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3.2 BOLLINGER BANDS:

Bollinger bands developed by John Bollinger are one of the important technical indicators in Bollinger bands developed by John Bollinger are one of the important technical indicators in measuring price action volatility.

measuring price action volatility. The major signals from the Bollinger Bands are:The major signals from the Bollinger Bands are:

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 The squeezeThe squeeze

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 The expansionThe expansion

The bands automatically widens when the volatility increases and contracts when the volatility The bands automatically widens when the volatility increases and contracts when the volatility decreases. Bollinger band limits indicate whether an individual stock is overbought or oversold. decreases. Bollinger band limits indicate whether an individual stock is overbought or oversold.

Bollinger band consists of a middle band and two outer bands. The middle band is a Simple Bollinger band consists of a middle band and two outer bands. The middle band is a Simple Moving average usually set at 20 periods. The outer two bands are usually set at a standard Moving average usually set at 20 periods. The outer two bands are usually set at a standard deviation of 2 above and below the middle band.

deviation of 2 above and below the middle band.

For determining the strength of the band two trends are to be identified: For determining the strength of the band two trends are to be identified:

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 M-TopsM-Tops

W-Bottoms: This is formed during a downtrend and it involves two reaction lows in which the W-Bottoms: This is formed during a downtrend and it involves two reaction lows in which the second low is lower than the lower band but it remains above the first low. The stages of  second low is lower than the lower band but it remains above the first low. The stages of  formation of W-Bottoms are-First a reaction low is formed then the prices shoots upward formation of W-Bottoms are-First a reaction low is formed then the prices shoots upward towards the middle band and then the prices declines below the first low but it remains above the towards the middle band and then the prices declines below the first low but it remains above the lower band. This indicates that the weakness of the stock is reducing and then the prices shoots lower band. This indicates that the weakness of the stock is reducing and then the prices shoots upward and it generally breaks the resistance level.

upward and it generally breaks the resistance level.

M-Tops:

M-Tops: An M-Top is formed during an up-trend. The stages of formation of it are Firstly theAn M-Top is formed during an up-trend. The stages of formation of it are Firstly the price breaks the resistance level and overshoots the upper band then the price is pulled backward price breaks the resistance level and overshoots the upper band then the price is pulled backward towards the middle band again the price moves upward and it overshoots the previous high but it towards the middle band again the price moves upward and it overshoots the previous high but it fails to reach the upper band. The failure of the price to reach the upper band is usually a signal fails to reach the upper band. The failure of the price to reach the upper band is usually a signal that the trend is going to be reversed. Finally the price moves in a downward trend indicating a that the trend is going to be reversed. Finally the price moves in a downward trend indicating a bearish market sign.

bearish market sign.

3.3 Relative Strength Index 3.3 Relative Strength Index

Relative strength index was developed by J.Welles Wilder. RSI is an extremely popular Relative strength index was developed by J.Welles Wilder. RSI is an extremely popular momentum indicator. RSI is a momentum oscillator that measures the speed and change of price momentum indicator. RSI is a momentum oscillator that measures the speed and change of price movements. RSI oscillates between zero and 100. Here RSI is calculated on 14 days basis. movements. RSI oscillates between zero and 100. Here RSI is calculated on 14 days basis. Traditionally the stock is considered to be overbought when RSI is above 70 and oversold when Traditionally the stock is considered to be overbought when RSI is above 70 and oversold when RSI is below 30.

RSI is below 30.

RSI Signals: RSI Signals:

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 When the RSI crosses over 70 marks the stock is considered to be oversold and hence itWhen the RSI crosses over 70 marks the stock is considered to be oversold and hence it is overvalued. So it is high time to sell the stock so as to make profits.

is overvalued. So it is high time to sell the stock so as to make profits.

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 When the RSI crosses below 30 marks the stock is overbought and hence it isWhen the RSI crosses below 30 marks the stock is overbought and hence it is undervalued. So it is high time to buy the stock.

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 An RSI reading over 50 indicates a bullish signal and below 50 indicates a bearish signalAn RSI reading over 50 indicates a bullish signal and below 50 indicates a bearish signal

3.4 Rate of Change (ROC): 3.4 Rate of Change (ROC):

The Rate-of-Change (ROC) indicator, which is also referred to as simply Momentum, is a pure The Rate-of-Change (ROC) indicator, which is also referred to as simply Momentum, is a pure momentum oscillator that measures the percent change in price from one period to the next. The momentum oscillator that measures the percent change in price from one period to the next. The value of ROC oscillates around a central zero-point level. To calculate ROC 12 days period is value of ROC oscillates around a central zero-point level. To calculate ROC 12 days period is used to compare with toda

used to compare with today‟s priy‟s price.ce.

ROC Indicators: ROC Indicators:

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 A movement toward the zero line indicates that the existing trend is losing momentum.A movement toward the zero line indicates that the existing trend is losing momentum.

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 ROC moving from above zero to below zero level is an indication of sell while ROCROC moving from above zero to below zero level is an indication of sell while ROC moving from below zero to above zero level is an indication of buy.

3.5 Analysis

3.5 Analysis1515:: Charts taken under study are from 8Charts taken under study are from 8thth February to 6February to 6ththMay 2011.May 2011. ICICI BANK

ICICI BANK

Chart 24: EMA 50 and EMA 20 Chart 24: EMA 50 and EMA 20

Interpretation: Interpretation:

EMA 20 was above EMA 50 EMA 20 was above EMA 50 from March till May 2 but from March till May 2 but the two EMAs are coming the two EMAs are coming close together and is also close together and is also downward trend along with downward trend along with the price so bearish trend is the price so bearish trend is indicative of that and hence indicative of that and hence SELL signal is generated.

SELL signal is generated.

Chart 25: Bollinger Band Chart 25: Bollinger Band

Interpretation: Interpretation:

From this it can be seen that From this it can be seen that M-tops are formed during M-tops are formed during March 28 when the prices March 28 when the prices have overshot the upper band have overshot the upper band again in April 4 the price has again in April 4 the price has crossed the previous high but crossed the previous high but is unable to touch the upper is unable to touch the upper band which indicates that the share price is weakning and hence a downward trend prevails band which indicates that the share price is weakning and hence a downward trend prevails thereafter. But a price have crossed the lower band in May 2-6 which indiactes the possibility of  thereafter. But a price have crossed the lower band in May 2-6 which indiactes the possibility of  formation of W-bottoms and rising of share prices in future but the bands have contracted formation of W-bottoms and rising of share prices in future but the bands have contracted indicating a bearish market trend. For a long run, this indicates a HOLD signal.

indicating a bearish market trend. For a long run, this indicates a HOLD signal.

15 15

Charts taken from

Chart 26: ROC Chart 26: ROC

Interpretation: Interpretation:

The ROC line shows that it has The ROC line shows that it has crossed below 0 point indicating crossed below 0 point indicating a bearish momentum and hence it is time to SELL the stock.But it is upward sloping at the end a bearish momentum and hence it is time to SELL the stock.But it is upward sloping at the end indicating that the stock is gaining strength. The chance of upward movement of share generates indicating that the stock is gaining strength. The chance of upward movement of share generates a HOLD signal. a HOLD signal. Chart 27: RSI Chart 27: RSI Interpretation: Interpretation: The

The RSI line RSI line shows that shows that the trendthe trend line has crossed below 30 mark  line has crossed below 30 mark  and hence it is overbought and reversal of trend is indicative of that and it has touched 50 mark  and hence it is overbought and reversal of trend is indicative of that and it has touched 50 mark  indicating a bullish market is on the way. This indicates a BUY signal.

indicating a bullish market is on the way. This indicates a BUY signal.

AXIS BANK AXIS BANK

Chart 28: EMA 50 and EMA 20 Chart 28: EMA 50 and EMA 20

Interpretation: Interpretation:

From the graph it is seen that From the graph it is seen that EMA20 crossed below EMA EMA20 crossed below EMA 50 and both are downward 50 and both are downward sloping and the share price is sloping and the share price is also below the EMAs also below the EMAs indicating a bearish trend and indicating a bearish trend and hence it is time to SELL the hence it is time to SELL the stock.

Chart 29: Bollinger Band Chart 29: Bollinger Band

Interpretation: Interpretation:

W-bottom is formed during W-bottom is formed during April-May indicating that the April-May indicating that the weakness of the stock is getting weakness of the stock is getting reduced and the bands have also reduced and the bands have also expanded indicating that a expanded indicating that a bullish market trend is on its bullish market trend is on its way. This gives a signal to way. This gives a signal to BUY. BUY. Chart 30: ROC Chart 30: ROC Interpretation: Interpretation:

Since ROC line is below 0 point Since ROC line is below 0 point and downward sloping so it is and downward sloping so it is time to SELL the stock.

time to SELL the stock.

Chart 31: RSI Chart 31: RSI

Interpretation: Interpretation:

The RSI line indicates that the it The RSI line indicates that the it has touched 30 mark indicating has touched 30 mark indicating overbought and hence reversal of trend is indicative of that and also the line is upward sloping so overbought and hence reversal of trend is indicative of that and also the line is upward sloping so bullish market trend is on its way. So this generate a BUY signal.

CANARA BANK CANARA BANK

Chart 32: EMA 50 and EMA 20 Chart 32: EMA 50 and EMA 20

Interpretation: Interpretation:

From the graph it is seen the From the graph it is seen the EMA 20 has crossed below EMA 20 has crossed below EMA 50 and share price is also EMA 50 and share price is also   below the EMA‟s indicating a   below the EMA‟s indicating a bearish signal. Hence it is time bearish signal. Hence it is time to SELL the stock.

to SELL the stock.

Chart 33: Bollinger Band Chart 33: Bollinger Band

Interpretation: Interpretation:

From the graph it is seen that M From the graph it is seen that M top was formed in the month of  top was formed in the month of  April. Again we can see that share April. Again we can see that share price has crossed below the lower price has crossed below the lower band, which indicates the band, which indicates the formation of W Bottom. This formation of W Bottom. This indicates that the weakness of the indicates that the weakness of the stock is getting reduced and the stock is getting reduced and the bands have also expanded bands have also expanded indicating that a bullish market trend is on its way. This gives a signal to BUY.

indicating that a bullish market trend is on its way. This gives a signal to BUY.

Chart 34: ROC Chart 34: ROC

Interpretation: Interpretation:

The ROC line shows that it has The ROC line shows that it has crossed below 0 point indicating a crossed below 0 point indicating a

bearish momentum and hence it is time to SELL the stock.But it is upward sloping at the end bearish momentum and hence it is time to SELL the stock.But it is upward sloping at the end indicating that the stock is gaining strength. The chance of upward movement of share generates indicating that the stock is gaining strength. The chance of upward movement of share generates a HOLD signal. a HOLD signal. Chart 35: RSI Chart 35: RSI Interpretation: Interpretation:

The RSI line indicates that the it The RSI line indicates that the it has touched 30 mark indicating has touched 30 mark indicating overbought and hence reversal of trend is indicative of that and also the line is upward sloping so overbought and hence reversal of trend is indicative of that and also the line is upward sloping so bullish market trend is on its way. So this generate a BUY signal.

bullish market trend is on its way. So this generate a BUY signal.

STANDARD CHARTERED STANDARD CHARTERED Chart 36: EMA 50 and EMA 20 Chart 36: EMA 50 and EMA 20

Interpretation: Interpretation:

The EMA 20 line is moving The EMA 20 line is moving below the EMA 50 line for the below the EMA 50 line for the past three months. Also the past three months. Also the current shareprice is below the current shareprice is below the EMAs lines. This indicates a EMAs lines. This indicates a bearish market and is time to bearish market and is time to SELL the shares.

Chart 37: Bollinger Band Chart 37: Bollinger Band

Interpretation: Interpretation:

The graph shows the formation of a The graph shows the formation of a M Top from April 4 to May 3. The M Top from April 4 to May 3. The shareprice has crossed above the top shareprice has crossed above the top band on April 4 and came below the band on April 4 and came below the middle band on April 18. Again we middle band on April 18. Again we can see that share price has crossed can see that share price has crossed below the lower band, which below the lower band, which indicates the formation of W indicates the formation of W Bottom. This indicates that the weakness of the stock is getting reduced. The bands have started Bottom. This indicates that the weakness of the stock is getting reduced. The bands have started to expand indicating a reversal in trend. For the moment this generates a HOLD signal.

to expand indicating a reversal in trend. For the moment this generates a HOLD signal.

Chart 38: ROC Chart 38: ROC

Interpretation: Interpretation:

The ROC line shows that it has The ROC line shows that it has crossed below 0 point indicating crossed below 0 point indicating a bearish momentum and hence it is time to SELL the stock.

a bearish momentum and hence it is time to SELL the stock.

Chart 39: RSI Chart 39: RSI

Interpretation: Interpretation:

From the graph it is seen that RSI is From the graph it is seen that RSI is reaching between the 70 and 30 reaching between the 70 and 30 mark. This indicates that shares are nither overbought nor undersold. Therefore this generates a mark. This indicates that shares are nither overbought nor undersold. Therefore this generates a signal to HOLD.

HDFC HDFC

Chart 40: EMA 50 and EMA 20 Chart 40: EMA 50 and EMA 20

Interpretation: Interpretation:

EMA 20 is below EMA 50 line. EMA 20 is below EMA 50 line. Also the shareprice is below the Also the shareprice is below the EMA 20 line. But the last share EMA 20 line. But the last share price is above the EMA 20 line. price is above the EMA 20 line. This sows that stock is gaining This sows that stock is gaining strenght. Therefore it is a HOLD strenght. Therefore it is a HOLD signal.

signal.

Chart 41: Bollinger Band Chart 41: Bollinger Band

Interpretation: Interpretation:

The price of the share has gone The price of the share has gone below the lower band and the next below the lower band and the next lower is above the lower band. This lower is above the lower band. This indicates that stock will gain indicates that stock will gain strength and is bullish. Hence it is a strength and is bullish. Hence it is a BUY signal. BUY signal. Chart 42: ROC Chart 42: ROC Interpretation: Interpretation:

The ROC is above 0. This shows The ROC is above 0. This shows that the share is bullish and the that the share is bullish and the price of share will increase. Hence it indicates a BUY signal.

price of share will increase. Hence it indicates a BUY signal.

Chart 43: RSI Chart 43: RSI

Interpretation: Interpretation:

The RSI is reaching 50. This The RSI is reaching 50. This indicates share to be bullish, indicates share to be bullish, hence it is a BUY signal.

Yes Bank  Yes Bank 

Chart 44: EMA 50 and EMA 20 Chart 44: EMA 50 and EMA 20

Interpretation: Interpretation:

The graph shows that EMA The graph shows that EMA 20 is above EMA 50 from 20 is above EMA 50 from March 28. This is a bullish March 28. This is a bullish signal. But the two EMAs are signal. But the two EMAs are converging, which is a sign of  converging, which is a sign of  trend reversal. At this trend reversal. At this moment it is better to HOLD the shares.

moment it is better to HOLD the shares.

Chart 45: Bollinger Band Chart 45: Bollinger Band

Interpretation: Interpretation:

From the graph it is seen that From the graph it is seen that that share price has crossed that share price has crossed below the lower band, which below the lower band, which indicates the formation of W indicates the formation of W Bottom. This indicates that Bottom. This indicates that the weakness of the stock is