Basics of Technical

Analysis

By,
Rajendra Balusu
INH200007016
 Webinar for
Technical analysis
Class 6(Session covers)
• How to handle highs and lows of index
and stocks
• Dos and Don'ts of trading, Methods of
stock selection
• Trade Plans, Positional Analysis
• Opportunities and traps
• Inside And Out Side Bar
• Tips for Intraday Trading
 High-Low Index
The high-low index compares stocks
that are reaching their 52-week highs & life
highs with stocks that are hitting their 52-
week lows & life lows.
 Examples
High Makes 548
TATACONSUM

03-Aug-20
09-June-20
O-428
O-433 H-440
H-437 L-427
L-428

Monthly Chart
GRANULES
17th Aug 2020
CMP 312

31-Dec-2015
25-May-17 30-Jan-20
O-159
O-150 O-124
H-164
H-164 H-165
L-144
L-131 L-120

Monthly Chart
 Now Trading 3290
DIVISLAB

27-Aug-18

O-1930 30-Apr-20
H-2484
L-1930 O-1930
H-2486
L-1822

Monthly Chart
 Makes High 185
TANLA

17-June-20
7-Feb-20
O-77
O-76 H-91
H-89 L-76
L-76

Weekly Chart
 Example for NIFTY
Dec 2018 High Makes 11760
NIFTY
Here not crossed
pervious Swing
High 6357

31-Jan-2008 31-Mar-2014

O-6136 O-6264
H-6357 H-6730
L-4448 L-6212

Monthly Chart
 Example for BANK NIFTY
Dec 2018 High Makes 28388
BANK NIFTY

Nov-2010
May-2014
O-12485
H-13303 O-12920
L-11362 H-15742
L-12773

Monthly Chart
DEEPAKFERT
High Makes 500

31-Jan-08

O-213
H-232
L-150
30-Oct-16

O-212
H-233
L-201

Monthly Chart
DENABANK

24-Dec-08 31-Mar-16
28-Dec-17
O-27 O-26
H-34 H-29 O-25
L-25 L-25 H-25
L-23

Makes Low 9.60

Monthly Chart
DHFL

26-Sep-13
30-Jul-09 03-May-19
O-117
O-155 O-147
H-127
H-165 H-148
L-101
L-102 L-102

Makes Low 8.35

Monthly Chart
ADVANTAGE
1. Low Risk and Steady Growth
2. Chances of Exceedingly Good Returns in Medium
Term
DISADVANTAGE
1.Lack of Flexibility FOR TRADE ENTRY
2.No Big Gains in short term
3.Time Consuming sometimes.
 DO & DONOT S
• Don’t get out of a trade when you are afraid get out when
your trailing stop or stop loss is hit.
• Don’t enter a trade when you are greedy for profits get in
when you get an entry signal.
• Don’t take a huge position size because you are greedy
for profits, trade a planned position size based on risk
and probability of the entry.
• Don’t trade based on your personal opinions trade based
on a robust methodology.
• Don’t trade based on tips, trade based on your own
trading plan.
• Don’t have a target price let a trade go as far as it will
trend.
• Don’t marry your stock, do marry your risk
management plan.
• Don’t trade with your ego but do trade with
confidence after you have done your
homework.
• Don’t just copy another trader’s strategy but do
find a strategy that fits your own personality.
• Don’t try to trade based on future predictions
but do trade the current price action.
 Methods of stock selection
New product, service or management
The biggest winners of the past had one
thing in common: New products, new services,
new leadership, new pricing or a new condition
in the industry.
Supply and demand
Look for heavy-volume accumulation by
institutional investors, particularly at key
moments like when the stock is breaking above
prior resistance levels.
Leader or laggard
Buy leading stocks from the leading industry groups.
Institutional sponsorship
For a stock to be a top performer, it must have
institutional support to fuel its price movement.
Market direction
Three out of four stocks follow the market’s
trend, so trade in sync with the market. 
 Trade Plans
• A trading plan is a systematic method for
identifying and trading securities that
takes into consideration a number of
variables including time, risk and the
investor's objectives.
• A (Day)trading strategy tells you when to
enter and when to exit trades. A trading
plan is more comprehensive than a trading
strategy.
A trading plan covers at least seven
elements:
1.The market(s) you want to trade.
2.The timeframes you want to trade, e.g. 15
min, 30 min, tick or range bars.
3. A brief description of the
strategies you want to trade and
when to use what strategy.
4. Stock open and High are same is
shorting Opportunities.
5. Stock open and Low are same is
Buying Opportunities.
6. The entry rules of the strategies.
7. The exit rules of the strategies.
8. Other important rules, e.g. when to
trade and when not to trade.
9. The money management approach you
are using.
 Positional Analysis
• The basic tenet of stock market analysis is
that stocks move in trends. Once a trend
starts, it is likely to continue. Traders make
profits by recognizing a trend early, buying
a stock for the duration of the trend, and
selling as soon as it has run its course.
ZEEL
Positional Call

BUY Zeel CMP 159 buy till 154 TGT 168 STOPLOSS 152

17th Aug 2020

Our TGT Completed 168 With 3 trading days

12th Aug 2020

O-158
H-164
L-156
why stock market traders lose
money
1. Trading during the first half-hour of the
session
2. Failing to hear the market's message
3. Ignoring which phase the market is in
4. Failing to reduce position size when
warranted
5. Failing to treat every trade as just another
trade
6. Over-eagerness in booking profits
7. Trading for emotional highs
8.  Failing to realise that trading decisions
are not about consensus building
 Opportunities and traps
1.Avoid the herd mentality
The typical buyer's decision is usually heavily influenced by the
actions of his acquaintances, neighbours or relatives. Thus, if
everybody around is investing in a particular stock, the tendency
for potential investors is to do the same. But this strategy is
bound to backfire in the long run.

No need to say that you should always avoid having the herd
mentality if you don't want to lose your hard-earned money in
stock markets. The world's greatest investor Warren Buffett was
surely not wrong when he said, "Be fearful when others are
greedy, and be greedy when others are fearful!"
2. Take informed decision
Proper research should always be
undertaken before investing in stocks. But
that is rarely done. Investors generally go by
the name of a company or the industry they
belong to. This is, however, not the right way
of putting one's money into the stock market.
3. Invest in business you understand
Never invest in a stock. Invest in a
business instead. And invest in a business
you understand. In other words, before
investing in a company, you should know
what business the company is in.
4.Don't try to time the market
One thing that even Warren Buffett doesn't do
is to try to time the stock market, although he
does have a very strong view on the price levels
appropriate to individual shares. A majority of
investors, however, do just the opposite,
something that financial planners have always
been warning them to avoid, and thus lose their
hard-earned money in the process.
5. Follow a disciplined investment approach

Historically it has been witnessed that

even great bull runs have shown bouts of
panic moments. The volatility witnessed in
the markets has inevitably made investors
lose money despite the great bull runs.
6.Create a broad portfolio
Diversification of portfolio across
asset classes and instruments is the key
factor to earn optimum returns on
investments with minimum risk. Level of
diversification depends on each investor's
risk taking capacity.
 INSIDE BAR

An inside bar must stay completely within the range of the bar

immediately before it. In other words, the second bar must have a lower
high and a higher low.

An inside bar is a contraction in price range/volatility. Within the

same unit time, the market covers less ground and stays completely
within the range of the previous bar.

It is a pause in price action and does not show clear strength in either
direction.
Place bracket orders around it to trade its breakout
in either direction. (A buy stop order above its high,
and a sell stop order below its low. Once one order is
triggered, cancel the other.)

Place only one order (buy or sell) according to the

market trend.
 OUTSIDE BAR

An outside bar pattern is the polar opposite of an inside

bar.

Its range must exceed that of the previous bar with a

higher high and a lower low.
It is a short-term expansion in price range/volatility.
It shows strength in both directions.

In most cases, it is uncertain if the bulls or the bears

have won. The only certainty is the increased volatility.
 TRADING RULES – OUTSIDE BAR FAILURE

LONG SWING TRADE

The market breaks below the low of a bearish

outside bar.

Place a buy stop order above any bullish bar.

 Tips for Intraday Trading

Below are a few tips for intraday trading in Indian share market which will
help investors in making the right decision:

 Choose Two or Three Liquid Shares

 Determine Entry and Target Prices
 Utilising Stop-Loss for Lower Impact
 Book Your Profits When You Reach Your Target
 Be a Trader Rather Than an Investor
 Research Your Wish-List Thoroughly
 Don’t Move Against the Market
Choose Two or Three Liquid Shares
Intraday trading involves squaring open positions before the end of
the trading session. This is why it is recommended to choose two or three
large-cap shares that are highly liquid. Investing in mid-size or small-
caps can result in the investor having to hold these shares because of low
trading volumes.

Determine Entry and Target Prices

Before placing the buy order, you must determine your entry level and
target price. It is common for a person’s psychology to change after
purchasing the shares. As a result, you may sell even if the price sees a
nominal increase. Due to this, you may lose the opportunity to take
advantage of higher gains because of the price increase.
Utilising Stop-Loss for Lower Impact
Stop loss is a trigger that is used to automatically sell the shares if the
price falls below a specified limit. This is beneficial in limiting the potential
loss for investors due to the fall in the stock prices. For investors who have
used short-selling, stop loss reduces loss in case the price rises beyond their
expectations. This intraday trading strategy ensures emotions are eliminated
from your decision.

Book Your Profits When You Reach Your Target

Most day traders suffer from fear or greed. It is important for investors to
not only cut their losses, but also to book their profits once the target price is
reached. In case the individual thinks the stock has a further possibility of
rising in price, the stop loss trigger must be readjusted to match this
expectation.
Be a Trader Rather Than an Investor
Intraday trading, as well as investing, requires individuals to purchase
shares. However, factors for both these strategies are distinct. One kind
adopts fundamentals while the other considers the technical details. It is
common for day traders to take delivery of shares in case the target price is
not met. He or she then waits for the price to recover to earn back his or her
money. This is not recommended because the stock may not be worthy of
investing, as it was purchased only for a shorter duration.

Research your Wish list thoroughly

Investors are advised to include eight to 10 shares in their wish lists and
research these in depth. Knowing about corporate events, such as mergers,
bonus dates, stock splits, dividend payments, etc., along with their technical
levels is important. Using the Internet for finding resistance and support
levels will also be beneficial.
Don’t Move Against the Market
Even experienced professionals with advanced tools are not able to
predict market movements. There are times when all technical factors
depict a bull market; however, there may still be a decline. These factors
are only indicative and do not provide any guarantees. If the market moves
against your expectations, it is important to exit your position to avoid
huge losses.

Stock returns can be huge; however earning smaller gains by adhering

to these intraday trading tips & strategies should be satisfactory. Intraday
trading provides higher leverage, which effectively provides decent returns
in one day. Being content is crucial to succeeding as a day trader.