Mastering Technical Analysis

 

Course Name:

Mastering Technical Analysis: A Comprehensive Guide to the Indian Stock Market

Duration:

4 Weeks (20 Hours Total)

• 5 Days a Week (1 Hour/Day)
• Optional Weekend Workshops

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Learning Objectives:

By the end of the course, learners will:

1. Understand the fundamental principles of technical analysis.
2. Use various tools and indicators to analyze stock charts.
3. Make informed trading decisions based on technical analysis.
4. Gain hands-on experience using real-world data from Indian stock markets (NSE/BSE).

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Module Breakdown:

Week 1: Introduction to Technical Analysis

Session 1: Basics of Stock Markets

• Overview of the Indian Stock Market (NSE, BSE, SEBI Regulations)
• Difference between Fundamental and Technical Analysis
• The Role of Technical Analysis in Trading

Session 2: Charts and Price Movements

• Understanding Stock Charts: Line, Bar, Candlestick Charts
• How to Read OHLC (Open, High, Low, Close) Data
• Concepts of Support and Resistance Levels

Session 3: Trend Analysis

• Types of Trends: Uptrend, Downtrend, Sideways
• Identifying Trends Using Moving Averages (SMA, EMA)
• Practical: Applying Moving Averages on Indian Stocks

Session 4: Timeframes and Chart Patterns

• Choosing the Right Timeframe for Analysis
• Introduction to Common Chart Patterns:
  • Head and Shoulders
  • Double Top/Bottom
  • Flags and Pennants

Session 5: Candlestick Patterns

• Single Candle Patterns (Doji, Hammer, Shooting Star)
• Double and Triple Candle Patterns (Engulfing, Morning Star)
• Practical: Identifying Patterns on NSE Stocks

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Week 2: Technical Indicators

Session 1: Momentum Indicators

• Relative Strength Index (RSI)
• Moving Average Convergence Divergence (MACD)

Session 2: Volume Analysis

• Importance of Volume in Technical Analysis
• Using Volume Oscillators and VWAP

Session 3: Volatility Indicators

• Bollinger Bands
• Average True Range (ATR)

Session 4: Fibonacci Tools

• Fibonacci Retracements and Extensions
• Practical: Applying Fibonacci on Indian Indexes

Session 5: Combining Indicators for Better Accuracy

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Week 3: Advanced Concepts

Session 1: Elliott Wave Theory Basics

• Five-Wave and Three-Wave Structures

Session 2: Gap Analysis

• Types of Gaps: Breakaway, Runaway, Exhaustion

Session 3: Divergence Analysis

• Identifying Bullish and Bearish Divergences

Session 4: Trading Psychology

• Understanding Market Sentiment
• The Role of Discipline and Emotional Control

Session 5: Risk Management and Position Sizing

• Setting Stop Loss and Take Profit Levels
• Risk-to-Reward Ratios

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Week 4: Practical Application and Case Studies

Session 1: Using Trading Platforms

• Hands-On with Indian Trading Platforms (Zerodha, Upstox, etc.)
• Drawing Charts and Placing Technical Indicators

Session 2: Backtesting Strategies

• How to Backtest on Historical Data

Session 3: Live Market Analysis

• Real-Time Analysis of Indian Stocks

Session 4: Building a Trading Plan

• How to Develop a Personal Trading Strategy

Session 5: Course Wrap-Up and Q&A

• Final Quiz and Certification

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Resources Provided:

• Course Workbook (PDF)
• Access to Demo Trading Accounts
• List of Recommended Books (e.g., “Technical Analysis of the Financial Markets” by John Murphy)
• Links to Free Tools (TradingView, NSE/BSE Websites)

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Assessment:

• Weekly Assignments (Chart Analysis, Indicator Use)
• Final Quiz (Online or Offline)
• Practical Project: Submit a Trading Plan for a Selected Indian Stock

The Morning Star

 

4. The Morning Star:

The Morning Star is a multiple candlestick chart pattern which is formed after a downtrend indicating a bullish reversal.

It is made of 3 candlesticks, the first being a bearish candle, the second a Doji and the third being a bullish candle.

The first candle shows the continuation of the downtrend. The second candle being a doji indicates indecision in the market. The third bullish candle shows that the bulls are back in the market and reversal will take place.

The second candle should be completely out of the real bodies of the first and third candles.

Traders can enter a long position if the next day a bullish candle is formed and can place a stop-loss at the low of the second candle.

Below is an example of Morning Star Candlestick Charts Pattern:

REVIEW COMPLETE INTRADAY TRADING SET UP

 

1. Doji:

   • The Doji candlestick pattern signifies indecision in the market.
   • It has an open and close price that are very close or identical, resulting in a small or nonexistent body.
   • This pattern suggests that neither bulls nor bears are in control and a potential reversal might occur.
     
     
     

2. Hammer:

   • A Hammer pattern appears after a downtrend and indicates potential reversal.
   • It has a small body at the upper end of the price range and a long lower wick.
   • This suggests that bears were dominant during the session but lost control, and bulls might be taking over.
     
     
     

3. Shooting Star:

   • The Shooting Star pattern appears after an uptrend and suggests a potential reversal.
   • It has a small body at the lower end of the price range and a long upper wick.
   • This implies that bulls were dominant during the session but lost control, and bears might be taking over.
     
     
     

4. Bullish Engulfing:

   • This pattern occurs during a downtrend and suggests a reversal to an uptrend.
   • It features a small bearish candle followed by a larger bullish candle that completely engulfs the previous one.
   • This signals a shift from bearish sentiment to bullish sentiment.
     
     
     

5. Bearish Engulfing:

   • The Bearish Engulfing pattern appears during an uptrend and indicates a potential reversal to a downtrend.
   • It consists of a small bullish candle followed by a larger bearish candle that engulfs the previous one.
   • This indicates a shift from bullish sentiment to bearish sentiment.
     
     
     

6. Morning Star:

   • The Morning Star is a three-candle pattern that suggests a reversal from a downtrend to an uptrend.
   • It starts with a long bearish candle, followed by a small bullish or bearish candle, and then a long bullish candle.
   • This signifies a potential change in sentiment, with bears losing control and bulls taking over.
     
     
     

7. Evening Star:

   • The Evening Star is the opposite of the Morning Star and indicates a reversal from an uptrend to a downtrend.
   • It starts with a long bullish candle, followed by a small bullish or bearish candle, and then a long bearish candle.
   • This implies a potential shift from bullish sentiment to bearish sentiment.
     
     
     

8. Harami:

   • A Harami pattern suggests a possible reversal in the market.
   • It consists of two candles, where the first one has a large body and the second one is smaller and within the range of the first candle.
   • The second candle's body can be bullish or bearish.
   • This indicates a potential change in sentiment, but confirmation is needed from subsequent price action.
     
     
     

9. Piercing Pattern:

   • The Piercing Pattern appears after a downtrend and suggests a potential reversal.
   • It has a bearish candle followed by a bullish candle that opens below the previous close but closes above the halfway point of the first candle's body.
   • This indicates potential strength in bulls and a potential reversal.
     
     
     

10. Dark Cloud Cover:

    • The Dark Cloud Cover is the opposite of the Piercing Pattern and appears after an uptrend.
    • It has a bullish candle followed by a bearish candle that opens above the previous close but closes below the halfway point of the first candle's body.
    • This suggests potential weakness in bulls and a potential reversal.
      
      
      

Hammer

1. Hammer:

Hammer is a single candlestick pattern that is formed at the end of a downtrend and signals a bullish reversal.

The real body of this candle is small and is located at the top with a lower shadow which should be more than twice the real body. This candlestick chart pattern has no or little upper shadow.

The psychology behind this candle formation is that the prices opened, and sellers pushed down the prices.

Suddenly the buyers came into the market and pushed the prices up and closed the trading session more than the opening price.

This resulted in the formation of bullish pattern and signifies that buyers are back in the market and downtrend may end.

Traders can enter a long position if next day a bullish candle is formed and can place a stop-loss at the low of Hammer.

Below is an example of Hammer candlestick pattern:

Bullish Harami:

Bullish Harami: candle pattern is a reversal pattern appearing at the bottom of a downtrend. It consists of a bearish candle with a large body, followed by a bullish candle with a small body enclosed within the body of the prior candle. As a sign of changing momentum, the small bullish candle ‘gaps’ up to open near the mid-range of the previous candle.

The opposite of the Bullish Harami is the Bearish Harami and is found at the top of an uptrend.

The Bullish Harami Cross

Traders will often look for the second candle in the pattern to be a Doji. The reason for this is that the Doji shows indecision in the market. The colour of the Doji candle (black, green, red) is not of too much importance because the Doji itself, appearing near the bottom of a downtrend, provides the bullish signal. The Bullish Harami Cross also provides an attractive risk to reward potential as the bullish move (once confirmed) is only just starting.

Simple Moving Average

 Simple Moving Average: Simple Moving Average or SMA is a moving average which is calculated by adding the closing price of security prices for the last n-periods and dividing it by the total number of time periods. For example, suppose we want to calculate the 9 periods SMA of a security price. First, we will add the last 9 Days Closing Price of the security and then it will be divided by the 9 periods. 

Calculation for 9 periods SMA: 

(P9+P8+P7+P6…. +P1)/9 

Where, P=Price  P9= Closing Price 9 days ago SMA is a Technical indicator which is represented by a line and it is directly plotted on the security price. As per the choice of the trader, the periods can be changed in the SMA indicator. For shorter-term SMA, we can use 5,8,13 etc. For Medium term 20, 34, 50 and for longer term 100,200 can be used. If a medium term moving average is having a positive slope, the trend is considered to be positive in medium term and vice versa. Price breaching a particular moving average from down to up is considered a bullish sign. Similarly, price breaching a particular moving average from upside and closing below is considered bearish. If we find a shorter term moving average crossing a medium term moving average from below, often this is called bullish crossover. On the other hand if a shorter term moving average crosses a medium term moving average from upside to below that is called a bearish crossover and often considered a signal of bearishness.

Doji:

Doji: The Doji is a single candlestick pattern. The Doji assumes significance, when it appears after a trending move, be it up or down. The Doji symbolizes indecision and after a Doji the incumbent trend can reverse, go sideways or continue uptrend. However, appearance of a Doji is a signal of caution that the probability is high that the erstwhile trend may be coming to an end. Doji is a candle which has open and close almost at similar level. There can be upper shadows and lower shadows of various proportions.