NIFTY is a well diversified index having 50 companies based in the National Stock Exchange from any of the 24 sectors. The sectors include telecommunications, cement, banks, computers, pharmaceuticals, mining and more. Based on their performance, the companies forming the Index are changed. NIFTY is used by certain mutual funds as a bench mark and their performance are compared. NIFTY is owned by the India Index services and Products [IISL] which again is a joint venture project between CRISIL and NSE. NIFTY is also called S & P CNX NIFTY while the CRISIL is a part of Standard and Poor (S&P).
The stock chart is a graph by which the stock traders assess the activity of the stock. Technical analysis can be said to be the study of stock charts. The charts graphically display and stress on future trends, relationships and patterns. The technical analysis is the study of the price of the stock in the past and predicts how the future price trend would be. Though technical analysis is not 100 % accurate, it is quite a useful tool to find the low risk and highly rewarding trade opportunities.
Stock Chart:
The stock chart can be used for technical analysis as follows:
- It could be a plotted graph of time and price. Charts are prepared for all the listed companies using the closing price of the day. The graph is made by connecting each plot combined with the opening, closing, high or low prices. The other type of data is the price bar which are individual bars overlaid onto the graph which helps in viewing the stock movement.
- Charts can be created for mutual funds too using monthly charts. Day traders create a 1 minute and 5 minutes chart which helps them in taking quick decisions.
- Two kinds of charts arithmetic chart with equal vertical distance and logarithmic with equal vertical distances between same percentages of price growth can be drawn.
- The chart clearly can help one decide if the market is bullish or bearish. One can learn about their favourite companies through these charts.
Trends:
Trends are upwards, downwards and range bound. A few points on these trends are:
- Uptrend is when the stock prices rallies to rise even when the market has certain periods of lows in the stock chart. This is called positive rate of price change over time.
- Downtrend is when the price declines with certain period of lower highs in the chart. Here there would be negative rate of price change over time.
- Range bound is price swings for long periods between the upper and lower limits. There is no movement on the stock chart with hardly or little change in price.
- Many times it so happens that any stock rising will continue to do so till some changes occurs in value. Similarly stocks declining will continue to decline.
The advantage here is in most of the cases, these stocks are either on top or bottom and the people analysing or reading these charts usually locate only the companies on top or bottom.
Then another way of the stock analysis is the bar charts like the histograms below the price pane. These are more detailed in display. The bar charts show high and low bars of a company or investment and the colour usually red for down bars and green for up bars helps in one analysing whether the stock will rise or fall. This could be for one day or over a long period.
Some investors buy the stock at higher prices than what they sell at. This is called “Accumulation”. Similarly some stocks are sold at higher prices than what they are bought for. This is said to be in “Distribution”. They lead the price movement. It can be analysed that soon the stocks under accumulation rise soon after the buying starts while those stocks under distribution falls as soon as selling starts.
Traders prefer to buy and sell liquid stocks while stocks which are illiquid need high transaction costs to buy or sell and cannot be eliminated soon. Illiquid stocks do not give proper stock chart analysis. All the stocks usually reach a position of “Climax” some day or the other when the last few buyers or sellers come to action, the stock changes direction and starts moving in reverse.