Business Daily from THE HINDU group of publications
Sunday, Nov 26, 2006
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Business Daily from THE HINDU group of publications Sunday, Nov 26, 2006 ePaper |
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Investment World
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Technical Analysis Markets - Stock Markets Lokeshwarri S.K.
Please advise regarding few important technical parameters and their uses for analysing the movement of any scrip. N. K. Mondal Two basic tools of technical analysis that can be used by beginners for analysing a chart are: a) trend lines and (b) support and resistance levels. The trend is sacrosanct in technical analysis. Identification of the trend is done with the help of trend lines. A trend line in an up-trend is drawn by joining the lows and the trend line in a down trend is drawn by joining the highs. Buy signals are generated, when price rises above a downward trend line and sell signal will be generated, when the price moves below the upward moving trend line. Supports can be identified on a chart by zeroing in on the chart points from where the price reversed. These lows form supports in the event of a future fall in the price of a security. Resistance levels are the former peaks formed on the charts. Whenever the price nears the former peaks, investors tend to get nervous and resort to selling. This tends to turn these peaks into resistance levels. Your various analysis like Elliott Wave and other analysis will apply for fundamentally strong companies, but will it apply for company like Unitech, where promoters hold more than 78 per cent and FII hold below 1 per cent, although the performance of the company is far better than the fundamental companies.
I entered IFCI at Rs 13.65 last week now it is not going beyond Rs 13.50. Shall I exit or wait for few more days. T.C. Rajashegaran, Dubai You are right in pointing out that technical analysis is most effective in high volume stocks with decent floating stock. Getting in to stock with low floating stock can be dangerous as there would be no exit route once the stock starts falling. The way to make the most of the rally in stocks such as Unitech is to keep booking profits at regular intervals. With regards to IFCI, we had written on October 23, that the stock seems headed towards Rs 15 in the short-term. We had recommended that fresh positions may be initiated with a stop at Rs 11.20. The price is currently reacting after hitting a high of Rs 14.60. The medium-term outlook will stay positive as long as the price stays above Rs 11.50. Hold the stock with a stop at Rs 11.00. The price can move to Rs 17.00 once Rs 15.00 is crossed.
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