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Introduction to Technical Analysis by Suchita Ambardekar Tecwealth

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Introduction to Technical Analysis by Suchita Ambardekar Tecwealth Introduction To Technical Analysis By Suchita Ambardekar Tecwealth “Introduction to Technical Analysis – Definition, Branches, Financial Markets & Business cycle, Basic assumptions” & “Dow theory – Interpretation, Typical parameters, Types of charts” Basic Definition Types Of Charts Assumptions Financial Sector Rotation Markets & Dow Theory Business Cycles Financial Markets are made of people views & there Action. Financial markets is reflection of Human nature. So Price action in financial markets is a reflection of human nature, and human nature remains more or less constant. Technical Analysis should be regarded as the art of assessing the technical positon of a particular security, financial instrument with the aid of several scientifically derived research indicators. Technical Analysis is an ART & science. Technical Analysis is a scientific yet technical approach to investment is essentially a reflection of the idea that prices move in trends that are determined by the changing attitudes of Investors towards variety of economic, monetary, political & psychological forces The art of technical analysis is to identify a trend reversal at a relatively early stage and ride on that trend until the weight of the evidence shows or proves that the trend has reversed. Human Nature remains more or less constant and tends to react to similar situations in consistent ways.. E.G Fear & Greed. Technical analysis is based on the assumption that people will continue to make the same mistakes they have made in past. Sentiment Indicators Flow Of Funds Market Structure Sentiment or expectational indicators monitor the actions of different market participants, such as insiders, mutual funds mangers and investors, and floor specialists. This indicator is based on assumption that different groups of investors are consistent in their actions at major market turning points. Since the consensus or majority opinion is normally wrong at market turning points, these indicators of market psychology are a useful basis from which to form a contrary opinion . Flow-of-fund indicators analyses the financial position of various groups in an attempt to measure their potential capacity for buying or selling stocks. The flow -of -funds approach is therefore concerned with the before-the-fact balance between supply and demand-ex ante relationship. Flow-of-funds statistics may be used as back ground material. This is the core area of technical analysis, embracing market structure or the character of the market indicators. These indicators monitor the trend of various price indexes market breadth, cycles, volume & so in order to evaluate the health of the prevailing trend. Primary or cyclical Major Movements Intermediate Movements 6 weeks to few months ShortShort--termterm Movements 33--44 weeks All price movements have 1 thing in common. They are a reflection of the trend in the hopes, fears, knowledge, optimism, and greed of market participants. Discounting Mechanism of the market. These basic principles of technical analysis apply to all securities and time frame from 20-minute to 20-year trends. Major movements in bonds, stock, and commodity prices are caused by long term trends in the emotions of the investing public. These emotions reflect the anticipated level and growth rate of future economic activity, and the attitude of investors toward that activity. There is a definite link between primary movements in the stock market and cyclical movements in the economy because trends in corporate profitability are an integral part of the business cycle. 1st changes in directions of the economy can take some time to materialize. 2nd changes in the market usually precede changes in the economy by 6 to 9 months, but the lead time can be shorter or longer. 3rd even when an economic recovery is in the middle of its cycle, doubts about its durability often arise. 4th changes is the profits may increase, but investors attitudes towards those profits may longer. PRICE 11STST Dimension TIME 22NDND Dimension Volume 33rdrd Dimension Price –indicates the level of that change TIME - Measures the Reoccurrences & Length Of the Cycle . VOLUME-Reflects The intensity Of Changes in investor attitude. 100% Commodities Equity Bonds 0%0% Trend is a time measurement of the direction in price levels covering different time spans. Primary –Last generally between 9 months and 2 years. Intermediate- A primary upswing is interrupted by several reactions along the way. These counter cyclical trends within the confines of a primary bull markets are known as intermediate price movements. Lasts from 6 weeks to longs as 9months. Short term-Last from 2 to 4 weeks. They interrupt the course of intermediate cycle, just as the intermediate- term trend interrupts primary cycle movements. Primary trend consists of several intermediate cycles, but the secular or very longer term, trend is constructed from no of primary trends. Secular trend creates super cycle . This Super cycle, or long wave, extends over a substantially greater period, usually lasting well over 10 years, and often as long as 25 years. Chart Title 9%9% 10% 1st Qtr 2nd Qtr 23% 58% 3rd Qtr 4th Qtr 66 55 44 Series 1 33 Series 2 Series 3 22 Series 4 11 00 Category 1 Category 2 Category 3 Category 4 1414 1212 1010 88 Series 3 66 Series 2 44 Series 1 22 00 Category Category Category Category 11 22 33 44 Dow Theory is concerned with the direction of a trend and has no forecasting value as to its ultimate duration or size. Dow theory evolved from the work of Charles H Dow, who published a series of The Wall Street Journal editorials between 1900 and 1902 concerning market action. Name Title Group Technical Trend analysis is about probabilities and possibilities & never certainities. [email protected].
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