TECHNICAL INDICATORS: IDENTIFYING BUY AND SELL SIGNALS Presenter s:
Ankur Jain Ghulam Khan Saurabh Manoj Kumar
FUNDAMENTAL ANALYSIS: DEFINED Fundamental analysis is a stock valuation method that uses financial and economic analysis to predict the movement of stock prices. The fundamental information that is analyzed can include a company's financial reports, and non-financial information such as estimates of the growth of demand for products sold by the company, industry comparisons, and economy-wide changes, changes in government policies etc.
FUNDAMENTAL ANALYSIS: KEY FINANCIAL RATIOS Earning
Per Share P/E Ratio PEG Ratio Dividend Yield Ratio Price to Book Ratio Debt-Equity Ratio
KEY FINANCIAL RATIOS: INFOSYS TECH 31-03-2005 31-03-2006 31-03-2007 31-03-2008 31-03-2009 DEBT-EQUITY RATIO
NIL
EPS GROWTH IN EPS
70.38 NA
BOOK VALUE
NIL
87.86
NIL
66.23
78.15
101.58
24.8366013 -24.618712
17.997886
29.980806
250.29
195.41
235.84
310.9
11.5
45
11.5
33.25
23.5
1128.6
1490.7
2018.65
1439.9
1323.9
16.035806
16.9667653
30.47939
18.424824
13.033077
0.68313555 -1.2380579
1.0237216
0.434714
CLOSING PRICE/SHARE
PEG RATIO
NIL
193.73
DIVIDEND/SHARE
P/E RATIO
NIL
NA
DIVIDEND YIELD RATIO
1.0189615
3.01871604
0.5696877
2.3091881
1.7750585
PRICE/BOOK RATIO
5.8256336
5.95589117
10.330331
6.1054104
4.2582824
SOURCE: WWW.MONEYCONTROL.COM
FUNDAMENTAL VS TECHNICAL ANALYSIS Fundamental analysis is the analysis of a stock on the basis of core financial and economic analysis to predict the movement of stocks price. On the other hand, technical analysis is the study of prices and volume, for forecasting of future stock price or financial price movements.
TECHNICAL ANALYSIS: DEFINED Technical Analysis is the forecasting of future financial price movements based on an examination of past price movements. Like weather forecasting, technical analysis does not result in absolute predictions about the future. Instead, technical analysis can help investors anticipate what is "likely" to happen to prices over time.
TECHNICAL ANALYSIS: STRENGHTS Focus
on price Supply, demand and price action Support/resistance Pictorial price history Assist with entry point
TECHNICAL ANALYSIS: WEAKNESS Analyst
bias Open to interpretation Too late Always another level Trader’s remorse
TECHNICAL ANALYSIS: INDICATORS Bollinger
Bands Moving Average Convergence Divergence Volumes Relative Strength Index
CHARTS A price chart is a sequence of prices plotted over a specific time frame. In statistical terms, charts are referred to as time series plots. On the chart, the y-axis (vertical axis) represents the price scale and the x-axis (horizontal axis) represents the time scale. Technicians, technical analysts and chartists use charts to analyze a wide array of securities and forecast future price movements.
CHARTS: INFOSYS TECH (BSE) 2
3
1
SOURCE: WWW.ICHARTS.IN
4
CHARTS: INFOSYS TECH (BSE) SIGNAL -1 (BUY), 19-05-2005 C.P = Rs. 2098.5 * 100 SHARES = Rs. 209850/SIGNAL -2 (SELL), 11-07-2005 C.P = Rs. 2315.45 * 100 SHARES = Rs. 231545/% RETURN = (231545-209850)/209850 = 10.33% ANNUALIZED RETURNS = (10.33/53DAYS)*360DAYS = 70.16%
CHARTS: INFOSYS TECH (BSE) SIGNAL -3 (BUY), 29-07-2005 C.P = Rs. 2269.2 * 100 SHARES = Rs. 226920/SIGNAL -4 (SELL), 19-10-2005 C.P = Rs. 2499.95 * 100 SHARES = Rs. 249995/% RETURN = (249995-226920)/226920 = 10.16% ANNUALIZED RETURNS = (10.16/82DAYS)*360DAYS = 44.6%
CHARTS: INFOSYS TECH (BSE) 5
6
SOURCE: WWW.ICHARTS.IN
CHARTS: INFOSYS TECH (BSE) SIGNAL -5 (BUY), 7-11-2005 C.P = Rs. 2637.1 * 100 SHARES = Rs. 263710/SIGNAL -6 (SELL), 12-01-2006 C.P = Rs. 2835 * 100 SHARES = Rs. 283500/% RETURN = (283500-263710)/263710 = 7.5% ANNUALIZED 40.9%
RETURNS
=
(7.5/66DAYS)*360DAYS
=
CHARTS: INFOSYS TECH (BSE) AVERAGE ANNUALIZED RETURNS = ( 70.16+ 44.6+ 40.9)/3 = 51.8% VS BUY, 1-04-2005 Rs. 2243.6 * 100 SHARES = Rs. 224360/SELL, 27-03-2006 Rs. 2881.65 * 100 SHARES = Rs. 288165/ANNUALIZED RETURN = (288165-224360)/224360 = 28.43%
CHARTS: INFOSYS TECH (BSE) 1
SOURCE: WWW.ICHARTS.IN
2
3
CHARTS: RIL (BSE) SIGNAL -1 (BUY), 13-07-2007 C.P = Rs. 1768.5 * 100 SHARES = Rs. 176850/SIGNAL -2 (SELL), 31-07-2007 C.P = Rs. 1892.3 * 100 SHARES = Rs. 189230/% RETURN = (189230-176850)/176850 = 7% ANNUALIZED 148.23%
RETURNS
=
(7/17DAYS)*360DAYS
=
CHARTS: RIL (BSE) 4
SOURCE: WWW.ICHARTS.IN
CHARTS: RIL (BSE) SIGNAL -3 (BUY), 29-08-2007 C.P = Rs. 1889.8* 100 SHARES = Rs. 188980/SIGNAL -4 (SELL), 18-01-2008 C.P = Rs. 2799.5 * 100 SHARES = Rs. 279950/% RETURN = (279950-188980)/188980 = 48.13% ANNUALIZED RETURNS = (48.13/142DAYS)*360DAYS = 122.01%
CHARTS: INFOSYS TECH (BSE) AVERAGE ANNUALIZED RETURNS = ( 148.23+ 122.01)/2 = 135.12% VS BUY, 2-04-2005 Rs. 1313.5 * 100 SHARES = Rs. 131350/SELL, 27-03-2006 Rs. 2264.5 * 100 SHARES = Rs. 226450/ANNUALIZED RETURN = (226450-131350)/131350 = 72.4%
CHARTS: ICICI (BSE) 1
2
SOURCE: WWW.ICHARTS.IN
3
CHARTS: ICICI (BSE) SIGNAL -1 (BUY), 17-05-2007 C.P = Rs. 935.75* 100 SHARES = Rs. 93575/SIGNAL -2 (SELL), 26-07-2007 C.P = Rs. 945.1 * 100 SHARES = Rs. 94510/% RETURN = (94510-93575)/93575 = 0.99% ANNUALIZED RETURNS = (0.99/70DAYS)*360DAYS = 5.09%
CHARTS: ICICI (BSE) 4
SOURCE: WWW.ICHARTS.IN
CHARTS: ICICI (BSE) SIGNAL -3 (BUY), 3-09-2007 C.P = Rs. 907.3* 100 SHARES = Rs. 90730/SIGNAL -4 (SELL), 18-01-2008 C.P = Rs. 1245.45 * 100 SHARES = Rs. 124545/% RETURN = (124545-90730)/90730 = 37.2% ANNUALIZED RETURNS = (37.2/137DAYS)*360DAYS = 97.75%
CHARTS: ICICI (BSE) AVERAGE ANNUALIZED RETURNS = (5.09+97.75)/2 = 51.42% VS BUY, 2-04-2007 Rs. 804.5 * 100 SHARES = Rs. 80450/SELL, 31-03-2008 Rs. 770.1 * 100 SHARES = Rs. 77010/ANNUALIZED RETURN = (77010-80450)/80450 = (4.2)%
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