Technical Analysis Factors in NSE Stock Market:
Determine the Trend:
- Start with Monthly Charts: It helps to determine the long-term trend.
- Then Check Weekly Charts: It helps to determine the intermediate trend.
- Last Check Daily Chart: It helps to determine the short-term trend.
- If all the three charts are positive, then expect an excellent bullish move.
- If Monthly Charts and Weekly Charts are showing and up trend, but daily chart shows a down trend, then it presents us with an opportunity to buy at support levels.
- If Monthly Charts and Weekly Charts are showing a downtrend, but the daily chart is showing an uptrend, then it presents us with an opportunity to sell at resistances, and get out of the position.
- Always trend in the direction of the trends; the longer term trends are more reliable.
Scan for stocks making 52- week high’s or all time high’s or 52 week lows or all-time lows
- Scan for stocks making new 52 week highs or all-time highs or stocks that are making new 52 week lows or all-time lows.
Spot Patterns if any:
- Pattern range projection advantage should be taken, in case of any visible pattern on charts. When going long for a longer period. Avoid pattern traps.
Spot Divergences if any:
- Advance cues can be obtained when divergences are visible. Divergences between price and indicators like RSI, MACD give good advance signal of imminent trend reversal.
Check Oscillator Supports and Resistances:
- RSI tends to rebound from major supports it forms, so keep watch on it. Likewise MACD can also rebound from a previously established level.
Check Moving Averages:
Check Moving Averages on monthly, weekly and daily charts. Moving Averages work better in advancing stocks and market charts.
Check momentum of stock movements based on RSI, MACD and Stochastic Oscillator Moves.
Check Candle Stick Formations:
Candle Stick Combinations create formations, which indicate imminent trend change possibilities.
Differentiate Stocks into following categories:
- Up Trending Stocks
- Down Trending Stocks
- Consolidating Stocks
Up Trending Stock Criteria:
- RSI should be above 50, on monthly, weekly and daily basis.
- Price should be above all its moving averages, when momentum is high.
- Above 14 EMA (Exponential Moving Average) expect a strong momentum on up move.
- Above 50 EMA but below 14 EMA, stock faces a trading range.
- Above 200 EMA but below 50 EMA, stock faces a major trading range.
- Short term up trend remains intact as long as 50 and 200 EMA are held on daily charts.
- Long term up trend is intact, as long as 50 EMA is held on monthly charts.
For an established up trend to remain in place, all major indicators should rise in tandem with each other and should be in its respective positive territories.
Down Trending Stock Criteria:
- If RSI is below 50, and ranging between 50 and 30 on monthly, weekly and daily basis.
- Price below 50 and 200 EMA on monthly, weekly and daily charts.
- Avoid going long in such stocks, and sell at every major resistances faced.
- Such stocks become pull back, which should be sold on every rise.
- If RSI is below 50 in weekly and daily charts, short term upward spurts in prices of such stocks should be ignored.
Ranging/Consolidating Stock Criteria:
- RSI rotates near 50 levels, without much volatile movement.
- Prices fluctuate between established ranges, for a longer period of time.
- Moving Averages are pointing sideways, indicating a trend less movement.