BASICS

WHAT IS MARKET?

Market is in the mind. Market is not certain, but probable. Market is always right. I can be wrong. Buyer v/s Seller.

www.malkansview.com

PRICE AND VALUE

In the Long Term - Price = Value

Current price = Value + Noise

Noise can be either positive or negative.

www.malkansview.com

INTRODUCTION TO TECHNICAL ANALYSIS

First identified in Japan in Eleventh Century. Study of Price and Volume. Uses Charts and Patterns to identify and predict future activity. Does not measure Intrinsic Value.

www.malkansview.com

FUNDAMENTAL ANALYSIS V/S TECHNICAL ANALYSIS

Cause and Effect Charts v/s Financial Statements Time Horizon Trading v/s Investing Fundamental Analysis No capacity to judge Market Risk Can they Co-exist?
5

www.malkansview.com

TECHNICAL ANALYSIS ASSUMPTIONS

Market Discounts Everything.

Price Moves in Trends.

History Tends to Repeat Itself.

www.malkansview.com

WHAT IS A CHART
A Chart is a Visual Representation of Price Movements in a given period of time. Types of charts: 1. Line chart 2. Bar chart 3. Candle chart

www.malkansview.com

DOW THEORY

Origination Charles Dow Used since 100 years Higher Tops & Higher Bottoms indicate Uptrend. Lower Tops & Lower Bottoms indicate Downtrend.

www.malkansview.com

TREND & TYPES OF TRENDS

No Randomness in Price movement - Prices always move in Trends. Volumes confirm a trend. Trend is your friend Dont buck the trend Types of trends: - Uptrend - Downtrend - Sideways / Horizontal Trend

www.malkansview.com

MARKET CYCLE
DISTRIBUTION MATURITY

DECLINE

GROWTH

DEGENERATION

ADVANCE

DEATH ACCUMULATION

www.malkansview.com

10

Greater Fool Theory..

Fear
Hope Greed Hope Fear

Price is low
Price goes high Price goes further High Price goes down Price goes further Down
www.malkansview.com

You avoid.
You buy. You hold / buy more. You keep holding. You sell.
11

SUPPORT / RESISTANCE

Support sends the Price moving UP. Resistance sends the Price moving DOWN. Role Reversal of Support and Resistance. Support is formed when demand exceeds supply. Resistance is formed when supply exceeds demand.

www.malkansview.com

12

SUPPORT / RESISTANCE (contd.)

Support & Resistance areas:
Previous peaks & troughs

Round numbers Retracement Levels

www.malkansview.com

13

SUPPORT / RESISTANCE (contd.)

Shift in Psychology - New Levels of Support & Resistance. Resistances are overcome in Growth phase. Supports are breached in Decay phase.

www.malkansview.com

14

VOLUME

What is Volume? Why is volume important? Prices can be hidden, Volume cannot be hidden. If Price moves with Volume, move is likely to sustain. Change in Price-Volume Relationship indicates weakness in prevailing trend. Volume & Chart Patterns.

www.malkansview.com

15

RETRACEMENTS
Fibonacci Series:

Founded by Leonardo Fibonacci in the Twelfth Century. Obtained by adding the two preceding numbers in the series. Series 1, 1, 2, 3, 5, 8, 13, 21, Quotient of the adjacent terms possesses an amazing proportion i.e. 1.618 / 0.618
www.malkansview.com 16

RETRACEMENTS (contd.)
Fibonacci Ratios:

R1 R2 R3 R4

= = = =

# / Immediate preceding No. # / Immediate succeeding No. # / Alternate preceding No. # / Alternate succeeding No.

www.malkansview.com

17

RETRACEMENTS (contd.)
Examples:

5, 8, 13, 21, 34, 55, 89 >1 1.615 2 (double) 2.625 4.225 61.8% or 0.618% <1 0.618 0.5 (mid-point) 0.382 0.236 GOLDEN RATIO
18

www.malkansview.com

RETRACEMENTS (contd.)

Fibonacci Retracements: Uses horizontal lines to indicate Support and Resistance levels.
Retracement Projection Coming back (into chartered territory) Going into future (into unchartered territory) Retracement (<1) Uptrend Downtrend Support Resistance Projection(>1) Resistance Support

Shallower the Retracement stronger the uptrend.

www.malkansview.com

19