Average Directional Index

6 years, 5 months agoComments closed

average-directional-index technical-analysis tutorial

DISCLAIMER: If you trade stocks, you do so at your own risk. Trading/Investing in stocks carry high risk. Any trade or action you take in the market is your own responsibility. Techpaisa.com will not be liable for any loss arising out of the use of any information on the website by anybody.

Adding to our arsenal of technical analysis tools, we intoduce Average Directional Index (ADX) at techpaisa.

ADX tells us whether a stock or a commodity is in a trend or not. It also tells us the strength of the trend. However using ADX only, one can not determine whether a stock is in a downtrend or uptrend, that is, ADX only tells whether a stock is in a trend or a trading range.

Reading ADX values is pretty straight forward. If ADX is less than 25, then stock is in a trading range. If ADX is greater than 25 then the stock is in a trend. If ADX becomes very large (around 50) then it generally means, the trend is weak and expect ADX to fall from here.

As ADX does not tell us the direction of trend, it can not be used to generate buy or sell signals. However, you can combine ADX with other technical indicators to get an idea of stock’s movement in next few weeks.

Other Tutorials on internet:
Stay tuned for latest updates:

Happy Investing!

Techpaisa Team.

Average True Range

6 years, 5 months ago840 Comments

average-true-range technical-analysis tutorial

DISCLAIMER: If you trade stocks, you do so at your own risk. Trading/Investing in stocks carry high risk. Any trade or action you take in the market is your own responsibility. Techpaisa.com will not be liable for any loss arising out of the use of any information on the website by anybody.

We have introduced several technical analysis tools and talked about them here and here.

Quoting from stockcharts:

Developed by J. Welles Wilder, the Average True Range (ATR) is an indicator that measures volatility. It is important to remember that ATR does not provide an indication of price direction, just volatility.

At techpaisa,we use a 14-day period (most common period) to calculate ATR. You can find ATR in technical analysis section on each stock page at techpaisa. ATR is calculated using stock prices and is not normalized, which means, a stock with price Rs. 100 will have a lower ATR than a stock with price Rs. 1000. ATR can be used to identify breakouts. When a breakout occurs, ATR suddenly goes up.

For more details, check out following links.

Other Tutorials on internet:
Stay tuned for latest updates:

Happy Investing!

Techpaisa Team.

Fibonacci Retracement

6 years, 6 months agoComments closed

fibonacci-retracement technical-analysis tutorial

DISCLAIMER: If you trade stocks, you do so at your own risk. Trading/Investing in stocks carry high risk. Any trade or action you take in the market is your own responsibility. Techpaisa.com will not be liable for any loss arising out of the use of any information on the website by anybody.

We have introduced several technical analysis tools and talked about them here.

Adding to existing set of tools, we are pleased to introduce one more technical analysis tool - Fibonacci Retracement.

Fibonacci Retracement technical analysis tool is based on the assumption that there are a certain ratios that naturally occur in nature. In a fibonacci sequence, ratio of two consecutive numbers is 1:1.618 or 0.618:1. Based on that, using fibonacci retracement, we can find support and resistance levels.

Fibonacci Retracement is most effective when a stock is tredning. Main idea is that when a stock is trending, it will pull back a percentage of the trend before continuing the trend. These retracement percentages are 38.2%, 50% and 61.8%.

We use a proprietery algorithm to find swings/trends to get fibonacci levels.

At techpaisa, you can find fibonacci retracement analysis on each stock page, my watchlist page, sector page and index page.

For more details, check out following links.

Other Tutorials on internet:
Stay tuned for latest updates:

Happy Investing!

Techpaisa Team.

Technical Analysis - RSI, MACD, Moving Averages, Bollinger Bands

6 years, 8 months agoComments closed

technical-analysis tutorial rsi macd moving-averages bollinger-bands

DISCLAIMER: If you trade stocks, you do so at your own risk. Trading/Investing in stocks carry high risk. Any trade or action you take in the market is your own responsibility. Techpaisa.com will not be liable for any loss arising out of the use of any information on the website by anybody.

We are excited to announce that now you can view charts and detailed analysis of following technical analysis tools at techpaisa:

We analyse every stock that’s traded on NSE and provide tips based on our analysis.

For each technial analysis tool, we provide a rating from 0 to 10. A rating of 0 would mean strong sell, whereas a rating of 10 would mean strong buy. A rating of 5 would mean that no trend was identified using that particular technical analysis tool. With each technical analysis tool, we associate a validity of short-term to medium-term which translates to a maximum of 1 month. That is, when we suggest a signal of 10 (strong buy), we say that it is valid upto 1 month from now.

Now we explain each method.

RSI (Relative Strength Index)

Quoting from Stockcharts Tutorial on RSI, which we suggest you should read completely.

Developed J. Welles Wilder, the Relative Strength Index (RSI) is a momentum oscillator that measures the speed and change of price movements. RSI oscillates between zero and 100. Traditionally, and according to Wilder, RSI is considered overbought when above 70 and oversold when below 30. Signals can also be generated by looking for divergences, failure swings and centerline crossovers. RSI can also be used to identify the general trend.

We use 14-day period to calculate RSI. We derive custom overbought and oversold levels for each security by analysing historical data. It is also pointed out in above tutorial that these levels vary for each stock.

By analysing RSI, we generate following signals:

  • Overbought and Oversold Zones.
  • Bullish and Bearish Divergences.
  • Support-Resistance Zones.

Apart from signals, we also report whether a stock is technically weak or strong.

RSI Overbought-Oversold Zones for RELIANCE

In the chart above, RELIANCE’s oversold and overbought levels are shown. 65-70 RSI act as oversold levels, whereas 25-30 RSI act as overbought levels. We also see that 50-60 RSI levels act as resistance for RELIANCE. For each stock, we calculate these levels using our algorithm. Also note that, a stock can remain oversold in an uptrend. RSI should be used with other technical indicators discussed below. We get good trading signals whenever the resistance or support is broken.

RSI acting as Support for ITC

In the chart above, we see that ITC has its support at 40-50 RSI levels.

MACD (Moving Average Convergence Divergence)

To understand MACD, you should read Stockcharts Tutorial on MACD. We use MACD (12,26,9). MACD generates following signals:

  • Singal line Crossovers
  • Centerline Crossovers

Again, we try to find whether stock is technically weak or strong.

MACD Signals

Chart above shows bearish centerline and bearish signal line crossovers for ASHOKLEY. Various areas are also marked as “No Trend” as macd gave no signal and there are just too many crossovers.

Moving Averages

To understand Moving Averages, you should read Stockcharts Tutorial on Moving Averages. We use exponential moving averages with 20, 50 and 200 period. EMA generates following signals:

  • Double Crossoves - For example, 20-Day EMA crosses 50-Day EMA and becomes greater than 50-Day EMA, then it’s a positive signal.
  • Price Crossovers - For example, when price crosses 20-Day EMA and becomes smaller than 20-Day EMA, it’s a negative signal.
  • Trend Identification - For example, when price is above all three 20-Day, 50-Day and 200-Day EMA, then stock is in a strong uptrend.

Exponential moving averages act as support and resistance levels when price is above and below EMA respectively.

Moving Average Crossovers

Chart above shows Exponential Moving Averages (EMA) of JUBLFOOD. We can see bearish double crossover when 20-EMA goes below 50-EMA and stock price goes down for 10-days. 200-EMA acts as a strong support. 20-EMA acts as support in a mild uptrend. Also there is a bullish double crossover when 20-EMA becomes larger than 50-EMA.

Moving Average Resistance

In the chart above, we see that GMRINFRA faces resistance from 20-EMA and 50-EMA in a strong downtrend.

Bollinger Bands

To get an overview of Bollinger Bands, read

As you can see, bollinger bands are volatility bands placed above and below a moving average. We use 20-Day Simple Moving Average (SMA). Outer bands are set 2 standard deviations above and below 20-Day SMA. 20-Day SMA is also know as middle band. Bollinger bands can be used to generate various signals, we support following signals at techpaisa:

  • Squeeze - It happens when a stock is trading with a very low volatility with a very high possibility of a breakout above upper band or lower band.
  • We also capture sharp moves towards lower or upper band.

NIFTY Bollinger Bands Squeeze

Chart above shows NIFTY Bollinger Bands. Before September 2010 uptrend, we see a squeeze and a breakout above upper band. Recently, we see a squeeze and breakout below lower band and NIFTY continues to go down.

You must be cautious for fake signals and all above technical indicators should be consulted before taking a decision. Please give your feedback and suggest other technical analysis tools you would like to have on techpaisa.

Here are tutorials to following indicators:
Stay tuned for latest updates:

Techpaisa Team.