CHARTING- THE BASIC

TECHNIQUE OF
TECHNICAL ANALYSIS
Fundamentals of investment
Charting

 Charts help in analysing the price movements over

a period of time. Some charts track only the
prices, while others analyse both price and volume
of the securities.
 However, before going towards the charts, it is
necessary to understand the types of security prices.
 The security prices keep on changing throughout the
day. But the analysts are concerned mainly with the
following four prices.
Charting
 1. Opening Price- It is the price at which the first
trading of that security took place on a particular
trading day. It could be equal to, more than or less
than the closing price of the previous trading day.
 2. Low Price- It is the lowest of all the prices at
which trading was done throughout the day.
 3. High Price- It is the highest of all the prices at
which trading was done throughout the day.
 4. Closing Price- It is the price at which the last
trading of that security took place on a particular
trading day.
Various types of charts
 Bar Chart : Bar chart is as very simple chart of analysing the price and
volume movements. Bar chart shows all the four prices for a day, i.e., high
price, low price, opening price and closing price.
 Opening price is shown as a horizontal tick on the left side of the high low
bar and the closing price is shown as the right sided horizontal tick on the
high low bar.
Bar chart
 A technical analyst generally makes bar chart showing daily price movement
over a period of 1 month, 3 months, 6 months and so on. Not only the price,
daily volumes traded can also be shown in the same chart below the bars.
Following is the screenshot of a securities bar chart, where volumes are shown
below the price bars.
Line chart
 Line chart is the simplest of all types of charts where an
independent variable is taken on X axis and the
dependent variable is taken on Y axis.
 In stock markets, line chart is made by plotting time on
the horizontal axis or X axis and the closing prices of
securities are taken on the vertical axis or Y axis.
Example of line chart of MRF :
Point and Figure Chart

 This is a different type of chart. Unlike the other charts which

constantly monitors the security price and/or the volume
traded over a period of time, this point and figure chart only
considers the significant changes. This chart only plots X’s and
O’s.

 For every significant price rise, an X is plotted and for every

significant fall in the price, an O is drawn. Therefore, the
significant change in the price has to be decided by the
analyst first. For example, the market price of a share is Rs.
10 and the analyst has decided a change of Rs. 5 to be
significant.
Point and Figure Chart
 Now, lets suppose the price increases to Rs. 12, nothing would be done. It
further increased to Rs. 14.90, but no action would be taken.
 However, as soon as price reaches to 15 or crosses it an X will be made against
15. Until the price reaches 20, i.e. another significant increase, nothing would
be done and as soon as price touches 20, other X will be made against 20.
 Suppose the price increases to 40 without any significant fall. If the price goes
down to 36, i.e., a fall of Rs. 4, nothing would be done but as soon as price fall
to Rs. 35, an O will be made against 35.
 Now the whole process will keep going. For every significant fall an O will be
marked and for every significant increase an X will be marked
Example of hdfc bank
Candle Stick Chart
 Candlestick chart is like an extension of bar chart. In
candlestick chart also, all the four prices (i.e., opening,
closing, high and low) are shown.
 Opening and closing prices form a candle. Then low and high
prices are plotted and joined to the candle so formed.
 Thus, low price is shown as a vertical line below the opening
price and the high price is shown as a vertical line above the
candle.
 On a bullish day, closing price is more than the opening
price and therefore, the candle is shown in green colour.
 On a bearish day when the opening price is more than the
closing price, the candle is shown in red colour. The green
candle is also termed as positive candle while the red candle
is also termed as a negative candle.
Candle Stick Chart
Real example of wirpro share
Bar graph of wirpo