Showing posts with label Technical Analysis Tools. Show all posts
Showing posts with label Technical Analysis Tools. Show all posts
Calculating Support & Resistance
Steps in Calculation of Support & Resistance
Step 1 Find out 52 Week High & Low for the stock
Let's suppose,
52 Week High = 1000
52 Week Low = 500
Step 2 Calculate difference between 52 Week High & Low
We have,
Difference = 500
Step 3 Divide the difference by 8
We have,
Result = 63
Step 4 Keep on adding "Step 3" figure (result) in 52 Week Low price till you reach 52 Week High to find out support & resistance for any stock
Here we go,
52 Week Low 500
563
625
688
750
813
875
938
52 Week High 1000
Step 5 Find out 8 Brackets which states Support & Resistance.
Bracket 1: 500 to 563,
Bracket 2: 563 to 625,
Bracket 3: 625 to 688,
Bracket 4: 688 to 750,
Bracket 5: 750 to 813,
Bracket 6: 813 to 875,
Bracket 7: 875 to 938,
Bracket 8: 938 to 1000
Step 6 Check Support & Resistance of Stock
Let's suppose,
CMP (Market Price) for Stock is 700
Try to find out the bracket in which CMP lies. It is evident that it is between 688 & 750. So the support for this stock would be 688 (lowest figure in bracket) which means that you should become cautious or should sell off your stock if it breaches 688 otherwise your stock may slip further. Resistance for this stock is at 750 (highest figure in the bracket) which mean that if CMP has crossed then there is probability that this stock will go up or gain upward momentum.
@ CMP (stock price)of 700
Support is 688 and
Resistance is 750
 |
| Graph Showing Support & Resistance |
MACD - Moving Average Convergence & Divergence
This is one of the important technical analysis techniques and is used to predict movements in the stock market. MACD is the difference between short term moving average and long term moving average. This difference helps in identifying, whether prices in the recent past have moved upward or downward as compared to longer period movement. With the help of MACD line various signals can be generated.
MACD = Short period moving average (Minus) long period moving average
Simply buy and sell signals can be generated with the help of MACD, when this indicator is in a positive zone, it indicates buying as the share prices are likely to move upward in future. On the contrary, when
Rate of Change (ROC)
ROC = Current price / Price n days ago
ROC value is plotted on a graph and this moves above or below a central value, that is, one ‘1’. Here ROC value one ‘1’ is the benchmark value. Buying and selling signals are generated as follows:
Buying signals:
- When ROC is more than one ‘1’ (ROC > 1) and moving upward continuously, it indicates that market is likely to move upward.
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