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ANCHOR FACULTY:

PROF. SUDIPTA NANDA

PRESENTED BY:

HIMANSHU KUMAR VIKAS KUMAR PANDEY

PRAGYA PARIMEETA

KUMARI SWATI

SUMITA MUKHERJEE

RECENT TOOLS FOR STOCK PRICE

FORCASTING

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INTRODUCTION

There are two types of analysis for predicting the performance of

a companys stock

yFUNDAMENTALANALYSIS

y

TECHNICALANALYSIS

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Fundamental analysis involves analyzing the fundamentals of acompany like :1. the analysis of the economy the company is present in,2. analysis of the industry the company is present in, and

3. finally analysis of the company through its financial statements..

FUNDAMENTAL ANALYSIS

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TECHNICAL ANALYSISy This involves predicting the stock prices using the past prices

of the stock.y Looks for peaks, bottoms, trends, patterns, and other factors

affecting a stocks price movement.

y Makes a buy/sell decision based on those factors.

y FundamentalAnalysis - which stock to buyTechnicalAnalysis - when to buy

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OBJECTIVES & IMPACTS OF TECHNICAL

ANALYSIS

y To predict the continuation of a trend.

y

To identify reversal patterns.

y To minimize risk arising from future price changes.

y To identify any prominent event like bursting of an assetbubble, terror-trading or other crises.

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TOOLS OF TECHNICAL ANALYSIS

y VOLUMEOF TRADE

yODDLOT TRADING

y

RELATIVESTRENGTHINDEX

y RATEOFCHANGE

yHEADANDSHOULDERS

y TRIANGLES

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VOLUME OF TRADE

y Technical analysts use volume as an excellent method ofconfirming the trend.

y The market or individual security will continue to have thesame trend if the volume of trading is large.

y If there is a sharp fall in the volume then it indicates that thetrend is going to change.

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ODD LOT TRADING

y Share, sold in smaller lots, fewer than 100 are called odd lot.

y Odd lot purchases to odd lot sales is the odd lot index.

y

The notation behind is that odd lot purchase is concentratedat the top of the market cycle and selling at the bottom.

y If there is increase of odd-lot purchases or odd-lot salesduring the upward or downward trend respectively then

there may be a high chance of change in the trend.

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RELATIVE STRENGTH INDEX(RSI)

y It is a tool used to identify the inherent technical strengthand weakness of a particular scrip or market.

y Prices close higher in strong market periods, and lower in

weaker periods.y RSI can be calculated for a scrip by adopting the following

formula :-

RSI = 100 { 100/(1+RS)}

RS = average gain per day

average loss per day

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Calculation of day RSI for ACC

DATE PRICE GAIN LOSS

Feb 4 300 -- --

6 304 4 --

7 319 15 --

8 317 -- 2

11 319 2 --12 333 14 --

13 331 -- 2

14 332 1 --

18 348 16 --

19 346 -- 2

52/6 = 8.67 6/3 = 2

RSI = 100 {100/(1+4.335)}

= 100 18.74= 81.26

RS = 8.67/2= 4.335

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RELATIVE STRENGTHINDEX(RSI)

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RATE OF CHANGEy Rate of change indicator measures the rate of change between the

current price and the price n number of days in the past.y ROC helps to find out the overbought and oversold position in a

scrip.y The historic high and low values of the ROC should be identified

at first to locate the overbought and oversold region.y If the scrips ROC reaches the historic high values, the scrip is in the

overbought region and a fall in the value can be anticipated.y If the scrips ROC reaches the historic low value, the scrip is in the

oversold region and a rise in the scrip price can be anticipated.y Calculation of ROC for 12 weeks or 12 months is most popular.

ROC= Todays price 100Price n days back

ROC= Todays price 100 - 100

Price n days back

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Date Price ROC-IMethod

(in percent)

ROC-IIMethod

(in percent)

Aug 199920

235.20 __ __

21 232.85 __ __

24 236.65 __ __

25 234.20 __ __

26 231.70 __ __27 244.75 __ __

28 257.95 __ __

31 254.90 108.38 8.38

sep 1 249.85 107.30 7.30

2 244.60 103.36 3.36

3 234.05 99.94 0.06

4 234.25 101.10 1.10

7 235.80 96.34 -3.66

8 232.70 90.21 -9.79

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HEAD AND SHOULDERS

y This pattern is easy to identify and the signalgenerated by this pattern is considered to be reliable.

y In the head and shoulder there are three rallies

resembling the left shoulder and a right shoulder.y Aneckline is drawn connecting the lows of the tops.

When the stock price cuts the neckline from above , itsignals the bear market.

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HEAD AND SHOULDERS

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TRIANGLESy The triangle formation is easy to identify and

popular in technical analysis.

y The triangles are of symmetrical, ascending,descending and inverted.

1. S ymmetrical triangle,

2. Ascending triangle,3. Descending triangle.

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Symmetrical triangley This pattern is made up of series of fluctuation, each

fluctuation smaller than the previous one.y Top do not attain the height of the previous tops. Likewise

bottoms are higher than the previous bottoms.

y It indicates the slow down or temporary halt in the direction

of the original trend.

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Ascending triangley Here, the upper trend line is almost a horizontal trend line

connecting the tops and the lower trend line is a rising trendline connecting the rising bottoms.

yWhen the demand for the scrip overcomes the supply for it,then there will be a break out. The break will be in favour of

bullish trend.

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Descending triangle

y Here, connecting the lower tops forms the upper trend line.The upper trend line would be a falling one.

y The lower trend line would be almost horizontal connectingthe bottoms. The lower line indicates the support level.

y

The possibility for a downward breakout is high in thispattern. This pattern is seen during the downtrend.

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CONCLUSION

The prediction of stock price is not a simple procedure. Itinvolves complex methods.

Fundamental and technical analysis both should be used

for forecasting the stock prices.

The sentiments of the investors also play a big role inestimating the future stock prices.

The area of technical analysis is a dynamic one and eachday a new model is coming out to predict the future stockprices.

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ANY QUERIES

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THANKYOU