Theory of Tom & Jerry (Most Important)

This is best  prediction to know trend reversal signals from the line chart. Let we assume two characters, Tom and Jerry to our trends. Example as below,

Trend Reversal Signal 

1. From Up to Down

Always remember that in up trend when Tom is in left side and Jerry is in right side, It will sure that current trend turn into reversal trend it means it will goes to down trend. 

Here Tom indicate as big height and Jerry indicate as small height.

2. From Down to Up
In down trend when Tom is in left side and Jerry is in right side, It will sure that current trend turn into reversal trend it means it will goes to up trend.

Remember :

• A trend is in force till it has reversed.
• A trend has ended ONLY if there are clear signals that the opposite trend has started.
• Stronger the trend, stronger the trend reversal signal (and vice versa).

Basic Chart Study

Line Chart
This is the most basic chart. Take the following chart of SUNW. A simple look reveals that stock has been in an uptrend and has minor corrections from time to time.

Line charts are plotted using the "closing" price of the stock.

Bar Chart
Bar charts provide more information than line charts as one can see the open, high and low for the day (apart from the close).

The red bar means stock closed lower relative to the previous close. The blue bar means stock closed higher relative to the previous close. The "tick" on the left side is the open and the tick on the right side is the close.

 

Candle Stick 

Candle stick (a 300 year old Japanese technique) give the same information as a bar but are visually more easy to read.

Red candles means stock closed lower relative to the previous close. Blue candles means stock closed higher relative to the previous close.

An Up Trend

For example, an uptrend is indicated by higher highs and higher lows. By connecting the lows together, we get an upward sloping trend line. When the trend line is sloping upwards, we have an uptrend.






A Down Trend

A downtrend is indicated by lower highs and lower lows. By connecting these points together, we can draw a downward sloping trend line. And when the trend line is sloping downwards, we have a downtrend.






The purpose of Trend line
To state the obvious, the purpose of trend lines is to identify a trend. As price moves in a trend, highs and lows are formed on the chart.
By connecting these highs and lows with a line, we are able to identify what the current trend is.

• In an uptrend, draw a line through the lowest points in the trend without letting the line cross through prices.
• In a downtrend, draw a line through the highest points in the trend without letting the line cross through prices.

In both cases, you will need a minimum of at least two touches of the trend line.

Technical Analysis Objective

Is to identify the Trend (Up trend or Down trend) of the Market understands and benefit from being with the trend of the market.

Basic principles on which analysis is based

• Every thing is discounted and reflected in market price (Sell on good news) (Demand / Supply).
• Price moves in trend & trend persist (Till clear reversal) trend is friend.
• Market Action is repetitive.

Dow Theory

• Avg. Discount every thing.
• Market has three trend.
• Market has three phases.
• Volume must confirm Trend.
• Trend is effective until is gives define signal of reversal.

Note :

1. For this study u need live chart where you analyses your market.
2. Download software which give you daily market chart views like Chartnexus from www.chartnexus.com software which is helps you to study.

Bulls and Bears

BULLS

Bulls are optimistic investors who are presently predicting good things for the market, and are attempting to profit from this upward movement.
Example : If you are bullish on the ACC you will attempt to profit from a rise in the ACC by going long (Buy 1st and sell later) on it. Bulls are the exact opposite of the market's bears, who are pessimistic and believe that a particular security, will suffer a decline in price.



BEARS

• Bears are generally pessimistic about the state of a given market.
• An investor who believes that a particular security or market is headed downward. Bears attempt to profit from a decline in prices.

Example : If an investor were bearish on the ACC they would attempt to profit from a decline in the market. By going short (sale 1st and buy later)

Things to Remember :

• Market is demand & supply.
• Buy and sell is also depending on the fair value of share & extent of over valuation & undervaluation.
• For making a decision of investment investor may have to depend on Fundamental & Technical analysis.
• Investor have to guard against wrong timing regarding both buy & sale decision, otherwise they will burn their fingers.

Share Market Technical Analysis (Debt vs. Equity)

Why does a company issue stock ?
Debt vs. Equity

Why does a company issue stock ? Why would the founders share the profits with thousands of people when they could keep profits to themselves ?
The reason is that at some point every company needs to raise money. To do this, companies can either borrow it from somebody or raise it by selling part of the company, which is known as issuing stock.
A company can borrow by taking a loan from a bank or by issuing bonds (Debenture).
Both methods fit under the umbrella of "Dept Financing".

On the other hand, issuing stock is called "Equity Financing". Issuing stock is advantageous for the company because it does not require the company to pay back the money or make interest payments along the way. All that the shareholders get in returns for their money is the hope that the shares will some day is worth more. The first sale of a stock, which is issued by the private company itself, is called the initial public offering (IPO).