CHART WATCH

CHART WATCH

SEE THE PICTURE AND TELL THE STORY

EXERCISE- 6

Charts are Graphical representation of price movement of anything over a period of time. The trend depicted by these charts is governed by the forces of demand and supply.  ‘History Repeats’ is a dictum that is operative in the markets also. Markets include all kinds, such as Stock, Commodity, Crude, Metals, and Foreign exchange etc.

I have started using names for the patterns in the charts. Watch them with attention.

Market Lesson 4  :   Sell around  ‘Resistance  Line’  

                                             Support Line                                            

_______________________________ 

                                             Resistance Line

What is a ‘Resistance  Line’?

The price level at which a stock or market can trade, but not exceed, for a certain period of time is called Resistance.

‘Resistance Line’ is an imaginary line or the point at which sellers (“bear”) take control of prices and prevent them from rising higher. The price at which a trade takes place is the price at which a “bull” and “bear” agree to do business. It represents the consensus of their expectations.

Resistance line indicates the price at which most investors feel prices will move lower.

The breaking through support/resistance lines can be triggered by fundamental changes that are above or below investor's expectations. Support and resistance is formed by supply and demand of a particular stock in the market.

‘Support and Resistance’ line:

Like two sides of a coin Support and Resistance are two sides of the same line.

When a resistance line is successfully broken through, that line becomes a support line.

Similarly, when prices drop below a support line, that line often becomes a resistance line.

In both the cases prices have a difficult time breaking through. Crossing of support and resistance lines are usually termed as breakouts.

If the breakouts are associated with huge volume of trade then it generally confirms the direction of the trend.

Note:

1. Buy on the breakout and Buy around Support line conveys the same meaning.

2. Sell on the breakdown and sell around the resistance line conveys the same meaning.

Are you able to comprehend the meaning? If not you will understand it as you advance further.

About the charts: (Dated 1.12.2010)

* To enlarge the chart Double click by keeping the cursor above the chart. 

1. CITY  UNION  BANK

2. GITHANJALI GEMS

FAQ:

5. What is “annual report”?

The write-ups and financial statements of an entity given every year to investors and regulatory bodies.

6. What is balance sheet?

A firm's financial statement that provides a picture of its assets, debts, and net worth at a specific time

7. What is dividend?

A sum of money, determined by a company's directors, paid to shareholders of a corporation out of earnings. It is usually paid once a year, sometimes more than once. If performance of the company is bad then it may skip paying dividend.

8. What is ‘Beta?’

The indicator used to measure a stock's risk relative to the market. The markets beta is always 1.0 (Based on past statistical records, a beta higher than 1.0 indicates that when the market rises, the stock will rise to a greater extent than that of the market; likewise, when the market falls; the stock will fall to a greater extent. A beta lower than 1.0 indicates that the stock will usually change to a lesser extent than that of the market. The higher the beta, the greater the investment risks.)             

                                     

Can we anticipate the line of Resistance in advance? Is there any method or Model to predict it? To get an answer for these queries you have to wait till we reach the Advanced Technical Analysis Module.

Dr.Felisleo

2.12.2010