14505 -66
29.06.2007 14651 155
02.07.2007 14664 129
03.07.2007 14807 551
04.07.2007 14880 694
05.07.2007 14862 798
06.07.2007 14964 881
09.07.2007 15046 915
10.07.2007 15010 1007
11.07.2007 14911 707
12.07.2007 15092 929
13.07.2007 15273 1193
16.07.2007 15311 1016
17.07.2007 15290 878
18.07.2007 15301 802
19.07.2007 15550 1083
20.07.2007 15566 1078
23.07.2007 15732 1231
24.07.2007 15795 1364
25.07.2007 15699 1195
26.07.2007 15776 1126

27.07.2007 15235 570
30.07.2007 15261 454
31.07.2007 15551 671
01.08.2007 14936 74
02.08.2007 14986 22
03.08.2007 15138 93
06.08.2007 14903 -107
07.08.2007 14933 22
08.08.2007 15308 216
09.08.2007 15100 -173
10.08.2007 14868 -443
13.08.2007 15017 -273
14.08.2007 15001 -300
16.08.2007 14358 -1192
17.08.2007 14142 -1424
20.08.2007 14428 -1305
21.08.2007 13989 -1806
22.08.2007 14249 -1451
23.08.2007 14164 -1612
24.08.2007 14425 -810
27.08.2007 14842 -419
28.08.2007 14919 -632
29.08.2007 14993 57
30.08.2007 15122 136
31.08.2007 15319 180
03.09.2007 15422 519
04.09.2007 15465 533
05.09.2007 15446 138
06.09.2007 15616 516
07.09.2007 15590 722
10.09.2007 15597 580
11.09.2007 15543 542
12.09.2007 15505 1147
13.09.2007 15614 1473
14.09.2007 15604 1176
17.09.2007 15504 1515
18.09.2007 15669 1420
19.09.2007 16323 2159
20.09.2007 16348 1923
21.09.2007 16564 1722
24.09.2007 16846 1927
25.09.2007 16900 1907
26.09.2007 16921 1800
27.09.2007 17151 1832
28.09.2007 17291 1869
01.10.2007 17329 1863
03.10.2007 17847 2401
04.10.2007 17777 2161

05.10.2007 17773 2183
08.10.2007 17491 1895
09.10.2007 18280 2737
10.10.2007 18658 3153
11.10.2007 18814 3200
12.10.2007 18419 2815
15.10.2007 19059 3554
16.10.2007 19052 3383
17.10.2007 18716 2393
18.10.2007 17998 1650
19.10.2007 17560 996
22.10.2007 17614 768
23.10.2007 18493 1593
24.10.2007 18513 1592
25.10.2007 18771 1620
26.10.2007 19243 1952
29.10.2007 19978 2649
30.10.2007 19784 1936
31.10.2007 19838 2061
01.11.2007 19724 1951
02.11.2007 19976 2485
05.11.2007 19591 1311
06.11.2007 19401 742
07.11.2007 19290 476
08.11.2007 19059 640
09.11.2007 18908 -151
12.11.2007 18737 -315
13.11.2007 19035 320
14.11.2007 19929 1931
15.11.2007 19785 2225
16.11.2007 19698 2084
19.11.2007 19633 1141
20.11.2007 19281 768
21.11.2007 18603 -168
22.11.2007 18526 -717
23.11.2007 18853 -1125
26.11.2007 19248 -536
27.11.2007 19128 -710
28.11.2007 18939 -785
29.11.2007 19003 -973
30.11.2007 19363 -228
03.12.2007 19603 203
04.12.2007 19530 240
05.12.2007 19738 679
06.12.2007 19796 888
07.12.2007 19966 1229
10.12.2007 19931 895
11.12.2007 20291 362

12.12.2007 20376 591
13.12.2007 20104 406
14.12.2007 20031 397
17.12.2007 19261 -19
18.12.2007 19080 477
19.12.2007 19092 566
20.12.2007 19163 310
24.12.2007 19854 607
26.12.2007 20193 1065
27.12.2007 20217 1278
28.12.2007 20207 1204
31.12.2007 20287 924

Technical Analysis &amp; Its Relevance

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TECHNICAL ANALYSIS AND ITS RELEVANCE

A Dissertation Submitted in partial fulfillment of the requirements of the

M.B.A Degree Course of Bangalore University

Registration No: 06XQCM6024

Under the Guidance and Supervision of

DR. NAGESH S MALAVALLI

Associate Bharathiya Vidya Bhavan

#43, Race Course Road

I hereby certify that this dissertation is an offshoot of the research work

undertaken and completed by DivyaSindhu K under my Guidance.

PLACE: Bangalore Dr Nagesh S

“TECHNICAL ANALYSIS AND ITS RELEVANCE IN INVESTING” has been undertaken

under my guidance and supervision by DivyaSindhu K with Registration Number

06XQCM6024 during the academic year 2006 – 2008 in partial fulfillment of

“TECHNICAL ANALYSIS AND ITS RELEVANCE IN INVESTING” is a record of

independent work carried out by me towards the partial fulfillment of

other degree or diploma.

Reg. No. 06XQCM6024

successful. I do recognize that mere thanksgiving does not redeem me of my

I script on this page my sincere thanks to each one of them:

Dr. Nagesh S Malavalli – Principal, M. P. Birla Institute of Management and my

guidance at every stage of the project.

My family and friends for always having stood by my convictions and

encouraging me to perform better.

Sl. No. Content Page No.

6 OBJECTIVES OF THE RESEARCH 25

DATA ANALYSIS &

LIST OF TABLES AND CHARTS

SL NO. PARTICULARS PAGE NO.

1 20 DAYS DAY MOVING AVERAGES 46

2 RELATIVE STRENGTH INDEX 50

3 RATE OF CHANGE METHOD 53

5 BUY / HOLD STRATEGY 60

6 % OF RETURNS FOR TECHNICAL ANALYSIS TOOLS 62

7 CHART SHOWING THE RETURNS IN TERMS OF % 63

8 RANKINGS OF TOOLS OF TECHNICAL ANALYSIS 64

9 CHART SHOWING THE RANKINGS OF TOOLSOF 64

10 RETURNS AND RANKINGS 65

11 CHART SHOWING RETURNS AND RANKINGS 65

EVOLUTION OF INDIAN STOCK MARKET

The 1850's witnessed a rapid development of commercial enterprise and brokerage

Trading Pattern of the Indian Stock Market

Trading in Indian stock exchanges is limited to listed securities of public limited

National Stock Exchange (NSE)

Trading at NSE can be classified under two broad categories:

¾ Wholesale debt market and

Wholesale debt market operations are similar to money market operations -

There are two kinds of players in NSE:

Trading at NSE takes place through a fully automated screen-based trading

¾ Delays in communication, late payments and the malpractice’s prevailing in

Bombay Stock Exchange (BSE)

Accordingly, an Executive Committee, consisting of three elected directors, three

INTRODUCTION TO TECHNICAL ANALYSIS

Primarily, but not exclusively, technical analysis is conducted by studying charts of

The premises of technical analysis were derived from empirical observations of

Technical analysis may be at odds with fundamental analysis. Fundamental analysis

Psychologists have described a number of ways in which people deal with

Technical analysis is applicable to stocks, indices, commodities, futures or any

Three Beliefs of Technical Analysis

1. Price Action In The Market Discounts Everything

2. Prices Move In Trends

3. History Tends To Repeat Itself

Technical analysis is not limited to charting. Technical analysis is always primarily

As an example, many technical analysts monitor surveys of investor enthusiasm.

Technical Analysis & Its Relevance

Technical Analysis & Its Relevance

An investor may be an active trader or a passive trader. An active trader is one

While an active trader is constantly hooked to the daily happenings of the

The study is aimed at to find how relevant technical analysis is in influencing

This study aims in the exploration of the topic “RELEVANCE OF

Stocks that trade abnormally often do so because of significant new

Technical analysis of stock trends by Martin Pring.

Day Moving Average.

Relative strength index.

Rate of change method.

Buy and hold Strategy.

Sample is restricted only to daily closing price of SENSEX INDEX for a

It is assumed that Sensex closing price is an individual stock which can be

_ = ___ = - 2.95