Datta Meghe Institute of Management Studies Datta Meghe Institute of Management Studies Meghe Group...
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Datta Meghe Institute of
Management Studies
Datta Meghe Institute of
Management Studies
Meghe Group of Institutions
Department
for
Technology Enhanced Learning
1
Datta Meghe Institute of
Management Studies
Datta Meghe Institute of
Management Studies
SECURITY ANALYSIS & PORTFOLIO MANAGEMENT
Unit – 5
EMH & Technical Analysis
2
Datta Meghe Institute of
Management Studies
Datta Meghe Institute of
Management Studies
Syllabus – Unit -5 Trends – Reversal of Trend.
Flat Trends.
Chart Patterns/Price Patterns –
Reversal Patterns, Continuation Patterns.
Datta Meghe Institute of
Management Studies
Datta Meghe Institute of
Management Studies
Learning Objectives
• To study the meaning of trend and trend reversal
and different types of patterns which show an
upward or downward trend.
Datta Meghe Institute of
Management Studies
Datta Meghe Institute of
Management Studies
Tools
• Retracement – Movement opposite to primary trend(correction).
Primary(main) Trend
Secondary (correction) trend,Retracement
UPWARD TREND
Datta Meghe Institute of
Management Studies
Datta Meghe Institute of
Management Studies
Trends
• Support & Resistance
Resistance
SupportE
F
G
H
A
B
POINT B – Retracement in trading zone or break the resistance????Volumes transaction at point B is decisive factor.
SHARE PRICE MOVEMENT
Datta Meghe Institute of
Management Studies
Datta Meghe Institute of
Management Studies
Trends(Continued)
• Tools for Support & Resistance
a)Previous significant Highs & Lows(52 week)
b)Trendlines
c)Fibonacci retracement levels
A(Trendline violation)Aggressive trader
B(Previous low)Cautious trader
Datta Meghe Institute of
Management Studies
Datta Meghe Institute of
Management Studies
Patterns
• Head & Shoulders Pattern on Chart
Shoulder
Head
Shoulder
A
Trading Idea – Sell at A
Approximate target should be B
B
Datta Meghe Institute of
Management Studies
Datta Meghe Institute of
Management Studies
Patterns(Contd.)
• Reverse Head & shoulders
B
Trading Idea –Buy at BMust have significant rise in volume
Approximate target
Datta Meghe Institute of
Management Studies
Datta Meghe Institute of
Management Studies
Patterns
• Double Bottom
Trendline
C
Trading Idea- Buy at C,Must have significant rise in volume
Target- Nearest significant high
Datta Meghe Institute of
Management Studies
Datta Meghe Institute of
Management Studies
Patterns
• Double Top
Trendline
D
Trading Idea-Sell at D
Target –Nearest significant low
Datta Meghe Institute of
Management Studies
Datta Meghe Institute of
Management Studies
Trade Set Up
• For generation of a trading idea
1)Set a time horizon.
2)Keep an extra buffer of some points for calculated Stop Loss price.
3)If setting target through Fibonacci retracement levels always choose the least ratio(23.6%) for achievement of target, no matter how sure you are of achieving higher targets.
Datta Meghe Institute of
Management Studies
Datta Meghe Institute of
Management Studies
Summary
Trend reversal spotting with help of Fibonacci retracement, Support and resistance lines and significant highs and lows is a very important info. for trend reversal of price.
14
Datta Meghe Institute of
Management Studies
Datta Meghe Institute of
Management Studies
SAQ
1)What are the tools for support and resistance ?
2) What is a trend reversal?
3) What is a continuation pattern?
15
Datta Meghe Institute of
Management Studies
Datta Meghe Institute of
Management Studies
LAQ
1) Explain the different types of reversal patterns?
2) Explain trend reversal with an example.
Datta Meghe Institute of
Management Studies
Datta Meghe Institute of
Management Studies
Reference
Strategic Financial Management by J.B. Gupta.
