Technical AnalysisMoving Averages, ROC

By

Ayush Kansal (I068)

Varsha Sharma (I072)

NMIMS MUMBAI

Flow of presentation

• Moving Average

• Index and Stock price moving average

• Buy and Sell Signal by stock price and stock price moving average.

• Buy and sell signal from two moving average

• Oscillators

• Relative Strength Index (RSI)

• Rate of change

• Conclusion

Moving Average

Moving average is an indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random price fluctuations.

• Used for smoothening of data.

• Takes series of arithmetic mean over time.

• Closing price of stock used.

Calculating Moving Average

Moving Average_data.xlsx

Key points

• Used to understand the movement of market and individual scrip price.

• Indicates the underlying trend in the scrip.

• Short term trend- 10 to 30 days moving Average.

• Medium term trend- 50 to 125 days moving average used.

• Long term trend- 200 days moving average

Index and Stock price moving average

Bullish trend

• If Index is above stock’s moving average line.

• Prices may increase above the market average.

Bearish Trend

• If index is below stock moving average

• Prices may fall.

Buy and Sell Signal by stock price and stock price moving average.

Buy and sell signal from two moving average

Short term Moving average

Long term Moving average

Sell

Buy

Oscillators

• It indicate market momentum or scrip momentum

Momentum indicates

Overbought and oversold conditions of scrip.

Signaling the possible trend reversal.

Rise or decline in the momentum.

• Common oscillators are MACD, ROC, RSI, CCI.

Relative Strength Index (RSI)

• Measures the speed and change of price movements.

• Oscillates between zero and 100

• RSI is considered overbought when above 70 and oversold when below 30

Calculation

RSI=100 - 100 1+RS

RS = Average Gain / Average Loss

Interpretation

Rate of change

• Measures the percent change in price from one period to the next

• Compares the current price with the price “n” periods ago

• Moves from positive to negative

• ROC signals include center line crossovers, divergences and overbought-oversold readings

Calculation

ROC = [(Today’s price) / (Close n periods ago)] * 100

ROC = [(today’s price) / (Close n periods ago)] * 100 -100

Overbought/Oversold Extremes

Conclusion

Thank You