The Hindu Business Line : Tech Tools

I am pursuing technical analysis but I am very confused about the tools that are used in technical analysis. Can you please tell me which technical tools are there with which I can learn to understand the know-how of technical analysis. Please also tell me the way by which I can master these skills. Sameer Grover

The basic tools of technical analysis with which a student can start learning are trend lines, moving averages and oscillators. The trend is the corner stone of technical analysis.

There are three kinds of trends, uptrend, downtrend and sideways trend.

These tools will help you to identify the trend and help you to stay with the trend till it reverses.

Entry and exit points can be gleaned by breakout from trend lines, moving averages crossovers and crossovers of the oscillators and their average lines.

Once a reasonable comfort level is established with these tools, you can move on to pattern recognition and Japanese candlesticks. These tools are also mainly trend identification tools and warn the analyst about a trend reversal.

Serious students can then graduate to trend predicting tools like Elliott Wave Theory, Gann Theory etc.

Trend predicting tools are usually not required by traders as their time-frame is generally short.

Trend following tools mentioned at the outset would suffice for most serious traders.

It is best to gain expertise in one or two of these tools alone and to use them to generate buy and sell signals.

Technical analysis is a highly subjective study. The tools that work for one trader would not work for another as the risk appetite of each trader is different. The speed with which each trader trades also varies.

A trader needs to form a system using the tools he is most comfortable with.

Adhering to such a trading system helps in expelling emotion from trading decisions and maximises trading profits.

Can I buy Dena Bank and UCO Bank at current levels? Please discuss. Roma J. Paharganj

Both the charts of Dena Bank and UCO bank are spiralling downwards and are best avoided. One of the common misconceptions in the stock markets is that a stock is cheap if its price is low. That is absolutely wrong.

The price of a stock is usually low because there is something not quite alright with the fundamentals or the growth prospects of the stock is not promising.

Buying into low priced stock in a volatile market is equal to throwing your money out of the window.

When the price starts falling, buyers vanish from these counters.

Please tell me the trend of Jindal Polyfilms allotted during the FPO. Pawan Gupta, Rahul

The chart of Jindal Polyfilms (Rs 119) is an investor's nightmare as the price spiralled downwards without giving any one a chance to exit. It has lost 77 per cent from its peak of Rs 549 hit in February 2005.

The fall is accompanied by low volumes. That is not a good sign as it means that the stock can move down further. Some support can be expected between Rs 90 to Rs 100. It is best to exit this stock and invest the money elsewhere.

Lokeshwarri S.K.

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