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A Summer Training Project ReportOn

TECHNICALANALYSISOFNIFTY

(An industry internship project report submitted in partial

fulfillment of the requirement of Post-Graduate Diploma in

Management2013-15)

UNDER THE GUIDANCE OF: - SUBMITTED BY: -Corporate Guide:

Mr. M.NAGEER AHMED K MADHAVARAO

(sales Manager) PGDMIndia Infoline Limited BIFAAS

ROLL NO.B7-12Faculty Guide:

DR.N C RAJYA LAKSHMI

PROFESSOR

(Mastersin finance, Ph.D.,)Siva Sivani Institute of Management


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TABLE OF CONTENTS

Sl. No. Particulars Pg. No.

1 DECLARATION 3

2ACKNOWLEDGEMENT

4

3CERTIFICATE

5

4 Executive Summary 6

5 REVIEW OF LITERATURE 7

6 INTRODUCTION 8-18

7 ABOUT THE TOPIC 19

8 SEBI 20-23

9 CNX NIFTY 23-25

10 DOW THEORY 26-27

11 Analyzing Chart Patterns 28-44

12 Method 0f technical analysis 44

13 Limitations of Technical Analysis 45

14 Technical Analysis OF NIFTY 45-53

15 Conclusion 53-55

16 BIBLIOGRAPHY 56


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DECLARATION

This is to certify that the project title:TECHNICAL ANALYSIS

OF NIFTY is a bonafide work completed by K MADHAVARAO,

Enrollment Number B7-12, in partial fulfillment of the requirements of the

PGDM Program and submitted to SIVA SIVANI INSTITUTE OF

MANAGEMENT- SECUNDERABAD.

I declare that this project is a result of my own efforts and has not

been copied from any source. References from which information has been

taken have been given in the references section.

This work has not been submitted earlier at any other university or

institute for the award of the degree.

K MADHAVARAOB7-12SIVA SIVANI INSTITUTE OF MANAGEMENT

SECUNDERABAD


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ACKNOWLEDGEMENTS

It is my privilege to thank and express my heartfelt gratitude to my company guide MR.

MOHOMMED NAGEER AHEMED sales manager , India Infoline Ltd. for his

constant guidance and supervision throughout the course of my internship. I would like

to express my heartiest gratitude to India Infoline for giving me an opportunity to work at

corporate office, situated in Hyderabad without which I would never have got a real time

practical experience in this field . I also want to express my profound gratitude to myfaculty guide DR. N.C. RAJAYALAKSHMI for her constant and cordial support and

providing information which helped me in completing my project. I am highly obliged to

rest of staff members for giving their time and cooperation in providing information

during the course of my project at the at the end. I would thank my parents for their

constant encouragement without which this project would have not been impossible.


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CERTIFICATE


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Executive Summary

In the days of technology advancement and increasing use of computers for trading and

investing, Algorithm trading has become the present trend in the markets. There is much

software present in the markets that will enable the trader to buy, sell and implement thestrategies that he has designed to be profitable. The prime goal of a trader in a Future and

Options segment is to be profitable and sue to the increasing efficiency of the markets he

has to be quick to identify opportunities and utilize them. One can do it using technical

analysis and fundamental analysis. If the trader is short and medium term or an

arbitrageur then his own skills are not enough to identify and trade on various derivatives

in various markets. This is where algorithmic trading comes into picture, but while using

algorithm trading the system must be able to identify its entry points and exit points. This

is done using technical analysis. When the entry and exit is done through technical

conditions it is very important to understand which technical indicators work the best in

the markets and how efficient are they in making the profits. This study is done to

understand what extent the technical analysis is working in the markets and what type of

indicators should be used for ranging markets and trending markets. The technical

indicators such as Relative Strength Index, Moving Average Convergence Divergence,

Slow Stochastic, Fast Stochastic, Average Directional Index, Bollinger Bands and

Average True Range are tested on the market for a period of 5 years time from 2008 to

2014 on CNX NIFTY. Their efficiency, profits losses and profit factor were understood

in this report by using tradestation software. In short we are buying and selling NIFTY

itself.


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REVIEW OF LITERATURE

Technical analysis is also often combined with quantitative analysis and economics. Forexample, neural networks may be used to help identify inter-market relationships .A fewmarket forecasters combine financial astrology with technical analysis. Chris Carolan'sarticle "Autumn Panics and Calendar Phenomenon," which won the Market Technicians

Association Dow Award for best technical analysis paper in 1998, demonstrates howtechnical analysis and lunar cycles can be combined. The S & P CNX Nifty index is afree float market capitalisation weighted index. The index was initially calculated on fullmarket capitalisation methodology. From June 26, 2009, the computation was changed tofree float methodology. The base period for the S&P CNX Nifty index is November 3,1995, which marked the completion of one year of operations of NSE's Capital MarketSegment. The base value of the index has been set at 1000, and a base capital of Rs 2.06trillion (S&P CNX Nifty Index Methodology). The S&P CNX Nifty Index wasdeveloped by Ajay Shah and Susan Thomas.


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IIFL Group is a leading financial services company in India, promoted by first generation

entrepreneurs. It has a diversified business model that includes credit and finance, wealth

management, financial product distribution, asset management, capital market advisory

and investment banking. Its evolution from an entrepreneurial start-up to a market

leadership position is a story of steady growth by adapting to the changing environment,

without losing the focus on its core domain of financial services. Its NBFC and lending

business accounts for 68% of their consolidated income in FY13 and has a diversified

product portfolio rather than remaining a mono-line NBFC. They are a leader indistribution of life insurance and mutual funds among non-bank entities. Although the

share of equity broking in total income was only 13% in FY13, IIFL continues to remain

a leading player in both, retail and institutional space.

Vision

To become the most respected company in the financial services space in India

Values

Values are IIFL are summarised in one acronym: GIFTS

Growth with focused team of dynamic professionals

Integrity in all aspects of businessno compromise in any situation

Fairness in all our dealingsemployees, customers, vendors and shareholders all

included

Transparency in what we doand in how and why we do it

Service orientation is our core value, imbibed by all sales as well as support teams

Business strategy

Steady growth by adapting to the changing environment, without losing the focus

on our core domain of financial services

De-risked business through multiple products and diversified revenue stream

Knowledge is the key to power superior financial decisions

Keep costs low and continuously strive for innovation

Customer strategy

Remain largely a retail focused organisation, driving stickiness through

knowledge and quality service

Cater to untapped areas in semi-urban and rural areas, which is relatively safe

from cut-throat competition


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Target the micro, small and medium enterprises mushrooming across the country

through a cluster approach for lending business

Use wide multi-modal network serving as one-stop shop to customers

Strategy People

Attract the best talent and driven people

Ensure conducive merit environment

Liberal ownership-sharing

Strengths of IIFL:

Managerial depth

The promoters individually are first-generation . Indian entrepreneurs with meritorious

academic backgrounds and impeccable professional careers. Mr. Nirmal Jain, Chairman,is a rank holder Chartered Accountant, Cost Accountant and an MBA from IIM

Ahmedabad and Mr. R. Venkataraman, Managing Director, is an Electronics Engineer

from IIT Kharagpur and an MBA from IIM Bangalore. The Promoters have built the

business from scratch, without pedigree of a large family business or inherited wealth

and steered it towards a market leading position by dint of hard work and enterprise.

It has consistently attracted the best of the talent from across the financial sectorprivate

sector banks, foreign banks, public sector banks and established NBFCs. The senior

management team have years of experience and backgrounds similar to promoters and

leads competent teams. IIFL has uninterrupted history of profits and dividends since

listing. It has delivered total shareholder returns of 34.3% CAGR from listing till March

31, 2013.

Governance

The Promoters have demonstrated an exemplary track record of governance and utmost

integrity. There have been no notable regulatory strictures or oversight ever in the

groups history. This is despite a widespread and broad range of operations governed by

multiple regulators including RBI, SEBI, IRDA, FMC and NHB. In addition, it has eight

licensed subsidiaries in major global financial centres.

The Board has independent directors, highly respected for their professional integrity as

well as rich financial and banking experience and expertise. It has an advisory board

comprising stalwarts with long and immaculate careers in banks, public service and legal

profession.

None of the promoters family members has held managerial or board position or have

related-party or financial transaction of any significance, since listing. Further, it has not

lent to any related party or associated concerns. The promoters do not have any other


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business interests and are committed to the core business of financial services under the

IIFL umbrella.

People

The people form the backbone of the organization and are the foundation of its success. It

has significant ownership by employees with a credo of owners work, workers own,

which has enabled it to maintain a highly motivated staff driven by owner mindset. It

creates owners out of its employees not just by offering a financial stake but also through

autonomy to take decisions, make mistakes and grow confidence, competence and career.

Knowledge

IIFL is a knowledge driven organization and has over the years developed and

institutionalized knowledge about its businesses at all the levels.

The roots are in original research on economy, sectors, companies, capital markets and

global financial trends. Its in-house research capabilities gives an edge in understanding

industry trends, macro-economic situations, business cycles, inflation and interest rate

trends, technological changes, regulatory and legal updates, environmental factors

impacting labour, raw material supply, pollution norms and for intermediate products-

trends in end user sectors and for consumption products- trends in customers habits.

It has strong origination and KYC processes across its businesses to get deep

understanding of customers needs and profile.

Innovation

It has successfully executed a number of innovative and disruptive ideas in the financial

services industry to rise from a start-up to leadership position in less than two decades.

For instance:

IIFL gave away all their research free on indiainfoline.com and acquired millions

of readers

It pioneered online trading and revolutionized broking at lowest rate of 5 basis

points

It inducted a high profile institutional team from a foreign brokerage house in a

first of its kind deal in Indian broking industry

Distribution reach

It is present in around 4,000 business locations across more than 900 cities in India. Its

global footprint covers Colombo, Dubai, New York, Mauritius, London, Geneva and

Singapore.


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De-risked business

IIFL has a de-risked and diversified business model across multiple revenue streams.

It offers multiple products across all segments of financial services.

Risk management

The basis of the risk management and hence the sustainability is its underlying

conservatism. The objective of its risk management process is to insulate the company

from risks associated with the business while simultaneously creating an environment

conducive for growth. Its ability to manage organizational risk cascades from its board of

directors, comprising professionals with rich and varied experience. The risk appetite

defined by the board is reflected in its business plans and integrated into its operations.

It continuously strengthens its risk measurement tools customized to the nature of each

business segment. Many critical decision levels for investments, major lending and

policy initiatives are institutionalized through appropriate committees.

Well capitalized

The Group has net worth of around Rs20 billion.The company has a significantly

unutilized capacity to leverage.

Technology

Right from inception, IIFL has incubated and developed next generation technology for

its core businesses. IIFLs front office software is seamlessly integrated to a highly

automated proprietary back office, risk management and MIS software.

IIFL Trader Terminal is an entirely home grown proprietary technology, which allows

trading in Equities Cash & Derivatives, Commodities, Forex, Mutual Funds, NFOs andIPOs on a single screen.

Customer service

Its existing customer service organization has evolved with the singular goal since

inception that its customer experience should be the best. It offers services through

multiple customer touch-points such as personal interaction at its offices, call centre,

email, and online web-based interface. It has made significant investment in systems,

technology, people and their training, to ensure high service standards. It has also won an

award for Best Customer Service in Financial Services 2013. Some key elements of itsservice approach are first time right and lightning fast response time. It has taken

several proactive steps to reduce the incidence of grievances.


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ManagementIIFL:

Name Designation

Mr. Nirmal Jain Chairman

Mr. A K Purwar Independent Director

Mr. Nilesh Vikamsey Independent Director

Mr. Sunil Kaul Non Executive Director

Mr. R Venkataraman Managing Director

Mr. S Narayan Independent Director

Mr. Kranti Sinha Independent Director


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Corporate Structure:

Productline:

Equity:

IIFL is a member of BSE and NSE registered with NSDL and CDSL as a depositoryparticipant and provides broking services in the cash, derivatives and currency segments,

online and offline. IIFL is a dominant player in the retail as well as institutional segments

of the market. It became the first Indian broker to get a membership of the Colombo

Stock Exchange and is also the first Indian broker to have received an in-principal

approval for membership of the Singapore Stock Exchange. Investors opt for IIFL given

its unique combination of superior service, cutting-edge proprietary technology, advice

powered by world-acclaimed research.


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IIFL has rapidly emerged as one of the premier institutional equities houses in India with

a team of research analysts, a full fledged sales and training team coupled with an

experienced investment banking team.

Commodities:

IIFL offers commodities trading to its customers vide its membership of the MCX and

the NCDEX. Our domain knowledge and data based on in depth research of complex

paradigms of commodity kinetics, offers the customers a unique insight into behavioral

patterns of these markets. Its customers are ideally positioned to make informed

investment decisions with high probability of success.

Credit and Finance:

IIFL offers a wide array of secured loan products. Currently, secured loans (mortgage

loans, margin funding, loans against shares) comprise 94% of the loan book. It has robust

credit processes and collections mechanism resulting in overall NPAs of less than 1%.

The company has deployed proprietary loan-processing software to enable stringent

credit checks while ensuring fast application processing. Recently the company has also

launched loans against Gold.

Insurance:

IIFL entered the insurance distribution business in 2000 as ICICI Prudential Life

Insurance Co. Ltds corporate agent. Later, it became an Insurance broker in October

2008 in line with its strategy to have an open architecture model. The company now

distributes products of major insurance companies through its subsidiary India Infoline

Insurance Brokers Ltd. Customers can choose from a wide bouquet of products from

several insurance companies including Max New York Life Insurance, Metlife, RelianceLife Insurance, Bajaj Allianz Life, Birla Sunlife, Life Insurance Corporation, Kotak Life

Insurance and others.

Wealth Management Service:

IIFL offers private wealth advisory services to high-net-worth individuals and corporate

clients under the IIFL Private Wealth brand. IIFL Private Wealth is managed by a

qualified team of MBAs from IIMs and premier institutes with relevant industry

experience. The team advises clients across asset classes like sovereign and quasi-

sovereign debt, corporate and collateralized debt, direct equity, ETFs and mutual funds,third party Portfolio Management Services (PMS), derivative strategies, real estate and

private equity. It has developed innovative products structured on the fixed income

side.It also has tied up with Interactive Brokers LLC to strengthen its executive platform

and provide investors with a global investment platform.


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Investment Banking;

IIFLs investment banking division was launched in 2006. The business leverages upon

the strength of research and placement capabilities of the institutional and retail sales

teams. The experienced investment banking team possesses the skill set to manage all

kinds of investment banking transactions. Our close interaction with investors as well as

corporates helps understand and offer tailor-made solutions to fulfill requirements.The

company possesses strong placement capabilities across institutional, high net-worthindividuals and retail investors. This makes it possible for the team to place large issues

with marquee investors.

Competitors:

Name Last PriceMarket Cap.

(Rs. cr.)

Sales

TurnoverNet Profit Total Assets

Network 18 37.00 3,872.67 203.06 -29.91 3,814.28

Edelweiss 44.75 3,487.11 156.81 46.79 2,260.02

IIFL Holdings 99.50 2,960.01 88.67 97.77 1,310.02

SKS Microfin 252.65 2,734.00 518.99 69.85 1,226.52

Delta Corp 100.45 2,286.01 38.95 21.62 701.47

SWOT Analysis:

Strength 1. India Infoline Ltd gives all the types of services and products an

individual investor can dream and think of. All the financial

products and services are under one-roof.

2. India Infoline Ltd brings within the customers reach their

institutional ex-pertise and the ability to effectively combine an

invaluable understanding of the financial markets, with an intention

of building a long-term partnership

3. Customization: It understands the dreams, needs, aspirations,

concerns and resources are unique and this is reflected in every

move they do for the sake of individual customer.

4. Have over 2500 offices in India in over 500 cities

5. The teams of expert investment advisors customize plans to suit
http://www.moneycontrol.com/india/stockpricequote/financegeneral/network18mediainvestments/NMIhttp://www.moneycontrol.com/india/stockpricequote/financegeneral/network18mediainvestments/NMIhttp://www.moneycontrol.com/india/stockpricequote/financegeneral/edelweissfinancialservices/EC01http://www.moneycontrol.com/india/stockpricequote/financegeneral/edelweissfinancialservices/EC01http://www.moneycontrol.com/india/stockpricequote/financegeneral/iiflholdings/II15http://www.moneycontrol.com/india/stockpricequote/financegeneral/sksmicrofinance/SM11http://www.moneycontrol.com/india/stockpricequote/financegeneral/sksmicrofinance/SM11http://www.moneycontrol.com/india/stockpricequote/financegeneral/deltacorp/DC11http://www.moneycontrol.com/india/stockpricequote/financegeneral/deltacorp/DC11http://www.moneycontrol.com/india/stockpricequote/financegeneral/deltacorp/DC11http://www.moneycontrol.com/india/stockpricequote/financegeneral/sksmicrofinance/SM11http://www.moneycontrol.com/india/stockpricequote/financegeneral/iiflholdings/II15http://www.moneycontrol.com/india/stockpricequote/financegeneral/edelweissfinancialservices/EC01http://www.moneycontrol.com/india/stockpricequote/financegeneral/network18mediainvestments/NMI


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the needs of investors.

6. IIFL has been awarded the Best Broker, India , Most improved

brokerage, India , Fastest Growing Equity Broking House

Weakness 1. High risk exposure as seen by conservative population

2. Less emphasis on advertising causes lack of brand visibility

Opportunity 1. High income Urban families

2. More penetration into the growing cities

3. Indian economy seems to be out of recession. This is the right

time for investors to re-enter the market. The company should adopt

some strategies to increase the business through existing clients.

Threats 1. Stringent Economic measures by Government and RBI

2. Entry of foreign finance firms in Indian Market

3. Increasing awareness of mutual funds and ULIPs created by

Domestic Insti-tutional Investors has reduced the direct investment

in to stock market tosome extent. This automatically reduces the

business of stock brokers.


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Organizational Structure of IIFL:

Board of Directors

CEO

COO

Exec. Director (Retail) Exec. Director (Finance

& Operations)

Equity

Distribution Research

Online Business

Head

Client Acquisition

Grou

Zonal Sales

Manager(South

Zonal Sales

Manager(Nort

Zonal Sales

Manager(West)

Zonal Sales

Manager(East)

Regional Sales

Manager

Trainee

Assistant Sales

Manager


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ABOUT THE TOPIC

Technical AnalysisTechnical analysis is a method of predicting price movements and future market trends

by studying charts of historical data. The initial data for a technical analysis are prices:

the highest and the lowest prices, the price of opening and closing within a certain periodof time, and the volume of transactions. Technical analysis presupposes that all theinformation about the market and its further fluctuations is contained in the price chain.Any factor, that has some influence on the price, be it economic, political orpsychological, has already been considered by the market and included in the price,technical analysis is concerned with what has actually happened in the market, ratherthan what should happen and takes into account the price of instruments and the volumeof trading, and creates charts from that data to use as the primary tool.In a shopping mall,a fundamental analyst would go to each store, study the product that was being sold, andthen decide whether to buy it or not. By contrast, a technical analyst would sit on a benchin the mall and watch people go into the stores.

The Pillars of Technical Analysis a. Price:Price is the most important of these areas; we measure profits and losses in pricedifferences between buys and sells. It deserves most focus by analysts and academicsalike, but if all four can be employed together, the odds of making successful decisionscan be dramatically increased.

b. Volume: Volume includes such concepts as accumulation and distribution, marketbreadth,open interest, and trade count.c. Time:Time includes cycles, seasonality, and relationships between patterns andtrends from aduration point of view.d)Sentiment:Sentiment is a more subjective area that seeks to determine solely if themasses i.e. the consensus of investors- is tipped too far in one direction. At that point, it

pays to consider positioning against the crowd.

Objective of the StudyThe prime objective of the study is to understand the trends in the stock prices usingtechnical analysis and to use this information to determine the attractiveness of the scriptfor the purpose of investment.

The objectives can be summarized as:unaware or ineffective with the stock market; everyone is affected by the To determinethe future direction where the price of a stock is headed in the short run.To learn thebasic concepts which an individual should be aware of when he or she enters the stock

market; as when to enter the market and when to exit Developing suitable modelcomprising of various technical indicators which could be applied to the stock market ingeneral. Being a future finance student it is very necessary to gain the knowledgeof stock market.Understand the day to day fluctuations of stock market.Technicalanalysis of stock exchange (nifty).In the present scenario nobody can be market, so onecantignore the situation.


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SEBI

The Securities and Exchange Board of India(frequently abbreviated SEBI) is

theregulator for thesecurities market in India. It was established in the year 1988 and

given statutory powers on 12 April 1992 through theSEBI Act, 1992.It was officially

established by TheGovernment of India in the year 1988 and given statutory powers in

1992 with SEBI Act 1992 being passed by theIndian Parliament. SEBI has its

Headquarters at the business district ofBandra Kurla Complex inMumbai, and has

Northern, Eastern, Southern and Western Regional Offices inNew

Delhi,Kolkata,Chennai andAhmedabad respectively.Controller of Capital Issues was

the regulatory authority before SEBI came into existence; it derived authority from the

Capital Issues (Control) Act, 1947.

Initially SEBI was a non statutory body without any statutory power. However in the

year of 1995, the SEBI was given additional statutory power by the Government of India

through an amendment tothe Securities and Exchange Board of India Act, 1992. In

April, 1988 the SEBI was constituted as the regulator of capital markets in India under a

resolution of the Government of India.

The SEBI is managed by its members, which consists of following: a) The chairman who

is nominated by Union Government of India. b) Two members, i.e. Officers from Union

Finance Ministry. c) One member from The Reserve Bank of India. d) The remaining 5

members are nominated by Union Government of India, out of them at least 3 shall be

whole-time members.

The office of SEBI is situated at SEBI Bhavan, Bandra Kurla Complex, Bandra East,

Mumbai- 400051, with its regional offices at Kolkata, Delhi,Chennai & Ahmadabad. It

has recently opened local offices at Jaipur and Bangalore and is planning to open offices

at Guwahati, Bhubaneshwar, Patna, Kochi and Chandigarh in Financial Year 2013 -

2014.

Functions and responsibilities

The Preamble of the Securities and Exchange Board of India describes the basic

functions of the Securities and Exchange Board of India as "...to protect the interests of

investors in securities and to promote the development of, and to regulate the securities

market and for matters connected therewith or incidental there to".

SEBI has to be responsive to the needs of three groups, which constitute the market:

the issuers of securities

the investors
http://en.wikipedia.org/wiki/Regulatory_agencyhttp://en.wikipedia.org/wiki/Securitieshttp://en.wikipedia.org/wiki/Securities_and_Exchange_Board_of_India_Act,_1992http://en.wikipedia.org/wiki/Government_of_Indiahttp://en.wikipedia.org/wiki/Parliament_of_Indiahttp://en.wikipedia.org/wiki/Bandra_Kurla_Complexhttp://en.wikipedia.org/wiki/Mumbaihttp://en.wikipedia.org/wiki/New_Delhihttp://en.wikipedia.org/wiki/New_Delhihttp://en.wikipedia.org/wiki/Kolkatahttp://en.wikipedia.org/wiki/Chennaihttp://en.wikipedia.org/wiki/Ahmedabadhttp://en.wikipedia.org/w/index.php?title=The_Securities_and_Exchange_Board_of_India_Act,_1992&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=The_Securities_and_Exchange_Board_of_India_Act,_1992&action=edit&redlink=1http://en.wikipedia.org/wiki/Ahmedabadhttp://en.wikipedia.org/wiki/Chennaihttp://en.wikipedia.org/wiki/Kolkatahttp://en.wikipedia.org/wiki/New_Delhihttp://en.wikipedia.org/wiki/New_Delhihttp://en.wikipedia.org/wiki/Mumbaihttp://en.wikipedia.org/wiki/Bandra_Kurla_Complexhttp://en.wikipedia.org/wiki/Parliament_of_Indiahttp://en.wikipedia.org/wiki/Government_of_Indiahttp://en.wikipedia.org/wiki/Securities_and_Exchange_Board_of_India_Act,_1992http://en.wikipedia.org/wiki/Securitieshttp://en.wikipedia.org/wiki/Regulatory_agency


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the market intermediaries

Powers

For the discharge of its functions efficiently, SEBI has been vested with the following

powers:

1. to approve bylaws of stock exchanges.sebi

2. to require the stock exchange to amend their bylaws.

3. inspect the books of accounts and call for periodical returns from recognized

stock exchanges.

4. inspect the books of accounts of a financial intermediaries.

5. compel certain companies to list their shares in one or more stock exchanges.

6. registration brokers.

there are two types of brokers.

1.circuit broker 2.merchant broker

SEBI Committees

1. Technical Advisory Committee

2. Committee for review of structure of market infrastructure institutions

3. Members of the Advisory Committee for the SEBI Investor Protection and

Education Fund

4. Takeover Regulations Advisory Committee

5. Primary Market Advisory Committee (PMAC)

6.

Secondary Market Advisory Committee (SMAC)7. Mutual Fund Advisory Committee

8. Corporate Bonds & Securitization Advisory Committee

Major achievements

SEBI has enjoyed success as a regulator by pushing systematic reforms aggressively

and successively. SEBI is credited for quick movement towards making the markets

electronic and paperless by introducing T+5 rolling cycle from July 2001 and T+3 in

April 2002 and further to T+2 in April 2003. The rolling cycle of T+2

means,Settlement is done in 2 days afterTrade date. SEBI has been active in

settingup the regulations as required under law. SEBI did away with physical

certificates that were prone t`o postal delays, theft and forgery, apart from making the

settlement process slow and cumbersome by passing Depositories Act, 1996.

SEBI has also been instrumental in taking quick and effective steps in light of the

global meltdown and the Satyam fiasco. In October 2011, it increased the extent and
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quantity of disclosuresto be made by Indian corporate promoters.In light of the

global meltdown, it liberalised the takeover code to facilitate investments by

removing regulatory structures. In one such move, SEBI has increased the

application limit for retail investors to Rs 2 lakh, from Rs 1 lakh at present

primary market

The primary marketis the part of thecapital market that deals with issuing of

newsecurities. Companies, governments or public sector institutions can obtain fundsthrough the sale of a newstock orbond issues through primary market. This is typicallydone through aninvestment bank orfinance syndicate of securities dealers.

The process of selling new issues to investors is calledunderwriting. In the case of anewstock issue, this sale is aninitial public offering (IPO). Dealers earn a commissionthat is built into the price of the security offering, though it can be found intheprospectus. Primary markets create long term instruments through which corporateentities borrow from capital market.Once issued the securities typically trade on

asecondary market such as astock exchange,bond market orderivatives exchange.

secondary market

The secondary market, is also called aftermarket, is thefinancial market in which

previously issuedfinancial instruments such asstock,bonds,options, andfutures are

bought and sold.[1]Another frequent usage of "secondary market" is to refer to loans

which are sold by amortgage bank toinvestors such asFannie Mae andFreddie MacThe

term "secondary market" is also used to refer to the market for anyused goods or assets,

or an alternative use for an existing product or asset where the customer base is the

second market (for example, corn has been traditionally used primarily for food

production and feedstock, but a "second" or "third" market has developed for use in

ethanol production).With primary issuances of securities or financial instruments, or

theprimary market, investors purchase these securities directly fromissuers such

ascorporations issuingshares in anIPO orprivate placement,ordirectly from the federal

government in the case oftreasuries. After the initial issuance, investors can purchase

from other investors in the secondary market.The secondary market for a variety of assets

can vary fromloans to stocks, from fragmented to centralized, and fromilliquid to very

liquid. The major stock exchanges are the most visible example of liquid secondary

markets - in this case, for stocks of publicly traded companies. Exchanges such as

theNew York Stock ExchangeNew York Stock Exchange,London Stock

Exchange andNasdaqprovide a centralized, liquid secondary market for the investors

who own stocks that trade on those exchanges. Most bonds and structured products trade

over the counter, or by phoning the bond desk of ones broker-dealer. Loans sometimes

trade online using aLoan Exchange.

Initial public offering(IPO) or stock market launchis a type ofpublic

offering where shares of stock in a company are sold to the general public, on a securities

exchange, for the first time. Through this process, aprivate company transforms into
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apublic company. Initial public offerings are used by companies to raise expansion

capital, to possiblymonetize the investments of early private investors, and to become

publicly traded enterprises. A company selling shares is never required to repay the

capital to its public investors. After the IPO, when shares trade freely in the open market,

money passes between public investors. Although an IPO offers many advantages, there

are also significant disadvantages, chief among these is the costs associated with the

process and the requirement to disclose certain information that could prove helpful to

competitors, or create difficulties with vendors. Details of the proposed offering aredisclosed to potential purchasers in the form of a lengthy document known as

aprospectus. Most companies undertake an IPO with the assistance of aninvestment

banking firm acting in the capacity of anunderwriter. Underwriters provide several

services, including help with correctly assessing the value of shares (share price), and

establishing a public market for shares (initial sale). Alternative methods such as

thedutch auction have also been explored. In terms of size and public participation, the

most notable example of this method is theGoogle IPO.[1]China has recently emerged as

a major IPO market, with several of the largest IPOs taking place in that country. the

largest IPOs taking place in that country.

'Follow On Public Offer - FPO'

FPOs are popular methods for companies to raise additional equity capital in the capital

markets through a stock issue. Public companies can also take advantage of an FPO

issuing an offer for sale to investors, which is made through an offer document. FPOs

should not be confused with IPOs, as IPOs are the initial public offering of equity to the

public while FPOs are supplemantary issues made after a company has been established

on an exchange.

CNX NIFTY

The CNX Nifty is a well-diversified 50 stock index accurately reflecting overall marketconditions. The reward-to-risk ratio of CNX Nifty is higher than other leading indices,making it a more attractive portfolio hence offering similar returns, but at lesser risk.CNX Nifty is based upon solid economic research and is well respected internationally asa pioneering effort in better understanding how to make a stock market index. CNX NiftyIndex is computed using free float market capitalization method, wherein the level of theindex reflects the total free float market value of all the stocks in the index relative toparticular base market capitalization value.CNX Nifty can be used for a variety of purposes such as benchmarking fund portfolios,

launching of index funds, ETFs and structured products.Eligibility Criteria for Selection ofConstituent Stocksi.Market impact cost is the best measure of the liquidity of a stock. It accurately reflectsthe costs faced when actually trading an index. For a stock to qualify for possibleinclusion into the CNX Nifty, have traded at an average impact cost of 0.50% or lessduring the last six months for 90% of the observations, for the basket size of Rs. 20Million.
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ii.The company should have an investable weight factor (IWF) of at least 10%.

iii. The company should have a listing history of 6 months.

iv.A company which comes out with an IPO will be eligible for inclusion in the index, ifit fulfills the normal eligibility criteria for the index for a 3 month period instead of a 6month period.

Index Re-Balancing:Index is re-balanced on semiannual basis. The cut-off date is January 31 and July 31 ofeach year, i.e. For semi-annual review of indices, average data for six months ending thecut-off data is considered. Four weeks prior notice is given to market from the date ofchange.

Index Govenance:A professional team at IISL manages CNX Nifty Index. There is a three-tier governancestructure comprising the Board of Directors of IISL, the Index Policy Committee, and the

Index Maintenance SubCommittee.

Portfolio CharacteristicsMethodology Free Float Market Capitalization

No. of Constituents 50

Launch Date April 01, 1996

Base Date November 03, 1995

Base Value 1000

Calculation Frequency Real-time Daily

Index Rebalancing

Semi-Annually

Sector RepresentationSector

Weight(%)

FINANCIAL SERVICES27.45

IT16.34

ENERGY14.31

CONSUMER GOODS12.63

AUTOMOBILE8.82

PHARMA 5.23CONSTRUCTION

4.97

METALS4.80

CEMENT & CEMENT PRODUCTS 3.08

TELECOM 1.68

INDUSTRIAL MANUFACTURING 0.69


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Top 10 constituents by weightage

Companys Name Weight(%)

I T C Ltd 8.69

Infosys Ltd 7.06

Reliance Industries Ltd. 6.81

ICICI Bank Ltd. 6.40

HDFC Bank Ltd. 6.18

Housing Development Finance

Corporation Ltd

6.14

Tata Consultancy Services Ltd. 4.86

Larsen & Toubro Ltd. 4.62

Tata Motors Ltd. 3.19

State Bank of India 2.64

StatisticsQTD TYD 1year 5years Since

inception

Returns 6.35 6.35 17.98 17.27 10.88

1year 5years Since inception

Std. Deviation * 18.07 20.81 25.83

Beta (Nifty) 1.00 1.00 1.00

Correlation 1.00 1.00 1.00

Fundamentals

P/E P/B Dividend

18.86 3.23 1.37


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DOW THEORY

The Dow theoryon stock price movement is a form oftechnical analysis that includes

some aspects ofsector rotation. The theory was derived from 255Wall Street Journal

editorials written byCharles H. Dow (18511902), journalist, founder and first editor oftheWall Street Journal and co-founder ofDow Jones and Company.

1. The market has three movements

(1) The "main movement", primary movement or major trend may last from less

than a year to several years. It can be bullish or bearish. (2) The "medium swing",

secondary reaction or intermediate reaction may last from ten days to three

months and generally retraces from 33% to 66% of the primary price change

since the previous medium swing or start of the main movement. (3) The "short

swing" or minor movement varies with opinion from hours to a month or more.

The three movements may be simultaneous, for instance, a daily minor movement

in a bearish secondary reaction in a bullish primary movement.

2. Market trends have three phases

Dow theory asserts that major market trends are composed of three phases: an

accumulation phase, a public participation (or absorption) phase, and a

distribution phase. The accumulation phase (phase 1) is a period when investors

"in the know" are actively buying (selling) stock against the general opinion ofthe market. During this phase, the stock price does not change much because

these investors are in the minority demanding (absorbing) stock that the market at

large is supplying (releasing). Eventually, the market catches on to these astute

investors and a rapid price change occurs (phase 2). This occurs when trend

followers and other technically oriented investors participate. This phase
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continues until rampant speculation occurs. At this point, the astute investors

begin to distribute their holdings to the market (phase 3).

3. The stock market discounts all news

Stock prices quickly incorporate new information as soon as it becomes available.

Once news is released, stock prices will change to reflect this new information.

On this point, Dow theory agrees with one of the premises of theefficient markethypothesis.

4. Stock market averages must confirm each other

In Dow's time, the US was a growing industrial power. The US had population

centers but factories were scattered throughout the country. Factories had to ship

their goods to market, usually by rail. Dow's first stock averages were an index of

industrial (manufacturing) companies and rail companies. To Dow, a bull market

in industrials could not occur unless the railway average rallied as well, usually

first. According to this logic, if manufacturers' profits are rising, it follows that

they are producing more. If they produce more, then they have to ship more

goods to consumers. Hence, if an investor is looking for signs of health in

manufacturers, he or she should look at theperformance of the companies that

ship the output of them to market, the railroads. The two averages should be

moving in the same direction. When the performance of the averages diverge, it is

a warning that change is in the air.

BothBarron's Magazine and theWall Street Journal still publish the daily

performance of the Dow Jones Transportation Index in chart form. The index

contains major railroads, shipping companies, and air freight carriers in the US.

5. Trends are confirmed by volume

Dow believed that volume confirmed price trends. When prices move on low

volume, there could be many different explanations. An overly aggressive seller

could be present for example. But when price movements are accompanied by

high volume, Dow believed this represented the "true" market view. If many

participants are active in a particular security, and the price moves significantly inone direction, Dow maintained that this was the direction in which the market

anticipated continued movement. To him, it was a signal that a trend is

developing.

6. Trends exist until definitive signals prove that they have ended
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Dow believed that trends existed despite "market noise". Markets might

temporarily move in the direction opposite to the trend, but they will soon resume

the prior move. The trend should be given the benefit of the doubt during these

reversals. Determining whether a reversal is the start of a new trend or a

temporary movement in the current trend is not easy. Dow Theorists often

disagree in this determination. Technical analysis tools attempt to clarify this but

they can be interpreted differently by different investors.

Chart PatternsChart Patterns: Introduction

Chart Patterns: Why Charts?Chart Patterns: Head And Shoulders

Chart Patterns: Cup And Handle

Chart Patterns: Double Top And Double Bottom

Chart Patterns: Triangles

Chart Patterns: Flags And Pennants

Chart Patterns: The Wedge

Chart Patterns: Gaps

Chart Patterns: Triple Tops And Bottoms

Chart Patterns: Round BottomsChart Patterns: Conclusion.

1) Introduction

Ever looked at the chart of a stock or commodity? Most likely, you have. Just about

everyone who has ever analyzed a security takes a look at the price movements of

the past month, quarter, year, etc.

For many analysts, the chart of a security is the starting point for all future analysis.

Even staunch critics of technical analysis use charts to some extent.

And for good reason: charts can provide a lot of information in a small amount of time.

Taking a look at the five-year chart of a company, you can quickly determine how well

shareholders have done over the period. Based on the movements represented on the

chart, one can tell if a company's share value has grown over the period or lagged.

The chart reader also can determine the volatility of the companys shares by looking at

the movements on the chart. A company whose stock exhibits very jagged up-and-

down movements is clearly more volatile than a company whose stock moves relatively


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smoothly across time.

But this is only the tip of the iceberg in terms of how charts are used by market

participants. In this tutorial, we'll introduce you to some of the more advanced uses of

charts.

2) Why Charts?

Before the advent of computers and data feeds, the use of charts to formulate tradingstrategies was outside the mainstream of trading techniques. The reason, creating chartswas difficult. Each chart had to be created by hand, with chartists adding another datapoint at the close of trading for each security they were following. Also, chart users wereoften misrepresented as a bizarre group of individuals huddled in the recesses of thebrokerage house as they added the latest data point to their closely coveted charts.

But with the advancement of technology and the increased popularity of technical

analysis, the use of charts has greatly increased, making them one of, if not the most

important tools used by technical traders.

A single chart has the ability to display a significant amount of information. More

conceptually, charts are an illustration of the struggle between buyers and sellers. While

this point is debatable between the schools of investment like technical, fundamental andefficient market analysis, technical analysis assumes that: a) prices discount everything,

b) prices moves in trends and c) history repeats itself.

Assuming the above tenets are true, charts can be used to formulate trading signals

and can even be the only tool a trader utilizes.

Patterns on a ChartChart patterns signal to traders that the price of a security is likely to move in one

direction or another when the pattern is complete.

There are two types of patterns in this area of technical analysis: reversal andcontinuation. A reversal pattern signals that a prior trend will reverse on completion

of the pattern. Conversely, a continuation pattern indicates that the prior trend will

continue onward upon the pattern's completion.

The difficulty in identifying chart patterns and their subsequent signals is that chart use isnot an exact science. In fact, it's often viewed as more of an art than a science. Whilethere is a general idea and components to every chart pattern, the price movement doesnot necessarily correspond to the pattern suggested by the chart. This should notdiscourage potential users of charts - once the basics of charting are understood, thequality of chart patterns can be enhanced by looking at volume and secondary indicators.

There are several concepts that need to be understood before reading about specific chart

patterns. The first is a trendline, which is a line drawn on a chart to signal a level of

support or resistance for the price of the security. Support trendlines are the levels at

which prices have difficulty falling below. Conversely, a resistance trendline illustrates

the level at which prices have a hard time going above. These trendlines can be constant

price levels, such as $50, or rise or fall in the direction of the trend as time goes on.

Now that we have an understanding of the concepts behind the use of charts as a trading


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technique, we can start to explore the many different patterns used by chartists.

3) Head And Shoulders

The head-and-shoulders pattern is one of the most popular and reliable chart patterns

in technical analysis. And as one might imagine from the name, the pattern looks

like a head with two shoulders.

Head and shoulders is a reversal pattern that, when formed, signals the security is likely

to move against the previous trend. There are two versions of the head-and-shoulderspattern. The head-and-shoulders top is a signal that a security's price is set to fall, once

the pattern is complete, and is usually formed at the peak of an upward trend. The

second version, the head-and-shoulders bottom (also known as inverse head and

shoulders), signals that a security's price is set to rise and usually forms during a

downward trend.


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The head and shoulders are sets of peaks and troughs. The neckline is a level of support

or resistance. The head and shoulders pattern is based on Dow Theory's peak-and-trough

analysis. An upward trend, for example, is seen as a period of successive rising peaks and

rising troughs. A downward trend, on the other hand, is a period of falling peaks andtroughs. The head-and-shoulders pattern illustrates a weakening in a trend where there is

deterioration in the peaks and troughs.

4) Cup And Handle

A cup-and-handle pattern resembles the shape of a tea cup on a chart. This is a bullishcontinuation pattern where the upward trend has paused, and traded down, but willcontinue in an upward direction upon the completion of the pattern. This pattern canrange from several months to a year, but its general form remains the same.

The cup-and-handle pattern is preceded by an upward move, which stalls and sells off.

The sell-off is what forms the initial part of this pattern. After the sell-off, the security

will basically trade flat for an extended period of time, with no clear trend. The next part

of the pattern is the upward move back towards the peak of the preceding upward move.

The last part of the pattern, known as the handle, is a relatively smaller downward move

before the security moves higher and continues the previous trend.


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5) Double Top And Double Bottom

The double top and double bottom are another pair of well-known chart patterns whosenames dont leave much to the imagination. These two reversal patterns illustrate a

security's attempt to continue an existing trend. Upon several attempts to move higher,the trend is reversed and a new trend begins. These chart patterns formed will oftenresemble what looks like a W (for a double bottom)or an M (double top).

Double Top

The double-top pattern is found at the peaks of an upward trend and is a clear signalthat the preceding upward trend is weakening and that buyers are losing interest. Upon

completion of this pattern, the trend is considered to be reversed and the security is

expected to move lower.

The first stage of this pattern is the creation of a new high during the upward trend,

which, after peaking, faces resistance and sells off to a level of support. The next stage

of this pattern will see the price start to move back towards the level of resistance found

in the previous run-up, which again sells off back to the support level. The pattern is

completed when the security falls below (or breaks

down) the ` `support level that had backstopped each move the security made, thus

marking the beginnings of a downward trend.Double BottomThis is the opposite chart pattern of the double top as it signals a reversal of the

downtrend into an uptrend. This pattern will closely resemble the shape of a "W".


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The double bottom is formed when a downtrend sets a new low in the price movement.This downward move will find support, which prevents the security from moving lower.

Upon finding support, the security will rally to a new high, which forms the security'sresistance point. The next stage of this pattern is another sell-off that takes the securitydown to the previous low. These two support tests form the two bottoms in the chart

pattern. But again, the security finds support and heads back up. The pattern is confirmedwhen the price moves above the resistance the security faced on the prior move up.6) Triangles

As you may have noticed, chart pattern names don't leave much to the imagination.

This is no different for the triangle patterns, which clearly form the shape of a triangle.The basic construct of this chart pattern is the convergence of two trendlines - flat,

ascending or descending - with the price of the security moving between the twotrendlines.

There are three types of triangles, which vary in construct and significance: the

symmetrical triangle, the descending triangle and the ascending triangle.

Symmetrical triangle

The symmetrical triangle is mainly considered to be a continuation pattern that signals aperiod of consolidation in a trend followed by a resumption of the prior trend. It isformed by the convergence of a descending resistance line and an ascending supportline. The two trendlines in the formation of this triangle should have a similar slopeconverging at a point known as the apex. The price of the security will bounce betweenthese trendlines, towards the apex, and typically breakout in the direction of the prior

trend.


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Ascending Triangle

The ascending triangle is a bullish pattern, which gives an indication that the price of the

security is headed higher upon completion. The pattern is formed by two trendlines: a

flat trendline being a point of resistance and an ascending trendline acting as a pricesupport.

The price of the security moves between these trendlines until it eventually breaks out

to the upside. This pattern will typically be preceded by an upward trend, which makes

it a continuation pattern; however, it can be found during a downtrend.

Descending triangle

The descending triangle is the opposite of the ascending triangle in that it gives a bearish

signal to chartists, suggesting that the price will trend downward upon completion of the

pattern. The descending triangle is constructed with a flat support line and a downward-

sloping resistance line.Similar to the ascending triangle, this pattern is generally

considered to be a continuation pattern, as it is preceded by a downward trendline. But

again, it can be found in an uptrend.


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7) Flags And Pennants

The flag and pennant patterns are two continuation patterns that closely resembleeach other, differing only in their shape during the pattern's consolidation period.

This is the reason the terms flag and pennant are often used interchangeably. A flagis a rectangular shape, while the pennant looks more like a triangle.

FlagThe flag pattern forms what looks like a rectangle. The rectangle is formed by two

parallel trendlines that act as support and resistance for the price until the price

breaks out. In general, theflag will not be perfectly flat but will have its trendlines

sloping.

In general, the slope of the flag should move in the opposite direction of

the initial sharp price movement; so if the initial movement were up, the flag should be

downward sloping.

The buy or sell signal is formed once the price breaks through the support or resistance

level, with the trend continuing in the prior direction. This breakthrough should be on

heavier volume to improve the signal of the chart pattern.

The Pennant

The pennant forms what looks like a symmetrical triangle, where the support andresistance trendlines converge towards each other. The pennant pattern does not need tofollow the same rules found in triangles, where they should test each support orresistance line several times. Also, the direction of the pennant is not as important as it isin the flag; however, the pennant is generally flat.


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General Ideas

While the construct of the pause in the trend is different for the flag and pennant, the

attributes of the chart patterns themselves are similar. It is vital that the price movement

prior to the flag or pennant be a strong, sharp move.

Typically, these patterns take less time to form during downtrends than in uptrends. In

terms of pattern length, they are generally short-term patterns lasting one to three weeks,

but can be formed over longer periods.

The volume, as with most breakout signals, should be seen as strong during the

breakout to confirm the signal. Upon breakout, the initial price objective is equal to the

distance of the prior move added to the breakout point. For example, if a prior sharp up

movement was from $30 to $40, then the resulting price objective from a price breakout

of $38 would be $48 ($38+$10).

8) The Wedge

The wedge chart pattern signals a reverse of the trend that is currently formed within the

wedge itself. Wedges are similar in construction to a symmetrical triangle in that thereare two trendlines - support and resistance - which band the price of a security.

The wedge pattern differs in that it is generally a longer-term pattern, usuallylasting three to six months. It also has converging trendlines that slant in an either

upward or downward direction, which differs from the more uniform trendlines of

triangles.

There are two main types of wedges falling and rising which differ on the

overall slant of the pattern. A falling wedge slopes downward, while a rising wedge

slants upward.

Falling Wedge

The falling wedge is a generally bullish pattern signaling that one will likely see the

price break upwards through the wedge and move into an uptrend. The trendlines of

this pattern converge, with both being slanted in a downward direction as the price is

trading in a downtrend From the below, one can see that a wedge is similar to the

triangles, in that the price movement bounces between the two trendlines, which are

bounding the price movement.


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Rising Wedge

Conversely, a rising wedge is a bearish pattern that signals that the security islikely to head in a downward direction. The trendlines of this pattern converge, with

both trendlines slanted in an upward direction. Again, the price movement is bounded

by the two converging trendlines. As the price moves towards the apex of the pattern,

momentum is weakening. A move below the lower support would be viewed by traders

as a reversal in the upward trend.

9) Gaps

A gap in a chart is essentially an empty space between one trading period and theprevious trading period. They usually form because of an important and material event

that affects the security, such as an earnings surprise or a merger agreement.

This happens when there is a large-enough difference in the opening price of a tradingperiod where that price and the subsequent price moves do not fall within the range of

the previous trading period. For example, if the price of a companys stock is trading

near $40 and the next trading period opens at $45, there would be a large gap up on the

chart between these two periods, as shown by the figure below.


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Gap price movements can be found on bar charts and candlestick charts but will not be

found on point-and-figure or basic line charts. The reason for this is that every point on

both point-and-figure charts and line charts are connected.

Common Gap

As its name implies, the common gap occurs often in the price movements of a security.

For this reason, it's not as important as the other gap movements but is still worth noting.

These types of gaps often occur when a security is trading in a range and will often be

small in terms of the gap's price movement. They can be a result of commonly

occurring events, such as low-volume trading days or after an announcement of a

stock split.

Breakaway Gap

A breakaway gap occurs at the beginning of a market move - usually after the security

has traded in a consolidation pattern, which happens when the price is non-trendingwithin a bounded range. It is referred to as a breakaway gap as the gap moves the

security out of a non-trending pattern into a trending pattern.


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Runaway Gap (Measuring Gap)

A runaway gap is found around the middle of a trend, usually after the price has already

made a strong move. It is a healthy sign that the current trend will continue as it

indicates continued, and even increasing, interest in the security.

After a security has made a strong move, many of the traders that have been on the

sideline waiting for a better entry or exit point decide that it may not be coming and if

they wait any longer they will miss the trade. It is this increased buying or selling that

creates the runaway gap and continuation of the trend.

Volume in a runaway gap is not as important as it is for a breakaway gap but generally

should be marked with average volume. If the volume is too extreme, it could signal that

the runaway gap is actually an exhaustion gap (discussed further in the next section),which signals the end of a trend.

The runaway gap forms support or resistance in the exact same manner as the breakaway

gap. Likewise, the measuring gap does not often fill, and there's cause for concern if the

price breaks through the support or resistance, as it is a sign that the trend is weakening -

and could even signal that this is an exhaustion gap and not a runaway gap.

Exhaustion Gap

This is the last gap that forms at the end of a trend and is a negative sign that the trend isabout to reverse. This usually occurs at the last thrusts of a trend

(typically marked with panic or hype), but can also be the point when weakermarket participants start to move in or out of thesecurity.

The exhaustion gap usually coincides with an irrational market philosophy, such as the

security being touted as "a can't-miss opportunity" or conversely as something to "avoid

at all costs".


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Above is an example of an island-bottom reversal that occurs at the end of a downtrend. It's

formed when an exhaustion gap appears in a downtrend followed by a period of flat trading.

The pattern is confirmed when an upward breakaway gap forms in the price pattern.

The size of the trend reversal or the quality of the signal is dependent on the location of

the island in the prior trend. If it happens near the beginning of a trend, then the size of

the reversal will likely be less significant.

10 Triple Tops And Bottoms

The triple top and triple bottom are reversal patterns that are formulated when a security

attempts to move past a key level of support or resistance in the direction of the prevailingtrend.

This chart pattern represents the market's attempt to move a security in a certain direction.

After three failed attempts, the buyers (in the case of a top) or sellers

(in the case of a bottom) give up, and the opposing group in the market takes a hold of thesecurity, sending it downward (sellers) or upward (buyers).Triple Top

This bearish reversal pattern is formed when a security that is trending upward tests a

similar level of resistance three times without breaking through. Each time the security

tests the resistance level, it falls to a similar area of support. After the third fall to the

support level, the pattern is complete when the security falls through the support; theprice is then expected to move in a downward trend.


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The first step in this pattern is the creation of a new high in an uptrend that is stalled by

selling pressure, which forms a level of resistance. The selling pressure causes the price to

fall until it finds a level of support, as buyers move back into the security. The buying

pressure sends the price back up to the area of resistance the security previously met. Again,

the sellers enter the market and send the security back down to the support level.

Triple Bottom

This bullish reversal pattern has all of the same attributes as the triple top but signals areversal of a downward trend. The triple-bottom pattern illustrates a security that istrading in a downtrend and attempts to fall through a level of support three times, eachtime moving back to a level of resistance. After the third attempt to push the price lower,the pattern is complete when the price moves above the resistance level and beginstrading in an upward trend.

This pattern begins by setting a new low in a downtrend, which is followed by a rally to a

high. This sets up the range of trading for the triple-bottom pattern. After hitting the high, the

price again comes under selling pressure, which sends it back down to the previous low.

Buyers again move back into the security at this support level, sending the price back up

again, usually to the previous high.

11 Round Bottoms

A rounding bottom, also referred to as a saucer bottom, is a long-term reversal pattern that

signals a shift from a downtrend to an uptrend. This pattern is traditionally thought to lastanywhere from several months to several years. Due to the long-term look of these patternsand their components, the signal and construct of these patterns are more difficult to identifythan other reversal patterns.

A rounding-bottom pattern looks similar to a cup and handle, but without the handle. The

basic formation of a rounding bottom comes from a downward price movement to a low,

followed by a rise from thelow back to the start of the downward price movement - forming

what looks like a rounded bottom.


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ConclusionThis introduction to chart patterns has provided a broad overview of chart pattern analysis

and several of the largest patterns.

Here's a brief summary of what we've covered:

Chart analysis is the technique of using patterns formed on a securities chart to

formulate buy and sell signals.

There are two types of chart patterns: reversal and continuation. A continuation pattern suggests that the prior trend will continue upon

completion of the pattern.

A reversal pattern suggests that the prior trend will reverse uponcompletion of the pattern.

A head-and-shoulders top suggests a reversal in the prior uptrend. An inverse head and shoulders suggests a reversal in the prior downtrend. A cup-and-handle pattern is a bullish continuation pattern that suggests a

continuation of the prior uptrend. A double top is a bearish reversal pattern, which suggests that the preceding

up trend will reverse after confirmation of the pattern. A double bottom is a bullish reversal pattern, which suggests that the prior downtrend

will reverse. There are three main types of triangle patterns - symmetrical, descending and

ascending, which are constructed by converging trendlines.

A symmetrical triangle, which is formed when two similarly sloped trendlines

converge, typically suggests a continuation of the prior trend.

A descending triangle, which is formed when a downward sloping trendlineconverges towards a horizontal support line, suggests a downward trendafter completion of the pattern.

An ascending triangle, which is formed when an upward sloping trendline convergestowards a horizontal resistance line, suggests an uptrend after completion of the

pattern. Flags and pennants are continuation patterns formed after a sharp price movement.

The move consolidates, forming a flag shape or pennant share, and suggestsanother strong move in the same direction of the prior move upon completion.


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A wedge chart pattern suggests a reversal in the prior trend when the price action

moves outside of the converging trend lines in the opposite direction of the prior

trend.A gap is formed on a chart when there is an empty space between two time

periods. Common gap patterns include: common, breakaway, runaway

(measuring) and exhaustion. A triple top is a reversal pattern formed when a security attempts to move past a level

of resistance three times and fails. Upon failure of the third attempt the trend isthought to reverse and move in a downward trend.

A triple bottom is a reversal pattern formed when a security attempts to move belowan area of support three times but fails to do so. Upon failure of the third attempt

below resistance the trend is thought to reverse and move upward. A rounding bottom is a long-term reversal pattern that signals a shift from a

downward trend to an upward trend.

Exponential Moving Average - EMA

A type of moving average that is similar to a simple moving average, except that more weight

is given to the latest data. The exponential moving average is also known as "exponentially

weighted moving average". This type of moving average reacts faster to recent price changes

than a simple moving average. The 12- and 26-day EMAs are the most popular short-term

averages, and they are used to create indicators like the moving average convergence

divergence (MACD) and the percentage price oscillator (PPO). In general, the 50- and 200-day

EMAs are used as signals of long-term trends.

'Relative Strength Index - RSI'

A technical momentum indicator that compares the magnitude of recent gains to recent losses

in an attempt to determine overbought and oversold conditions of an asset. It is calculated

using the following formula:

RSI = 100 - 100/(1 + RS*)

Where RS = Average of x days' up closes / Average of x days' down closes.


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As you can see from the chart, the RSI ranges from 0 to 100. An asset is deemed to be

overbought once the RSI approaches the 70 level, meaning that it may be getting overvalued

and is a good candidate for a pullback. Likewise, if the RSI approaches 30, it is an indication

that the asset may be getting oversold and therefore likely to become undervalued.

Method 0f technical analysis

Steps involved in technical analysis

Under standing the dow theories behind technical analysi

a. Look for quick results.b. Read charts to spot price trendsc. Understanding the concepts of support and resistance.d. Pay attention to the volume of trading.e. Use moving averages to smooth out minor price fluctuationsf. Use oscillators and indicators to support what the price movemets are telling


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Limitations of Technical Analysis

1. Analyst Bias

Just as with fundamental analysis, technical analysis is subjective and our personal biases canbe reflected in the analysis. It is important to be aware of these biases when analyzing a chart.If the analyst is a perpetual bull, then a bullish bias will overshadow the analysis.

2. Open to Interpretation

Furthering the bias argument is the fact that technical analysis is open to interpretation. Eventhough there are standards, many times two technicians will look at the same chart and painttwo different scenarios or see different patterns. Both will be able to come up with logical

support and resistance levels as well as key breaks to justify their position.

3. Too Late

Technical analysis has been criticized for being too late. By the time the trend is identified, asubstantial portion of the move has already taken place..

4. Always Another Level

Even after a new trend has been identified, there is always another "important" level close athand. Technicians have been accused of sitting on the fence and never taking an unqualifiedstance.

5. Trader's Remorse

Not all technical signals and patterns work. When you begin to study technical analysis, youwill come across an array of patterns and indicators with rules to match. For instance: A sellsignal is given when the neckline of a head and shoulders pattern is broken. Even though this isa rule, it is not steadfast and can be subject to other factors such as volume and momentum. Inthat same vein, what works for one particular stock may not work for another.


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Technical Analysis

Technical Strength:

Indicator Analysis

RSI RSI is 78.0. According to RSI analysis, nifty is overbought.

MACD MACD: 183.0 and Signal Line: 169.0. According to MACD analysis,

nifty is technically strong.

Simple MovingAverage According to simple moving average analysis, nifty is in a stronguptrend. Major support levels are 7396.83, 7031.15, 6345.559.

Exponential Moving

Average

According to exponential moving average analysis, nifty is in a strong

uptrend. Major support levels are 7389.795, 7088.41, 6483.634.

Bollinger Bands %b is 0.918. According to bollinger bands, nifty is technically strong.

Fibonacci

Retracement

According to fibonacci retracement, price is above all levels. Major

support is at 7294.557 and 7169.3. Resistance level is 7700.05.

Average True

Range

ATR: 104

Average Directional

Index

ADX is 52.6 which means NIFTY's trend is ending soon.
http://techpaisa.com/chart/nifty/adx/http://techpaisa.com/chart/nifty/adx/http://techpaisa.com/chart/nifty/atr/http://techpaisa.com/chart/nifty/atr/http://techpaisa.com/chart/nifty/fibonacci-retracement/http://techpaisa.com/chart/nifty/fibonacci-retracement/http://techpaisa.com/chart/nifty/bollinger-bands/http://techpaisa.com/chart/nifty/bollinger-bands/http://techpaisa.com/chart/nifty/ma/http://techpaisa.com/chart/nifty/ma/http://techpaisa.com/chart/nifty/sma/http://techpaisa.com/chart/nifty/sma/http://techpaisa.com/chart/nifty/macd/http://techpaisa.com/chart/nifty/rsi/


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End-of-Day Stock Price - NSE

June 12, 2014

Open Price 7641.3

High Price 7658.0

Low Price 7593.8

Close Price 7649.9

Absolute Change 23.05

Percentage Change 0.302%

Weekly Change 2.35%

Monthly Change 7.39%

Yearly Change 29.2%

52-week high 7700.05

52-week low 5118.85


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A head and shoulders pattern is reversal pattern that signals a security is likely to

move against its previous trend.

Acup and handle pattern is a bullish continuation pattern in which the upward trend

has paused but will continue in an upward direction once the pattern is confirmed.

Double tops anddouble bottoms are formed after a sustained trend and signal tochartists that the trend is about to reverse. The pattern is created when a price

movement tests support or resistance levels twice and is unable to break through.

Atriangle is a technical analysis pattern created by drawing trendlines along a price

range that gets narrower over time because of lower tops and higher bottoms.

Variations of a triangle includeascending anddescending triangles.

Flags andpennants are short-term continuation patterns that are formed when there is

a sharp price movement followed by a sideways price movement.

Thewedge chart pattern can be either a continuation or reversal pattern. It is similar to

a symmetrical triangle except that the wedge pattern slants in an upward or downward

direction.

Agap in a chart is an empty space between a trading period and the following trading

period. This occurs when there is a large difference in prices between two sequential

trading periods.

Triple tops and triple bottoms are reversal patterns that are formed when the price

movement tests a level of support or resistance three times and is unable to break .

Arounding bottom (or saucer bottom) is a long-term reversal pattern that signals a

shift from a downward trend to an upward trend.

Amoving average is the average price of a security over a set amount of time. There

are three types:simple,linear andexponential.

Moving averages help technical traders smooth out some of thenoise that is found in

day-to-day price movements, giving traders a clearer view of the price trend.

Indicators are calculations based on the price and the volume of a security that

measure such things as money flow, trends, volatility and momentum. There are two

types:leading andlagging.

Theaccumulation/distribution line is a volume indicator that attempts to measure the

ratio of buying to selling of a security.

Theaverage directional index (ADX) is a trend indicator that is used to measure the

strength of a current trend.

TheAroon indicator is a trending indicator used to measure whether a security is in an

uptrend or downtrend and the magnitude of that trend.

The Aroon oscil

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