A STUDY ON TECHNICAL A STUDY ON TECHNICAL ANALYSISANALYSIS

Done by: Sukumar.R

MBA

INTRODUCTIONINTRODUCTION

INDIA INFOLINEIndia Infoline (IIFL)

group, is one of the leading players in the Indian financial services space. IIFL offers advice and an execution platform for a range of financial services covering products ranging from equities and derivatives, commodities, wealth management, asset management, insurance, fixed deposits, loans, investment Banking, GoI bonds and other small savings instruments.

INTRODUCTIONINTRODUCTION

Technical analysis:Technical analysis:

We can define Technical Analysis as a study of the stock market considering factors related to the supply and demand of stocks.

Technical analysis is a method of evaluating securities by analyzing the statistics generated by market activity, such as past prices and volume.

ASSUMPTIONS:ASSUMPTIONS:1. The Market Discount Everything

2. Price Moves in Trends

3. History Tends to Repeat Itself

How is Technical Analysis done?How is Technical Analysis done?

a) Moving Averages

b) Charts & Patterns

RESEARCH METHODOLOGY.RESEARCH METHODOLOGY.

RESEARCH OBJECTIVES:-RESEARCH OBJECTIVES:-

Primary Objective:Primary Objective:

To find out appropriate time to buy and sell securities based on selected indicator and oscillator.

Secondary Objectives:Secondary Objectives:

Understanding the technical analysis theories and methods to analyze charts of the 2 companies using technical analysis.

RESEARCH DESIGN:RESEARCH DESIGN: Descriptive Research Design.

DATA COLLECTION METHODDATA COLLECTION METHOD::

Secondary data (1 year)

SAMPLING TECHNIQUE:SAMPLING TECHNIQUE:

  Sample of 2 companies has been selected on the basis of market capitalization from NSE.

Reliance

BHEL

LIMITATIONS TO THIS STUDYLIMITATIONS TO THIS STUDY

CostsTimeReal investment informationSoftware rights

TECHNIQUES USEDTECHNIQUES USED

1)Moving Average Convergence Divergence – MACD

Formula:

MACD: (12-day EMA - 26-day EMA)

Signal Line: 9-day EMA of MACD MACD

Histogram: MACD - Signal Line

2)Relative Strength Index - RSI  RSI= 100- 100 1+RS

RS=EMA[U]/EMA[D] EMA- exponential moving average

U= Sig (close (today)-close (yesterday))

D= Sig(close(yesterday)-close(today))

FINDINGSFINDINGS I found that 73 RSI signals and 32 MACD signals have been

generated in a year and total are 105 signals.

Reliance has 37 RSI signals generated in a year which are highest.

Both companies have high profit for MACD.

Reliance has highest profit in RSI i.e. 44.45%

Active trading strategy is more useful and gives more return

compare to passive trading strategy.

 

RECOMMENDATIONRECOMMENDATION

It is recommended that one should use RSI because it is

more effective then MACD as it has more accuracy and

generate more signals then MACD and provide more

clear guidelines for entry and exit from the market.

One should go for active trading strategy because it is

more profitable then passive trading strategy.