TECHNICAL ANALYSIS - Geofin · What is Technical Analysis ?.. Technical Analysis is the forecasting...

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TECHNICAL ANALYSIS Special Emphasis to Candlestick Chart Formations Session III

Transcript of TECHNICAL ANALYSIS - Geofin · What is Technical Analysis ?.. Technical Analysis is the forecasting...

Page 1: TECHNICAL ANALYSIS - Geofin · What is Technical Analysis ?.. Technical Analysis is the forecasting of future financial price movements based on an examination of past price movements.

TECHNICAL ANALYSISSpecial Emphasis to Candlestick Chart Formations

Session III

Page 2: TECHNICAL ANALYSIS - Geofin · What is Technical Analysis ?.. Technical Analysis is the forecasting of future financial price movements based on an examination of past price movements.

What is Technical Analysis ?..

Technical Analysis is the forecasting of

future financial price movements based on

an examination of past price movements.

Like weather forecasting, technical analysis

does not result in absolute predictions

about the future. Instead, technical analysis

can help investors anticipate what is "likely"

to happen to prices over time. Technical

analysis uses a wide variety of charts that

show price over time.

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Technical Analysis Through Chart Analysis

Chart: A price chart is a sequence of prices plotted over a specific time

frame. In statistical terms, charts are referred to as time series plots.

Picking Time Frame: Time frame used for forming a chart depends on the

compression of the data. Intraday, Daily, Weekly, Monthly, quarterly and

Annual data.

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Types Of Charts

Page 5: TECHNICAL ANALYSIS - Geofin · What is Technical Analysis ?.. Technical Analysis is the forecasting of future financial price movements based on an examination of past price movements.

Candlestick Chart

• Originating in Japan over 300 years

ago, candlestick charts have become

quite popular in recent years. For a

candlestick chart, the open, high, low

and close are all required. A daily

candlestick is based on the open

price, the intraday high and low, and

the close. A weekly candlestick is

based on Monday's open, the weekly

high-low range and Friday's close.

• Candlestick charts are said to have

been developed in the 18th century

by legendary Japanese rice trader

Homma Munehisa.

• The method was picked up by Charles

Dow around 1900 and remains in

common use by today's traders of

financial instruments.

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Trend

• One of the most important concepts in technical analysis is that of trend. A trend is

nothing more than the general direction in which a commodity or market is

headed. There are mainly three types of trends are there.

• 1.Up trend

• 2.Down trend

• 3.Horizondal or Range bound

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Supports And Resistances

Support and resistance analysis is an important part of trends because it can be used to

make trading decisions and identify when a trend is reversing.

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Volume

• Volume is simply the number of shares or contracts that trade over a given period

of time, usually a day. The higher the volume, the more active the security. To

determine the movement of the volume (up or down), chartists look at the volume

bars that can usually be found at the bottom of any chart.

Page 9: TECHNICAL ANALYSIS - Geofin · What is Technical Analysis ?.. Technical Analysis is the forecasting of future financial price movements based on an examination of past price movements.

Technical Analysis: Chart Formations

Chart patterns/formations are one of the most important tool for price forecast in technical analysis. These formations may seen in Candlestick chart or Bar chart. Important and most common of them are:

1. Head and Shoulders

2. Cup and Handle

3. Double Top and Bottom

4. Triangles

5. Flag and Pennant

6. Triple Top and Bottom

7. Wedge

8. Rounding bottom

Page 10: TECHNICAL ANALYSIS - Geofin · What is Technical Analysis ?.. Technical Analysis is the forecasting of future financial price movements based on an examination of past price movements.

Head And Shoulder:

This is one of the most popular and reliable chart patterns in technical

analysis. Head and Shoulders is a reversal chart pattern that when formed, signals

that the security is likely to move against the previous trend.

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Cup and Handle:

A cup and handle chart is a bullish continuation pattern in which the upward trend has paused but

will continue in an upward direction once the pattern is confirmed.

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Double Top and Bottoms:

This chart pattern is another well-known patter that signals a trend reversal – it is considered to be

one of the most reliable and is commonly used. These patterns are formed after a sustained trend

and signal to chartists that the trend is above to reverse.

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Triangles:

These are some of the most well-known chart patterns used in technical analysis. The three types of

triangles, which vary in construct and implication, are the Symmetrical Triangles and Descending

Triangle.

Page 14: TECHNICAL ANALYSIS - Geofin · What is Technical Analysis ?.. Technical Analysis is the forecasting of future financial price movements based on an examination of past price movements.

Flag and Pennant :

These two short term chart patterns are continuation patterns that are formed when there is a sharp

price movement followed by a generally sideways price movement. This is then completed upon

another sharp price movement in the same direction as the move that started the trend. The

patterns are generally thought to last from one to three weeks.

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Wedge :

The wedge chart pattern can be either a continuation or reversal pattern. It is similar to a symmetrical

triangle except that the wedge pattern slants in an upward or downward direction, while the

symmetrical triangle generally shows a sideways movement.

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Triple Tops and Bottoms :

This is another type of reversal chart pattern but not as prevalent in charts as head and shoulders and

double top and bottoms whereas they act in a similar fashion. These two chart patterns are formed

when the price movement tests a level of support or resistance three times and is unable to break

though, this signals a reversal of the prior trend.

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Rounding Bottom:

A rounding bottom, also referred to as a saucer bottom, is a long-term reversal pattern

that signals a shift from a downward trend to an upward trend. This pattern is

traditionally thought to last anywhere from several months to several years.

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Candlestick Patterns

Candlestick patterns helps to identify the trend and reversal signals in a chart.

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Conclusion

1. Both Fundamental & Technical analysis are complementary

2. In technical analysis, we can’t predict that this thing will

definitely happen.

3. Even if there is a 99% chance of uptrend and 1% chance of

downtrend, that 1 % can also change the trend.

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