A Presentation on Technical Analysis describing various Chart Patterns.

1. Technical Analysis
Dr. V. M. Tidake

2. Technical Analysis
Reasons to do analysis in Stock Market-
a. Buying and/or Selling Price,
b. Risk Involved
c. Expected Reward
d. Expected Holding Period
Points to Understand before entering T.A.:
a. Short term Trades Only
b. No High Returns but Frequent Returns Please
c. Small Holding Period Only
d. TA is same for any Asset Class
e. Time Series Data Required
f. Four data points required (OHLC)

3. Assumptions in
Technical Analysis
a. Markets Discounts everything,
b. How is more important than Why,
c. Price moves in Trend,
d. History tends to repeat itself,

4. Chart Types
a. Line Chart
b. Bar Chart,
c. Candlestick Chart etc.

5. a. Line Chart

6. b. Bar Chart

7. c. Candlestick Chart

8. c. Draw a Candlestick
Day Open High Low Close
Day 1 430 444 425 438
Day 2 445 455 438 450
Day 3 445 455 430 437

9. Time Frame
Types of Time Frames:
• Monthly Charts
• Weekly charts
• Daily or End of day charts
• Intraday charts – 30 Mins, 15 mins and 5 minutes
Purpose of Time Frame:
A Successful Trader looks for Information and discards
Noise.

10. Types of Candlestick
Pattern
Single Candlestick
Patterns
Multiple Candlestick
Patterns

11. Single Candlestick
Pattern
 Marubozu (Bullish & Bearish)
 Spinning Tops
 Doji
 Paper Umbrella (Hammer & Hanging Man)
 Shooting Star

12. Multiple Candlestick
Pattern
Engulfing Pattern (Bullish & Bearish)
Harami (Bullish & Bearish)
Piercing Pattern
Dark Cloud Cover
Morning Star
Evening Star d Cover

13. Few Assumptions Specific to
Candlestick
Buy Blue Day - Sell Red
Day
 Be flexible with patterns
(Quantify & Verify)
 Look for a prior trend

14. Marubozu: (Bald)
Types:
Bearish Marubozu: Open = High and Close = Low
Bullish Marubozu: Open = Low and High = close

15. Bullish Marubozu

16. Bearish Marubozu

17. Marubozu Rules:
1. Marubozu is the only pattern which violates rule number 3 i.e Look for prior trend
2. A bullish marubozu indicates bullishness
a) Buy around the closing price of a bullish marubozu.
b) Keep the low of the marubozu as the stoploss
3. A bearish marubozu indicates bearishness
a) Sell around the closing price of a bearish marubozu
b) Keep the high of the marubozu as the stoploss
4. An aggressive trader can place the trade on the same day as the pattern forms
5. Risk averse traders can place the trade on the next day after ensuring that it obeys
rule number 1 i.e Buy strength, and Sell weakness
6. Trade Trap: Presence of Abnormal Candle Lengths (Short Below 1%) & Long (Above 100%)
a) An abnormal candle lengths should not be traded
b) Short candle indicates subdued activity
c) Long candle indicates extreme activity, however placing stoploss becomes an issue.

18. Spinning Top
• A spinning top candlestick pattern reflects indecision in the
market which simply means that buyer and sellers are pretty
much at even. Spinning top is a candlestick pattern a
substantially shorter body surrounded on both sides by two
long candlestick wicks.
• In other words, a spinning top candlestick if often regarded as
a neutral candlestick.

19. Spinning Top

20. SpinningTop
• You have to think in terms of where it forms:
• if a “green” spinning top forms on a resistance level, it should be
considered a potential bearish signal even thought it is
bullish(green).
• You apply the same logic if you see a “red” spinning top form on a
support level: it should be considered a potential bullish signal even
though it is bearish (red).
• These two charts below explain what I’m talking about here.
• Lets assume that on the first chart on the left, price is going up and
hits a resistance level and moves down and the next chart to it on
the right, price is going down and hits a support level and bounces
up. At each of these two situations, the turning point was the
formation of a green spinning top candlestick pattern. This chart
shows the “green” situation:
•