Mayank Mehta Final Project.docx

A REPORT ON TECHNICAL ANALYSIS OF STOCKS IN INDIAN MARKET By MAYANK MEHTA 45462 GFMP batch MUMPJTWEMAY'17 AT (MSS SECURITIES PVT LTD, MUMBAI) BSE Institute Limited 18th&19th Floor, P.J.Towers,Dalal Street Mumbai-400001

A REPORT ON TECHNICAL ANALYSIS OF STOCKS IN INDIAN MARKET By MAYANK MEHTA 45462 GFMP batch MUMPJTWEMAY'17 A report submitted in partial fulfilment of the course of Global Financial Markets Professional (GFMP) AT MSS Securities Pvt. Ltd. BSE Institute Limited 18th&19th Floor, P.J.Towers,Dalal Street Mumbai-400001

BSE Institute Limited 18th&19th Floor, P.J.Towers, Dalal Street, Mumbai-400001 Organization: MSS SECURITIES PVT LTD

Date of Start: 12th September 2018

Department: FINANCE

Date of Submission:

Title of the Project: TECHNICAL ANALYSIS OF STOCKS IN INDIAN MARKET

Name: MAYANK S MEHTA

ID No.: 45462

Name : Mr. Ajit Sanghvi

Designation: Director

Objective of the Report: The objectives of the internship was to analyze tools of technical analysis can be used in forecasting stock prices. To know the movements (upward or downward) of stock prices of selected company stocks through Technical analysis. To know how best we can utilize these analyses to meet the financial goals. To help the investor in making decisions based on report. Studying the stock price movement of the security market. Background: MSS Securities Private Limited (MSSPL) is one of the leading stock brokers of The Stock Exchange, Mumbai. It is also a Member of the Derivatives segment of the exchange. The internship required me to work majorly on Technical Analysis of the securities of the selected companies and to assist investment decisions in this Indian Market. It also involved in learning Institutional Dealing and Visiting Institutions to meet clients and create long lasting relationship with the company. Methodology used: The methodology used was Secondary Source i.e., sources of data are collected through website, various publication books, magazines, newspaper and reports prepared by research scholars etc. To carry out this project secondary data is collected which is the closing market price. Statistical Tools such as Exponential Moving Average (EMA), Relative strength Index (RSI) and Commodity Channel Index (CCI) method were used. Findings & Conclusion: Investment is a financial activity that involves risk. The objective of an investor is specified as maximization of return and minimization of risk. It is highly essential for the investor to do technical analysis for deciding the suitable stock. There is only one side to the stock market and it is not the bull side or the bear side but the right side. Always sell what shows you a loss and keep what shows you profit. Technical analysis can be used, when to buy and when to sell the stock. It is very helpful in determining the trend of the stock price. In stock market, trend is considered to be a investor’s best friend. Recommendations: Investors should undertake an analysis before investing into the stock market, as most of the investors do not undertake any study before entering into a particular stock.

Acknowledgement

Firstly, I would like to thank my Company Guide Mr. Ajit Sanghvi, Director at MSS Securities Pvt. Ltd. for giving me this wonderful opportunity to work under his guidance and expertise. His leadership and vision steered this project from day one. Without his expert advice and encouragement, this Internship Program would not have been possible. This project would have been impossible without the support and guidance of Prof. Benugopal Saha and Mrs. Manami Rej for mentoring this IP project, who provided me the knowledge and possibility to complete this project report. A special thanks to the staff of MSS Securities Pvt. Ltd. for being the best colleagues at work. It was always a pleasure coming to work with such lovely and engaging people.

Table of Contents 1 Introduction 1.1 Company Profile and History 1.2 Management 1.3 Organisation and Infrastructure 1.4 Business Activities 1.5 Company Details 1.6 Daily work allotment at MSS Securities 1.7 Industry Overview 1.8 Technical Analysis 2 Objectives 3 Methodology 4 Findings 5 Conclusions 6 Limitations 7 Recommendations 8 Bibliography

Introduction

Company Profile and History:

MSS Securities Private Limited (MSSPL) is one of the leading stock brokers of The Stock Exchange, Mumbai. It is also a Member of the Derivatives segment of the exchange. The Stock Exchange, Mumbai accounts for over 95% of the market capitalisation of Indian equity markets. The stock-broking business of MSSPL was originally carried on by the concern of M/s Malini Ajit Sanghvi which commenced business in December 1990. The business of M/s Malini Ajit Sanghvi was corporatized to a private company viz. MSSPL in December 1997. Management: The management of the company is looked after by the Directors - Mrs. Malini Sanghvi and Mr. Ajit Sanghvi. Both of them are Business graduates, have completed their Masters Degree and qualified Chartered Accountant and have extensive experience in stock-broking. Stock-broking has been Mrs. Malini Sanghvi’s family business and she acquired skills in the trade initially at her father’s stock-broking firm. She has also worked on investment banking assignments at JM Financial (now Indian associate of Morgan Stanley Dean Witter). Mrs. Malini Sanghvi was a member of the Market Operations Committee and the Training Committee of the Stock Exchange, Mumbai and also member of Risk Management Committee of SEBI.

Mr. Ajit Sanghvi has also had extensive experience in the finance business as Managing Director of Pioneer Leasing (India) Limited from 1984-88, he developed profitable business for the company in leasing, hire purchase financing and investments. He was also a member of the Governing Council of the Equipment Leasing Association of India. Mr. Ajit Sanghvi is an acknowledged expert in the field of “Technical Analysis” and identifying market turning points. He is a guest faculty at various leading

training and management institutes like UTI Institute of Capital Markets, National Insurance Academy, All-India Management Association and Sydenham College. He was frequently interviewed by leading business publications and news channels like Business India, Economic Times for his expert opinion on the financial markets.

The Directors are also well-versed in international finance and the operations of global stock markets. They have visited various international stock exchanges like the New York Stock Exchange, London Stock Exchange, Singapore Stock Exchange, Zurich Stock Exchange, Sydney Stock Exchange and Melbourne Stock Exchange. Ajit Sanghvi Ajit Sanghvi has done his Masters in Commerce and is an All-India rank holder Chartered Accountant. He is also keenly interested in Technical Analysis of stocks and was a visiting faculty at various capital markets and management training institutes . Malini Sanghvi She is a holder of a Bachelor's degree in Law and in Commerce, and a qualified Chartered Accountant. She has extensive experience in stock-broking and together with her husband, Mr. Ajit Sanghvi manage their stock brokerage company - MSS Securities Private Limited. MSS is a member of the Stock Exchange, Mumbai, India's premier stock exchange. Company clients include large institutional investors like mutual funds, insurance companies, financial institutions, banks and corporate houses.

Organisation and Infrastructue: The company uses a flat organisation structure. The management is assisted by a team of well-qualified staff for the day-to-day business activities of the company. All the key employees have sound experience in stock-broking.MSSPL’s office is situated in the heart of Mumbai’s central business district. It has offices in the Stock Exchange, Mumbai building. The company has a LAN network with over 8

computers and 4 printers which is supported by the latest software. The company uses the Windows NT operating system. The company has eight telephone lines, two fax machines and modems. Business Activities: Stock-broking is essentially a relationship business. The company has since inception concentrated its efforts on developing strong relationships with all major investors in India.

The main focus of the company is on institutional stock-broking. MSSPL has developed close business relationships with most of India’s large investors and is empanelled with all major institutional investors like LIC (India’s largest life insurance company), GIC ( India’s largest general insurance company) and various banks and other institutions.

Company Details:

Company Name

MSS SECURITIES PVT.LTD.

Company Status

Active

Company Category

Private limited

Class of Company

Private

Date of Incorporation

December 1997

Broking business of MSS Securities and how it works: Trade life cycle of securities:

Order placement When investors want to buy or sell shares, he approaches his broker who in turn places an order on behalf of his client on BSE online trading terminal. BSE online trading terminal [BOLT] is a terminal we use to place an order in the market. Timing of placing order is very crucial as within the fraction of seconds the price of shares changes and as we are getting order from clients it is our ultimate responsibility to fulfil their order in the ordered price and fully execute the trade. Trade execution When broker places the order in the market for his client and order matches, a trade is said to be executed. Execution is the transaction whereby the seller agrees to sell and the buyer agrees to buy a security in a legally enforceable transaction. Thereafter, all the processes that lead up to settlement is referred to as clearing, such as recording the transaction. Settlement is the actual exchange of money, or some other value, for the securities.

Clearing of Trades After the trades are cleared in clearing house NSCCL [National securities clearing corporation Ltd.], they are settled in NSDL [National securities depository Limited] i.e. depository. Clearing is the process of updating the accounts of the trading parties and arranging for the transfer of money and securities. There are 2 types of clearing: bilateral clearing and central clearing. In bilateral clearing, the parties to the transaction undergo the steps legally necessary to settle the transaction. Central clearing uses a third-party — usually a clearinghouse — to clear trades. Clearinghouses are generally used by the members who own a stake in the clearinghouse. Members are generally broker-dealers. Only members

may directly use the services of the clearing house; retail customers and other brokerages gain access by having accounts with member firms. The member firms have financial responsibility to the clearing house for the transactions that are cleared. It is the responsibility of the member firms to ensure that the securities are available for transfer and that sufficient margin is posted or payments are made by the customers of the firms; otherwise, the member firms will have to make up for any shortfalls. If a member firm becomes financially insolvent, only then will the clearinghouse make up for any shortcomings in the transaction.

Settlement of trades At this stage, the funds and securities are exchange and funds payin-payout and securities payinpayout occurs at settlement. Settlement is the actual exchange of money and securities between the parties of a trade on the settlement date after agreeing earlier on the trade. Most settlement of securities trading nowadays is done electronically. In futures, settlement refers to the mark-to-market of accounts using the final closing price for the day. A futures settlement may result in a margin call if there are insufficient funds to cover the new closing price.

Trade Life Cycle

Order Placem e nt

Settlem ent of Trades

Trade Executio n

Clearing of Trades Cash based transactions are those where you pay full value of the transactions with an intention of keeping the stocks in your custody (when you buy) or want to offload the stocks from your custody (when you sell). Such transactions are also referred as delivery trades.

Daily Work Allotment at MSS Securities

Below is the list of daily activities:

MSS Securities Front end business: To call the institutional clients and fetch the deal from them because the primary business of MSS Securities is of broking. The institutional broking at MSS Securities Broking offers corporate houses and institutions dealing capabilities on India leading stock exchanges (BSE) in the cash and derivatives segments. This unit has devised a process driven approach to address the needs of

institutional clients who have unique and specialized investment needs. Our specialized services consist of the most experienced market professionals and our Institutional Broking Services are backed by an insightful research team who provide the most in-depth reports on the markets. We live to serve our clients every exclusive need through our extensive knowledge repository and perfect blend of counseling, guidance and management. MSS Securities back end business:

After market hours check in the system whether each and every deal which we have placed on behalf of client is executed or not and give them the status of the execution whether it is fully executed or partially. ComTek is one of the pioneers in the field of Back Office Accounting Software for the members of the Stock Exchanges in India. Ever since the inception our prime activities were, the development of all the Back Office accounting related products for the Member’s of the Stock Exchange of India Research Report: Daily updating and preparing portfolio of shares. A research report is a document prepared by an analyst or strategist who is a part of the investment research team in a stock brokerage. Research reports are produced by a variety of sources, ranging from market research firms to in-house departments at large organizations. However, in the investment industry, the term usually refers to "sell side" research, or investment research produced by brokerage houses. Such research is disseminated to the institutional and retail clients. . Technical Analysis: Spider Ace is technical software which is used to solve the query and provides the best end of Day Technical Analysis Software for the Indian Markets. The software’s are a decision making terminal which helps traders and investors take the right trading decisions. The company is a licensed vendor of NSE, BSE and MCX Real-Time Price Feed. It uses internet based client server model for distribution of real-time data feed. Relationship Building:

Visiting Institution to meet clients and create long lasting relationship with the company. We believe strongly in the value of personal contact and in building strong and lasting client relationships and our independence sets us apart from the competition. Our Objective is to provide superior returns on investments through active management of portfolios.

Industry Overview: Stock Market: The Meaning Stock market is a place where the shares of different companies are bought and sold. The Organized Platform through which the buyers and sellers can trade in shares or other forms of securities like bonds, derivatives is called STOCK EXCHANGE. The stock exchanges could be a corporation or a mutual organization. They primarily serve the purpose of listing and trading the shares. In India, there are two prominent stock exchanges apart from Regional stock exchanges: 1) National Stock Exchange (NSE) 2) Bombay Stock Exchange (BSE) Definition “The market in which shares are issued and traded either through exchanges or over-the-counter markets. Also known as the equity market, it is one of the most vital areas of a market economy as it provides companies with access to capital and investors with a slice of ownership in the company and the potential of gains based on the company's future performance.” Role of Stock Exchange in an Economy

Stock exchanges have multiple roles in the economy. This may include the following: 1) Raising capital for businesses The Stock Exchange provides companies with the facility to raise capital for expansion through selling shares to the investing public. 2) Mobilizing savings for investment When people draw their savings and invest in shares, it leads to a more rational allocation of resources because funds, which could have been consumed, or kept in idle deposits with banks, are mobilized and redirected to promote business activity resulting in stronger economic growth and higher productivity levels of firms.

3) Corporate governance By having a wide and varied scope of owners, companies generally tend to improve management standards and efficiency to satisfy the demands of the stakeholders. 4) Creating investment opportunities for small investors As opposed to other businesses that require huge capital outlay, investing in shares is open to both the large and small stock investors because a person buys the number of shares they can afford. 5) Government capital-raising for development projects Governments at various levels may decide to borrow money to finance infrastructure projects by selling bonds. The issuance of such bonds can obviate the need, in the short term, to directly tax citizens to finance development. 6) Barometer of the economy At the stock exchange, share prices rise and fall depending, largely, on market forces. Therefore the movement of share prices and in general of the stock indexes can be an indicator of the general trend in the economy.

Central functions and responsibilities of a stock market: 1)

Making available cost-effective trading platforms

2)

Bundling of liquidity by concentrating supply and demand

3)

Guaranteeing the interchangeability, as well as the identical structuring of a particular category of security

4)

Ensuring the greatest possible transparency for investors

Investment strategies: One of the many things people always want to know about the stock market is, “How do I make money investing?" There are many different approaches; two basic methods are classified as either fundamental analysis or technical analysis. Fundamental analysis refers to analyzing companies by their financial statements found in SEBI Filings, business trends, general economic conditions, etc. In finance a share is a unit of account for various financial instruments including stocks, mutual funds, and limited partnerships. In British English, the usage of the word share alone to refer solely to stocks is so common that it almost replaces the word stock itself. In simple Words, a share or stock is a document issued by a company, which entitles its holder to be one of the owners of the company. A share is issued by a company or can be purchased from the stock market. By owning a share you can earn a portion and selling shares you get capital gain. So, your return is the dividend plus the capital gain. However, you also run a risk of making a capital loss if you have sold the share at a price below your buying price.

Primary Market Market for new issues of securities , as distinguished from the Secondary Market, where previously issued securities are bought and sold. A market is primary if the proceeds of sales go to the issuer of the securities sold. Secondary Market The market where securities are traded after they are initially offered in the primary market. Most trading is done in the secondary market. To explain further, it is trading in previously issued financial instruments. An organized market for used securities. Bull & Bear Market There are two classic market types used to characterize the general direction of the market. Bull markets are when the market is generally rising, typically the result of a strong economy. A bull market is typified by generally rising stock prices, high economic growth, and strong investor confidence in the economy. Bear markets are the opposite. A bear market is typified by falling stock prices, bad economic news, and low investor confidence in the economy. A bull market is a financial market where prices of instruments (e.g., stocks) are, on average, trending higher. The bull market tends to be associated with rising investor confidence and expectations of further capital gains. A market in which prices are rising. A market participant who believes prices will move higher is called a "bull". A news item is considered bullish if it is expected to result in higher prices. Simply put, bull markets are movements in the stock market in which prices are rising and the consensus is that prices will continue moving upward. During this time, economic production is high, jobs are plentiful and inflation is low. Bear markets are the opposite--stock prices are falling, and the view is that they will continue falling. A key to successful investing during a bull market is to take advantage of the rising prices. For most, this means buying securities early, watching them rise in value and then selling them when they reach a high.

However, as simple as it sounds, this practice involves timing the market. Since no one knows exactly when the market will begin its climb or reach its peak, virtually no one can time the market perfectly. The opposite of a bull market is a bear market when prices are falling in a financial market for a prolonged period of time. A bear market tends to be accompanied by widespread pessimism. A bear market is slang for when stock prices have decreased for an extended period of time. If an investor is "bearish" they are referred to as a bear because they believe a particular company, industry, sector, or market in general is going to go down.

Factors Affected for the Share Prices: Share

prices

are

affected

by

the

following

factors.

The

major

factors

are

Inflation: An increase in the cost of goods and services over a period of time. Decreases the purchasing power of the dollar. It is usually measured by the consumer price index. Interest Rates: The fee paid to a leader to borrow its money or a penalty charged for late payments usually shown as annual percentage rate. Deflation: The drop in the cost of goods and services over a period of time. Usually caused by a shrinking supply of money or credit, or reduced spending by consumers or government. Boosts Purchasing power of the dollar. Exchange Rates: The price of one country's currency expressed in another country's currency. In other words, the rate at which one currency can be exchanged for another.

Introduction to the Study: The methods used to analyze securities and make investment decisions fall into two very broad categories: fundamental analysis and technical analysis. Fundamental analysis involves analyzing the characteristics of a company in order to estimate its value. Technical analysis takes a completely different approach; it doesn’t care one bit about the ‘value” of a company or a commodity. Technicians (sometimes called chartists) are only interested in the price movements in the market. Despite all the fancy and exotic tools it employs, technical analysis really just studies supply and demand in a market in an attempt to determine what direction, or trend, will continue in the future. In other words, technical analysis attempts to understand the emotions in the market by studying the market itself, as opposed to its components. If you understand the benefits and limitations of technical analysis, it can give you a new set or skills that will enable you to be a better trader or investor. Just as there are many investment styles on the fundamental side, there are also many different types of technical traders. Some rely on chart patterns, others use technical indicators and oscillators, and most use some combination of the two. In any case, technical analysts exclusive use of historical price and volume data is what separates them from their fundamental counterparts. Unlike fundamental analysis, technical analysts don’t care whether a stock is undervalued – the only thing that matters is a security’s past trading data and what information this data can provide about where the society might move in the future.

Technical analysis It is the polar opposite of fundamental analysis, which is the basis of every method explored so far in this tutorial. Technical analysts, or technicians, select stocks by analyzing statistics generated by past market activity, prices and volumes. Technical analysts look at the past charts of prices and different indicators to make inferences about the future movement of a stock's price.

Philosophy of Technical Analysis In this book, "Charting Made Easy", technical analysis guru John Murphy introduces readers to the study of technical analysis, explaining its basic premises and tools. Here he explains the underlying theories of technical analysis: Definition "Chart analysis (also called technical analysis) is the study of market action, using price charts, to forecast future price direction. The cornerstone of the technical philosophy is the belief that all factors that influence market price - fundamental information, political events, natural disasters, and psychological factors - are quickly discounted in market activity. In other words, the impact of these external factors will quickly show up in some form of price movement, either up or down."  The most important assumptions that all technical analysis techniques are based upon can be summarized as follows: 1) Prices already reflect, or discount, relevant information. In other words, markets are efficient. 2) Prices move in trends. 3) History repeats itself. General description Technical analysts also widely use market indicators of many sorts, some of which are mathematical transformations of price, often including up and down volume, advance/decline data and other inputs. These indicators are used to help assess whether an asset is trending, and if it is, the probability of its

direction and of continuation. Technicians also look for relationships between price/volume indices and market indicators. Examples include the relative strength index, and MACD. Other avenues of study include correlations between changes in Options (implied volatility) and put/call ratios with price. There are adherents of different techniques may ignore the other approaches, yet many traders combine elements from more than one technique. Some technical analysts use subjective judgment to decide which pattern(s) a particular instrument reflects at a given time and what the interpretation of that pattern should be. Others employ a strictly mechanical or systematic approach to pattern identification and interpretation. Technical analysis is frequently contrasted with fundamental analysis, the study of economic factors that influence the way investor’s price financial markets. Technical analysis holds that prices already reflect all such trends before investors are aware of them. Uncovering those trends is what technical indicators are designed to do, imperfect as they may be. Fundamental indicators are subject to the same limitations, naturally. Some traders use technical or fundamental analysis exclusively, while others use both types to make trading decisions. Benefits of Technical Analysis     

Technical analysis focuses on price movement. Trends are easily found. Patterns are easily identified. Charting is quick and inexpensive. Charts provide a wealth of information.



Charting terms and indicators

Widely-known technical analysis concepts include:



Breakout - when a price passes through and stays above an area of support or resistance



Momentum - the rate of price change



Resistance - an area that brings on increased selling



Support - an area that brings on increased buying

Chart Pattern A chart pattern is a distinct formation on a stock chart that creates a trading signal, or a sign of future price movements. Chartists use these patterns to identify current trends and trend reversals and to trigger buy and sell signals. There are two types of patterns within this area of technical analysis, reversal and continuation. A reversal pattern signals that a prior trend will reverse upon completion of the pattern. A continuation pattern, on the other hand, signals that a trend will continue once the pattern is complete. These patterns can be found over charts of any time frame. Head and Shoulders: This is one of the most popular and reliable chart patterns in technical analysis. Head and shoulders is a reversal chart pattern that when formed, signals that the security is likely to move against the previous trend. As you can see in Figure 1, there are two versions of the head and shoulders chart pattern. Head and shoulders top (shown on the left) is a chart pattern that is formed at the high of an upward movement and signals that the upward trend is about to end. Head and shoulders bottom, also known as inverse head and shoulders (shown on the right) is the lesser known of the two, but is used to signal a reversal in a downtrend.

Both of these head and shoulders patterns are similar in that there are four main parts: two shoulders, a head and a neckline. Also, each individual head and shoulder is comprised of a high and a low. For example, in the head and shoulders top image shown on the left side in Figure 1, the left shoulder is made up of a high followed by a low. In this pattern, the neckline is a level of support or resistance. Remember that an upward trend is a period of successive rising highs and rising lows. The head and shoulders chart pattern, therefore, illustrates a weakening in a trend by showing the deterioration in the successive movements of the highs and lows.

Chart Types: There are four main types of charts that are used by investors and traders depending on the information that they are seeking and their individual skill levels. The chart types are: the line chart, the bar chart, the candlestick chart and the point and figure chart. Line Chart: The most basic of the four charts is the line chart because it represents only the closing prices over a set period of time. The line is formed by connecting the closing prices over the time frame. Line charts do not provide visual information of the trading range for the individual points such as the high, low and opening prices. However, the closing price is often considered to be the most

important price in stock data compared to the high and low for the day and this is why it is the only value used in line charts.

Bar Chart: The bar chart expands on the line chart by adding several more key pieces of information to each data point. The chart is made up of a series of vertical lines that represent each data point. This vertical line represents the high and low for the trading period, along with the closing price. The close and open are represented on the vertical line by a horizontal dash. Conversely, the close is represented by the dash on the right. Generally, if the left dash (open) is lower than the right dash (close) then the bar will be shaded black, representing an up period for the stock, which means it has gained value. A bar that is colored red signals that the stock has gone down in value over that period.

Candle Stick Chart: The candlestick chart is similar to a bar chart, but it differs in the way that it is visually constructed. Similar to the bar chart, the candlestick also has a thin vertical line showing the period's trading range. The difference comes in the formation of a wide bar on the vertical line, which illustrates the difference between the open and close. And, like bar charts, candlesticks also rely heavily on the use of colors to explain what has happened during the trading period. A major problem with the candlestick color configuration, however, is that different sites use different standards; therefore, it is important to understand the candlestick configuration used at the chart site you are working with. There are two color constructs for days up and one for days that the price falls. When the price of the stock is up and closes above the opening trade, the candlestick will usually be white or clear. If the stock has traded down for the period, then the candlestick will usually be red or black, depending on the site. If the stock's price has closed above the previous day’s close but below the day's open, the candlestick will be black or filled with the color that is used to indicate an up day.

Point and Figure Chart:The point and figure chart is not well known or used by the average investor but it has had a long history of use dating back to the first technical traders. This type of chart reflects price movements and is not as concerned about time and volume in the formulation of the points. The point and figure chart removes the noise, or insignificant price movements, in the stock, which can distort traders' views of the price trends. These types of charts also try to neutralize the skewing effect that time has on chart analysis.

When first looking at a point and figure chart, you will notice a series of Xs and Os. The Xs represent upward price trends and the Os represent downward price trends. There are also numbers and letters in the chart; these represent months, and give investors an idea of the date. Each box on the chart represents the price scale, which adjusts depending on the price of the stock: the higher the stock's price the more each box represents.

Resistance and Support Levels: The peak price of the stock is called the resistance area. Resistance level is the price level to which the stock or market rises and then falls repeatedly. This occurs during an uptrend or a sideway trend. It is a price level to which the market advances repeatedly but cannot break through. At this level, selling increases which causes the price fall. Support level shows the previous low price of the stock. It is a price level to which a stock or market price falls or bottom out repeatedly and then bounce up again. Demand for the stock increases as the price approaches a support level. The buying pressure or the demand supports the price of stock preventing it from going lower.

The figure shows that if the share price persistently fails to rise above a certain level, this is known as resistance level. This is perhaps because at this price people who purchased previously, but then saw the share prices fall, took the opportunity to sell at the price they previously paid. Likewise, a support level is a price at which buyers constantly seem to come forward to prevent the share prices dropping any further. The support and resistance levels are important tools in confirming a reversal, in forecasting the course of prices, and in making appropriate price moves.

Objectives This study is aimed at undertaking technical analysis of selected stocks of the companies listed on BSE . I will also demonstrate how technical analysis can be of invaluable use for the investors in marketing their investment decisions. The following are the main objectives of this study.  To analyze tools of technical analysis can be used in forecasting stock prices.  To know the movements (upward or downward) of stock prices of selected company stocks through Technical analysis.  To know how best we can utilize these analyses to meet the financial goals. Scope of the Study: This study mainly focuses on investment decisions by predicting futures stock price movements through the use of Technical analysis. This study is based on five companies selected from those listed in Bombay Stock Exchange. Following are the main scope of this study  To help the investor in making decisions based on report  Analysis of the shares of companies.  Studying the stock price movement of the security market. Helps to identify trend reversals at an earlier stage to formulate the buying and selling strategy.

Methodology Research Design: Research design is a plan of action to be carried out in connection with a research project. The main sources of data are collected through website, various publication books, magazines, newspaper and reports prepared by research scholars etc. The data so collected was subjected to analysis by using the necessary tools that are relevant and idealistic .To carry out this project secondary data is collected which is the closing market price.

Statistical Tools Used: 1. Moving Average: 2. Bollinger Band: 3. Stochastic RSI: 4. Fibonacci Retracement:

1. Moving Average: Moving averages are one of the most popular and easy to use tools available to the technical analyst. They smooth a data series and make it easier to spot trends, something that is especially helpful in volatile markets. They also form the building blocks for many other technical indicators and overlays. The two most popular types of moving averages: 

Simple Moving Average (SMA) and



Exponential Moving Average (EMA).

In this study Simple moving average has taken. For example: a 5 - day Simple moving average is calculated by adding the closing prices for the last 5 days and dividing the total by 5. 10 + 11 + 12 + 13 + 14 = 60 60 / 5 = 12. The calculation is repeated for each price bar on the chart. The averages are then joined to form a smooth curving line - the moving average line. Continuing our example, if the next closing price in the average is 15, then this new period would be added and the oldest day, which is 10, would be dropped. The new 5-day simple moving average would be calculated as follows: 11 + 12 + 13 + 14 + 15 =65 65 / 5 = 13 How are Moving Averages Used: The primary purpose of moving averages is to "smooth" data so that trends are more discernable. They are used to construct market indicators and to assist in interpretation of price charts. Moving average crossovers can also be used as signals to buy and sell. This is normally done in two ways: (1) By watching for price to cross whatever moving average you may be using, or (2) Running two moving averages of the same price or index, one faster than the other, and buying or selling when the faster average crosses the slower.The weakness of moving average buy and sell systems is that they will most likely become unprofitable when the stock or index begins moving sideways in a narrow trading range. Under these circumstances price never moves above or below the average far enough to become profitable.

2. MACD: Moving Average Convergence Divergence (MACD) is a trend following momentum indicator that shows the relationship between two moving averages of a security’s price. The MACD is calculated by subtracting the 26-period Exponential Moving Average (EMA) from the 12-period EMA. The result of that calculation is the MACD line. A nine-day EMA of the MACD, called the "signal line," is then plotted on top of the MACD line, which can function as a trigger for buy and sell signals. Traders may buy the security when the MACD crosses above its signal line and sell - or short - the security when the MACD crosses below the signal line. Moving Average Convergence Divergence (MACD) indicators can be interpreted in several ways, but the more common methods are crossovers, divergences, and rapid rises/falls. Formula for MACD is: MACD = 12 period EMA - 26 period EMA Takeaways: 

MACD is calculated by subtracting the 26-period EMA from the 12-period EMA.



MACD triggers technical signals when it crosses above (to buy) or below (to sell) its signal line.



The speed of crossovers is also taken as a signal of a market being overbought or oversold.



MACD helps investors understand whether bullish or bearish movement in the price is strengthening or weakening.

Findings Infosys Ltd.

Hindustan Copper

Bajaj Auto

Bombay Dyeing

Brigade Enterprise

Conclusions

Technical analysts consider the market to be 80% psychological and 20% logical. Fundamental analysts consider the market to be 20% psychological and 80% logical. Even though there are some universal principles and rules that can be applied, it must be remembered that technical analysis is more an art form than a science. As an art form, it is subject to interpretation. However, it is also flexible in its approach and each investor should use only that which suits his or her style. Developing a style takes time, effort and dedication, but the rewards can be significant. Investment is a financial activity that involves risk. It is the commitment of funds for a return expected to be realized in the future. Investments may be made in financial assets or physical assets. In either case there is the possibility that the actual return may vary from the expected return. That possibility is the risk involved in the investment. Risk and Return are the two most important characteristics of any investment. Safety and liquidity are also important for an investor. The objective of an investor is specified as maximization of return and minimization of risk. Investment is generally distinguished from speculation in terms of three factors, namely risk, capital gains and time period. Gambling is the extreme form of speculation. Investors may be individuals or institutions. Both types of investors combine to make investment activity dynamic and profitable. The investors in the financial market have different attitudes towards risk and varying levels of risk bearing capacity. Some investors are risk averse, while some may have an affinity to risk. The risk bearing capacity of an investor, on the other hand, is a function of his income. A person with higher income is assumed to have a higher risk bearing capacity. Each investor tries to maximize his wealth by choosing the optimum combination of risk and return in accordance with his preference and capacity. It is highly essential for the investor to do both fundamental and technical analysis for deciding the suitable stock. In stock market, trend is considered to be a man’s best friend.

Limitations

The problems which I have faced till now in completing this project: Time was the main constraint . The study was conducted for a period of 98 days till now i.e. from 27 th February 2017 to 3rd June 2017. One of the most important limitations for most technical analysis methods is the fact that there are so many people using the basic technical analysis methods already, and the number is increasing every day, making it harder for a single trader to make money on the market with the methods. Because of these methods are so widely spread and there is so much money riding on the methods, some also claim that technical analysis has become self-fulfilling prophecy, as people trend to enter the market and put their stops on the same places, increasing the volatility towards the technical analysis method being correct. Technical analysis systems usually do not take into account correlation between different markets. If you are analyzing several markets and they all give similar signals, they may have close correlations, meaning that the risk profile for each is very similar, and that the prices of the assets move in close steps with each other.

Recommendations  The investors should be trained to use the technical analysis tools. Since it will help them in their day to day investments to get more returns.  Fundamental analysis can also be suggested to the investors together corporate, growth of earnings and profitability.  The company should orient the investors to mainly watch the business, economic, social and political factors that affect the supply and demand for securities.  The investors can also use more number of charts which will depict a true picture on the movement of the securities.  The investors should analyze market data in real time; plan your own market timing strategy to make money, regardless of upwards and downwards trending markets.  Minute – by – Minute trading volume shows the reversal points of the market, and therefore when to buy and sell can be identified.  “The trend is your Friend” is the motto of technical analysis. So the investor has to monitor the trend of stocks before investment.

Bibliography

   

MSS SECURITIES PVT.LTD. www.mywealthguide.com Stock Prices www.moneycontrol.com About Technical Analysis www.investopedia.com Charts www.investing.com