Introduction to

Technical Analysis

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 What to Expect?
Not even T of Technical Analysis
(3 Hours is too less a time to expect anything w.r.t
Technical Analysis, theres too much out there)
Expect just an introduction to what is technical
analysis
Get yourself convinced by end of the presentation
that technical analysis is good enough to buy and
sell stocks

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What Is Technical
Analysis
in two words?

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Price &
volume
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 What wiki says?
Technical analysis is a
security analysis discipline for
forecasting the future
direction of prices through the
study of past market data,
primarily price and volume.

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 Different Kind of Charts
used:
Line charts

Bar charts

Candlestics

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Line Charts

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Bar Charts

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Candlesticks

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An Example

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How to use Candle
Sticks?

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 Dow Theory
Market Discounts everything

The 3 Trends
-> Primary Trends
-> Secondary Trends
-> Minor Trends

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Primary Trends and
Secondary Trends

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 Continued
Primary Trends : They run for years

Secondary Trends : Few weeks to months

1/3 , 50% , 2/3 retracements

Minor Trends : Day to day moments which are of not

importance to dow theory.

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Continued
The Bull market
-> Accumulation
-> Public Participation phase
-> Excess

The Bear Market

-> Distribution
-> Public Participation phase
-> Panic

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Continued
The 2 Averages must confirm
-> Industrial Average
-> Rail Average

Volumes goes with the trend

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Continued
A trend be assumed to continue in effect until
such time as its reversal has been definitely
signaled

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Some Examples

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Support and Resistance

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 Role Reversals
Support becomes Resistance and vise versa

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Real world Example

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 Chart Patterns
Reversal Patterns
Ex: Head and Shoulders, Rounding tops and
bottoms, Triangles, Rectangles, Double and triple
tops and bottoms,
Continuation Patterns
flags etc

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Head and Shoulders

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Double tops and bottoms

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Some Examples

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Bullish Flag

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Head and Shoulders
breakout

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Head and Shoulder
formation

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Triangular Consolidation
breakout

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 Averages
Simple moving average (20 DMA, 50 DMA,
100DMA)
Exponential moving average(20 EMA, 50 EMA)
Triangular moving average
Volume adjusted moving average
Weighted moving average

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Simple Moving Average
DAY PRICE SUM OF 3 DAYS 3rd COLUMN / 3

1 10

2 11

3 12 33 11

4 13 36 12

5 14 39 13

6 15 42 14

7 16 45 15

8 17 48 16

9 18 51 17

10 19 54 18

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 Exponential Moving
Average
Exponential Percentage = 2
----------------------------
Time Periods + 1

Ex: for 3 day EMA,

E % = 2/(3 + 1)
E % = 2/4 = 0.5

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A B
3 DAY EMAC D E

DAY PRICE PRICE * 0.5 YESTERDAY E * 0.5 C+D

1 10 10.000

2 11 5.5 5 10.500

3 12 6 5.25 11.250

4 13 6.5 5.625 12.125

5 14 7 6.062 13.062

6 15 7.5 6.531 14.031

7 16 8 7.015 15.015

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Moving Averages as
Support

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Use of major moving average as support

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 Indicators
Leading Indicators Ex: RSI, CCI, Stochastic, etc

Lagging Indicators Ex: MACD, moving averages

etc

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 Bollinger Bands
Shown in 3 bands

Middle Band = SMA

Upper Band = Middle band + 2 Standard
Deviations
Lower Band = Middle band 2 Standard
Deviations

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 RSI
Relative Strength Index

Usage
-> Tops and Bottoms (70 and 30)
-> Chart Formations
->Support and Resistance
-> Divergance

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 Calculation
100 - (100 / (1 + (U/D)))

U -> Upward Price Change

D -> Downward Price Change

Ex : 3 day RSI

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Continued
A B C D E
Closing Price Upward Price Smoothed B Down word Price Smoothed D
Change Change
10
11 1 0
9 0 2
13 4 1.66 0 0.66
10 0 1.33 3 1.33
14 4 2.66 0 1

C E F G H I = RSI

C E C/F F+1 100/G 100 - H

1.66 0.66 2.51 3.51 28.5 71.5

1.33 1.33 1 2 50 50

2.66 1 2.66 3.66 27.3 72.7

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Some Examples

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 MACD
Moving Average Convergence and Divergence

Calculation
12 EMA 16 EMA

Usage
-> Crossovers
-> Overbought/Oversold
-> Divergence

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Examples

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Q&A

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