INDIAN SECURITIES MARKET
FINANCIAL DERIVATIVES - FORWARDS, FUTURES AND OPTIONS
INVESTOR PROTECTION
TECHNICAL ANALYSIS
LEARNING OUTCOMES
After reading this chapter you will be able to
Explain the meaning and basic tenets of Technical analysis
Differentiate between fundamental analysis and technical analysis
Understand various types of charts
Draw line chart, bar chart, point and figure chart and candlestick chart
Explain Dow theory and Elliott Wave theory
Understand and use various market indicators and stock specific indicators to predict future price behaviour
Use moving average analysis to identify buy and sell signals
State the limitations of technical analysis
In Chapter 5 we discussed about Fundamental analysis. In case of fundamental analysis we perform EIC analysis to make a forecast about expected earnings, dividends and growth rate of the company. On the basis of these forecasts we determine the intrinsic value of a share (details about the calculation of intrinsic value of an equity share are provided in Chapter 8 – Equity Valuation.) As per fundamental analysis, the true value or fair price of a share is equal to its intrinsic value. Intrinsic value of a share is the present value of all expected future cash inflows from it. Hence under fundamental analysis we first calculate intrinsic value of a share and then compare it with market price in order to decide whether to buy or sell. Fundamental analysis is suitable for an investor who plans to invest in
shares for a fairly long period of time. However there are many investors, especially speculators who do not want to invest for long. Their investment horizon is short term and hence they want to predict stock prices in relatively short term. This chapter deals with the second approach of security valuation- Technical analysis.
6.1 TECHNICAL ANALYSIS
As per Technical Analysis future price behaviour can be predicted on the basis of past price analysis. Technical analysis involves the study of various charts, ratios and patterns to predict future direction of stock prices.
6.2 DIFFERENCE BETWEEN FUNDAMENTAL ANALYSIS AND TECHNICAL ANALYSIS
i Meaning and basic philosophy :
ii Objectives :
iii Source of information : -
iv Types of information :-
v Tools and Techniques for analysis :
vi Investment decision (Buy-Sell signals) :
vii Where to Invest vs. When to invest :
Para 6.2
viii Time horizon :
ix Emphasis :
x Who uses :
Para 6.3
6.3 BASIC TENETS (PROPOSITIONS) OF TECHNICAL ANALYSIS
6.4 TOOLS OF TECHNICAL ANALYSIS
6.4.1 Charts
Para 6.4
FIG 6.1 – LINE CHART
ii. Bar Chart
iii. Point and Figure Chart
FIG 6.2 : BAR CHART
Para 6.4
FIG 6.3 : POINT AND FIGURE CHART
iv. Candlesticks Charts
Para 6.4
v. Price and Volume Chart:
FIG 6.4 : CANDLESTICKS CHART PATTERN
Para 6.4
Para 6.4
6.4.2 Technical Indicators and Technical Chart Patterns
Market indicators :
1. Dow Theory : -
i Primary trend
ii Intermediate trend
FIG
SECURITY ANALYSIS & PORTFOLIO MANAGEMENT | TEXT AND CASES
AUTHOR : VANITA TRIPATHI
PUBLISHER : TAXMANN
DATE OF PUBLICATION : NOVEMBER 2024
EDITION : REPRINT 2025 EDITION
ISBN NO : 9789364558112
NO. OF PAGES : 624
BINDING TYPE : PAPERBACK
DESCRIPTION
In today's VUCA (volatile, uncertain, complex, and ambiguous) financial environment, investment decisions require a strong grasp of tools, techniques, and strategies. Security Analysis & Portfolio Management | Text and Cases delivers comprehensive coverage of investment practices with Indian and global perspectives, as well as up-to-date insights on regulatory reforms and financial innovations.
Designed for both academic and professional use, this book combines 17+ years of the author's teaching and research experience to address key topics like risk-return analysis, portfolio management, and investor protection.
This book caters to a diverse audience, including students, educators, investment professionals, and researchers.
The Present Publication is the Reprint 2025 Edition, authored by Prof. (Dr.) Vanita Tripathi. The pedagogical strengths of this book are as follows:
• [Learning Outcomes] Clear objectives for each chapter to guide learning
• [Illustrative Examples] Step-by-step explanations with real-world illustrations
• [Solved Problems] Practical questions for applying concepts
• [Chapter Summaries] Key takeaways for quick review
• [Case Studies] Real-world scenarios for practical application
• [Self-Assessment Tools] Assignments, true/false statements, and numerical problems for knowledge testing