TECHNICAL ANALYSIS DOW

THEORY & ELLIOT WAVE THEORY

Technical Analysis
Technical analysis isa method of evaluating securities by
analysing the statistics generated by market activity, such
as past prices andvolume.
Analyse relationship between price-volume and pricedemand.
Technical analysts do not attempt to measure a
security'sintrinsic value, but instead use charts and other
tools to identifypatternsthat can suggest future activity.

Assumptions of
Technical Analysis
The market value of the scrip is determined by
interaction of supply and demand
Market discounts everything.
Price moves in trends.
History tends to repeat itself.

Fundamental vs.
Technical Analysis
DEFINITION Calculates stock value
using economic
factors, known as
fundamentals.
DATA Financial statements
GATHERED
FROM

Uses price movement

of security to predict
future price
movements
Charts

STOCK When price falls below When trader believes

BOUGHT intrinsic value
they can sell it on for
a higher price
TIME HORIZON Long-term approach

Short-term approach

FUNCTION Investing

Trade

CONCEPTS Return on Equity

USED (ROE) and Return on
Assets (ROA)

Dow Theory, Price

Data

DOW Theory
Developed to explain the movement of the indices of the
DOW JONES Averages.
Theory: According to the DOW Theory the trend is divided
into primary, intermediate and short-term trend.
Primary- 1 year or 2 years
Intermediate- 3 weeks to 3 months
Short-term- Day-to-Day
Trend: Direction of movement. Share prices move in a zigzig manner.
Rising trends
Falling trends
Flat trends
Trend lines are straight lines drawn connecting either the
tops or bottoms of the share price movement

Hypothesis DOW
Theory
H1: No single individual or buyer can influence the
major trend of the market.
H2: Market discounts everything.
H3: This theory is infallible. Its not a tool to beat
the market, but provides a way to understand it
better.

Types Of Trends
Primary Trend

Bull Market

Primary Trend
NSE Futures

Bear Market

Types Of Trends
Secondary Trend

Bull Market

Support And Resistance

Support

 Support Lines for NSE Future

Support And Resistance

Resistance

Elliot Wave Theory

Developed by R.N. Elliot
Investors psychology market cycles
Assess whether prices are likely to rise
or fall - ahead of the event
Fractal nature of markets
Increase successful trade

Basic Sequence
Impulse
Moves in
direction of
larger degree
wave

Corrective
Moves against
major trend

Complete 8 Wave
Cycle

Fractal Nature
Fractals - Ever-smaller scale infinitely repeat
themselves

Three Rules
Rule 1:
Wave 2 cannot
retrace more
than 100% of
Wave 1

Rule 2:
Wave 3 can
never be the
shortest of the
three impulse
waves

Rule 3:
Wave 4 can
never overlap
Wave 1

Three Guidelines

Elliot Wave in NSE

Futures

Indicators
Indicators

Volume of
Trade

Breadth of
Market

Short sales

THANK YOU