A PROJECT REPORT ON TECHNICAL ANALYSIS

BY, Ningambika .G.Meti

1.1 INTRODUCTION TO TECHNICAL ANALYSIS:

Technical analysis is a security analysis discipline used for forecasting the direction of prices through the study of past market data, primarily price and volume. The efficacy of both technical and fundamental analysis is disputed by efficient-market hypothesis which states that stock market prices are essentially unpredictable. While fundamental analysts examine earnings, dividends, new products, research and the like, technical analysts examine what investors fear or think about those developments and whether or not investors have the wherewithal to back up their opinions; these two concepts are called psych (psychology) and supply/demand. Technicians employ many techniques, one of which is the use of charts. Using charts, technical analysts seek to identify price patterns and market trends in financial markets and attempt to exploit those patterns. Technicians use various methods and tools, the study of price charts is but one. Technicians using charts search for archetypal price chart patterns, such as the well-known head and shoulders or bottom reversal patterns, study technical indicators, moving averages, and look for forms such as lines of support, resistance, channels, and more obscure formations such as flags, pennants, balance days and cup and handle patterns.

Technical analysts also widely use market indicators of many sorts, some of which are mathematical transformations of price, often including up and down volume, advance/decline data and other inputs. These indicators are used to help assess whether an asset is trending, and if it is, the probability of its direction and of continuation. Technicians also look for relationships between price/volume indices and market indicators. Examples include the relative strength index, and MACD. Other avenues of study include correlations between changes in Options (implied volatility) and put/call ratios with price. Also important are sentiment indicators such as Put/Call ratios, bull/bear ratios, short interest, Implied Volatility, etc. There are many techniques in technical analysis. Adherents of different techniques (for example, candlestick charting, Dow Theory, and Elliott) may ignore the other approaches, yet many traders combine elements from more than one technique. Some technical analysts use subjective judgment to decide which pattern(s) a particular instrument reflects at a given time and what the interpretation of that pattern should be. Others employ a strictly mechanical or systematic approach to pattern identification and interpretation. Technical analysis is frequently contrasted with fundamental analysis, the study

of economic factors that influence the way investors price financial markets. Technical analysis holds that prices already reflect all such trends before investors are aware of them. Uncovering those trends is what technical indicators are designed to do, imperfect as they may be. Fundamental indicators are subject to the same limitations, naturally. Some traders use technical or fundamental analysis exclusively, while others use both types to make trading decisions.

1.2 COMPANY PROFILE:

Infosys Limited, formerly Infosys Technologies Limited (BSE: 500209, NSE: INFY,NASDAQ: INFY) is an Indian multinational provider of business consulting, technology, engineering and outsourcing services company. It is headquartered in Bangalore, Karnataka. Infosys was co-founded in 1981 by N. R. Narayana Murthy, Nandan Nilekani, N. S. Raghavan, S. Gopalakrishnan, S. D. Shibulal, K.Dinesh and Ashok Arora after they resigned from Patni Computer Systems. Current share holding:

LIC has 6.28%. Oppenheimer Developing Markets Fund, Abu Dhabi Investment Authority, a sovereign wealth fund owned by Abu Dhabi, and the Government of Singapore also hold significant shareholdings as on June 30, 2012. The remaining public shares are owned by financial institutions and individual investors.

2.1 TECHNICAL TOOLS: 2.1.2.LINE CHART:

Date 22-Oct-12 19-Oct-12 18-Oct-12 17-Oct-12 16-Oct-12 15-Oct-12 12-Oct-12 11-Oct-12 10-Oct-12 09-Oct-12 08-Oct-12 05-Oct-12 04-Oct-12 03-Oct-12 01-Oct-12 28-Sep12 27-Sep12 26-Sep12 25-Sep12 24-Sep12 21-Sep12 Closing 2,385.55 2,383.35 2,377.60 2,370.15 2,355.70 2,365.60 2,395.35 2,533.20 2,504.15 2,536.25 2,488.20 2,526.85 2,575.65 2,578.25 2,609.65 2,534.95 2,549.35 2,589.30 2,598.05 2,600.15 2,593.30 Date 28-Aug12 27-Aug12 24-Aug12 23-Aug12 22-Aug12 21-Aug12 17-Aug12 16-Aug12 14-Aug12 13-Aug12 10-Aug12 09-Aug12 08-Aug12 07-Aug12 06-Aug12 03-Aug12 02-Aug12 01-Aug12 31-Jul-12 30-Jul-12 27-Jul-12 Closing 2,421.15 2,411.90 2,444.80 2,477.20 2,433.60 2,409.00 2,351.05 2,315.45 2,329.35 2,320.10 2,313.05 2,282.05 2,283.60 2,253.30 2,216.80 2,208.50 2,205.75 2,218.55 2,226.95 2,209.70 2,148.65

20-Sep12 18-Sep12 17-Sep12 14-Sep12 13-Sep12 12-Sep12 11-Sep12 10-Sep12 08-Sep12 07-Sep12 06-Sep12 05-Sep12 04-Sep12 03-Sep12 31-Aug12 30-Aug12 29-Aug12

2,617.20 2,600.80 2,564.50 2,632.10 2,555.05 2,539.70 2,529.50 2,512.35 2,496.00 2,487.25 2,422.00 2,339.45 2,360.80 2,365.10 2,361.65 2,392.70 2,388.30

26-Jul-12 25-Jul-12 24-Jul-12 23-Jul-12 20-Jul-12 19-Jul-12 18-Jul-12 17-Jul-12 16-Jul-12 13-Jul-12 12-Jul-12 11-Jul-12 10-Jul-12 09-Jul-12 06-Jul-12 05-Jul-12 04-Jul-12 03-Jul-12

2,123.80 2,168.55 2,168.65 2,189.10 2,218.75 2,245.20 2,178.90 2,171.25 2,171.30 2,229.80 2,264.40 2,471.00 2,459.40 2,437.95 2,444.65 2,480.25 2,479.40 2,490.55

Trend direction

is

the The can

movement. share fall are price or

either increase or remain line flat.The trend lines straight drawn connecting

either the tops are bottom of the share price movement to draw a trend line. The above figure shows the trend line for 8o days.

Different trend lines are Upward Downward Support& resistance Trend reversal

1.

Upward Trend:

An uptrend line has a positive slope and is formed by connecting two or more low points. The second low must be higher than the first for the line to have a positive slope. Uptrend lines act as support and indicate that net-demand (demand less supply) is increasing even as the price rises. A rising price combined with increasing demand is very bullish, and shows a strong determination on the part of the buyers. As long as prices remain above the trend line, the

uptrend is considered solid and intact. A break below the uptrend line indicates that net-demand has weakened and a change in trend could be imminent.

2. Downward trend

A downtrend line has a negative slope and is formed by connecting two or more high points. The second high must be lower than the first for the line to have a negative slope. Downtrend lines act as resistance, and indicate that net-supply (supply less demand) is increasing even as the price declines. A declining price combined with increasing supply is very bearish, and shows the

strong resolve of the sellers. As long as prices remain below the downtrend line, the downtrend is solid and intact. A break above the downtrend line indicates that net-supply is decreasing and that a change of trend could be imminent.

3. Support & Resistance level:

A support level exists at a price where considerable demand for that stock is expected to prevent further fall in the price level. In the support level, demand for the particular scrip is expected.

In resistance level, the supply of scrip would be greater than the demand and further rise in price is prevented. The selling pressure is greater & the increase in price is halted for the time being.

4. Trend reversal:

A change in the direction of a price trend. On a price chart, reversals undergo a recognizable change in the price structure. An uptrend, which is a series of higher highs and higher lows, reverses into a downtrend by changing to a series of lower highs and lower lows. A downtrend, which is a series of lower highs and lower lows, reverses into an uptrend by changing to a series of higher highs and higher lows. Also referred to as a "trend reversal", "rally" or "correction".

2.1.2.RELATIVE STRENGTH INDEX: Date

02-Jul-12 03-Jul-12 04-Jul-12 05-Jul-12 06-Jul-12 09-Jul-12 10-Jul-12 11-Jul-12 12-Jul-12 13-Jul-12 16-Jul-12 17-Jul-12 18-Jul-12 19-Jul-12 20-Jul-12

Closing
2,499.40 2,490.55 2,479.40 2,480.25 2,444.65 2,437.95 2,459.40 2,471.00 2,264.40 2,229.80 2,171.30 2,171.25 2,178.90 2,245.20 2,218.75

Gain
------0.85

Loss
-----8.85 11.15 6.70

21.45 11.60 206.60 34.60 58.50 0.05 7.65 66.30 26.45

23-Jul-12 24-Jul-12 25-Jul-12 26-Jul-12 27-Jul-12 30-Jul-12 31-Jul-12 01-Aug-12 02-Aug-12 03-Aug-12 06-Aug-12 07-Aug-12 08-Aug-12 09-Aug-12 10-Aug-12 13-Aug-12 14-Aug-12 16-Aug-12 17-Aug-12 21-Aug-12 22-Aug-12 23-Aug-12 24-Aug-12 27-Aug-12 28-Aug-12 29-Aug-12 30-Aug-12 31-Aug-12 03-Sep-12 04-Sep-12 05-Sep-12 06-Sep-12 07-Sep-12 08-Sep-12 10-Sep-12 11-Sep-12 12-Sep-12 13-Sep-12 14-Sep-12 17-Sep-12 18-Sep-12 20-Sep-12 21-Sep-12 24-Sep-12 25-Sep-12

2,189.10 2,168.65 2,168.55 2,123.80 2,148.65 2,209.70 2,226.95 2,218.55 2,205.75 2,208.50 2,216.80 2,253.30 2,283.60 2,282.05 2,313.05 2,320.10 2,329.35 2,315.45 2,351.05 2,409.00 2,433.60 2,477.20 2,444.80 2,411.90 2,421.15 2,388.30 2,392.70 2,361.65 2,365.10 2,360.80 2,339.45 2,422.00 2,487.25 2,496.00 2,512.35 2,529.50 2,539.70 2,555.05 2,632.10 2,564.50 2,600.80 2,617.20 2,593.30 2,600.15 2,598.05

29.65 20.45 0.10 44.75 24.85 61.05 17.25 8.40 12.80 2.75 8.30 36.50 30.30 1.55 31.00 7.05 9.25 13.90 35.60 57.95 24.60 43.60 32.40 32.90 9.25 32.85 4.40 31.05 3.45 4.30 21.35 82.55 65.25 8.75 16.35 17.15 10.20 15.35 77.05 67.60 36.30 16.40 23.90 6.85 2.10

26-Sep-12 27-Sep-12 28-Sep-12 01-Oct-12 03-Oct-12 04-Oct-12 05-Oct-12 08-Oct-12 09-Oct-12 10-Oct-12 11-Oct-12 12-Oct-12 15-Oct-12 16-Oct-12 17-Oct-12 18-Oct-12 19-Oct-12

2,589.30 2,549.35 2,534.95 2,609.65 2,578.25 2,575.65 2,526.85 2,488.20 2,536.25 2,504.15 2,533.20 2,395.35 2,365.60 2,355.70 2,370.15 2,377.60 2,383.35 Total Average

8.75 39.95 14.40 74.70 31.40 2.60 48.80 38.65 48.05 32.10 29.05 137.85 29.75 9.90 14.45 7.45 5.75 1,046.65 26.84

1127.1 31.31

Relative Strength Index (RSI), which is a comparison between the days that a stock finishes up and the days it finishes down. This indicator is a big tool in momentum trading.

RSI = 100 - [100/(1 + RS)] where: RS = (Avg. of n-day up closes)/(Avg. of n-day down closes) n= days (most analysts use 9 - 15 day RSI)

The RSI ranges from 0 to 100. At around the 70 level, a stock is considered overbought and you should consider selling. However in a bull market some believe that 80 is a better level to indicate an overbought stock since stocks often trade at higher valuations during bull markets.

Likewise, if the RSI approaches 30, a stock is considered oversold and you should consider buying. Again, make the adjustment to 20 in a bear market.

Calculation of RSI: RSI = 100-{100/(1+Rs)}

Rs = 26.84/31.31 = 0.86 RSI = 100-{100/(1+0.86)}

RSI = 46.24