Technical Analysis of Stocks
Before getting into the Technical Analysis of Stocks section of LKP Securities,
let us dwell briefly on the importance of technical analysis. The premise on which
technical analysis is based is fairly important. Technical analysis of stocks is
based on the premise that the stock markets are a fairly efficient place and therefore
all information tends to be reflected in the price of the stock. This includes all
historic and future information about the stock. Therefore, technical analysis believes
that there is not much merit in trying to identify multi-baggers in the market.
Since markets are random, past patterns will repeat themselves in the future. The
best way to predict future price patterns is to understand and interpret past patterns.
At LKP Securities we do believe that technical analysis is an extremely important
tool for short term traders. While fundamental analysis can help to identify underpriced
and overpriced stocks, it is technical analysis that can help us to get the right
levels of entry and exit. Therefore technical analysis is relevant irrespective
of whether you are a short term trader or a long term investor.
Technical Analysis of Stocks at LKP Securities…
Technical charts help to identify the direction and drift of price patterns and
volume patterns. These chart patterns and breakouts are useful in understanding
possible stocks to focus on. In fact, there is truth in the view that technicals
do help identify patterns that are not visible at a fundamental level. Technical
analysis at LKP Securities focuses on market wide trends and stock specific trends.
Here is how traders can use them fruitfully.
Technical analysis of specific stocks…
During the course of trading certain stocks give out some distinct price/volume
patterns. With a combination of technical indicators like supports, resistances,
oscillators, momentum and dispersion of charts it is possible to identify unique
patterns that can highlight some unique aspect of a stock price pattern. Whenever
a stock shows such unique trends it is actually indicative of some larger trend
emerging. Technical analysts at LKP specialise in identifying such trends and highlighting
what it means for the stock prices. The technical analysis report also identifies
the range to accumulate the stock, the range to buy the stock aggressively and the
range to book profits and exit a particular stock. Even if you are a long term investor,
you can use these patterns to highlight levels of entry and exit.
Technical analysis of the market overall…
Apart from identifying specific patterns and trends in individual stocks, technical
analysis is also useful in identifying market level patterns. By using indices as
a proxy for the market overall or by using sectoral indices as proxies for the sector
overall, these trends can be identified and implemented. In fact, technical analysis
at LKP Securities is about identifying trends, translating these trends into ideas
and giving trading calls that are practical and actionable.