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MOVING AVERAGE

The market indices do not rise or fall instraight line. The upward and downwardmovements are interrupted by countermoves.

The underlying trend can be studied bysmoothening the data. The smooth thedata moving average technique is used.



Stock price and stock prices¶

moving average. Buy and sell signals are provided by the

moving averages.

Moving averages are used along with the priceof the scrip.

The stock price may intersect the moving

average at a particular point.



Downward penetration of the risingaverage indicates the possibility of afurther fall and gives the sell signal.

Upward penetration of a falling

average would indicate the possibilityof the further rise and gives the buysignal.



INTRINSIC VALUE

The actual value of a company or an asset based on anunderlying perception of its true value including allaspects of the business, in terms of both tangible andintangible factors. This value may or may not be the

same as the current market value.



Difference Between Fundamental and

Technical Analysis Fundamental analysis is a method of evaluating

securities by attempting to measure the intrinsic value of a stock. Fundamental analysts study everything from theoverall economy and industry conditions to the financial

condition and management of companies. It try to findout the long term value of shares.

Technical analysis is the evaluation of securities bymeans of studying statistics generated by marketactivity, such as past prices and volume. Technical

analysts do not attempt to measure a security's intrinsicvalue but instead use stock charts to identify patternsand trends that may suggest what a stock will do in thefuture. It predicts the short term price movement .



Fundamental analysts analyze the stock based on thespecific goals of the investors. They study the financialstrength of corporate, growth of sales, earning andprofitability. They also take into account the general

industry and economic condition.

The technical analyst mainly focus the attention onthe past history of prices. Generally technical analystchoose to study two basic market data- Price andvolume.



Fundamentalists are of the opinion that supply anddemand for stocks depend on the underlying factors. Theforecasts of supply and demand depend on variousfactors.

Technicians opine that they can forecast supply anddemand by studying the price and volume of trading.



EFFICIENT MARKET THEORY Efficient market theory states that

the share price fluctuations are

random and do not follow any regularpattern.



BASIC CONCEPT

S

Market Efficiency.

1.Operational efficiency.

2.Informational efficiency.

Liquidity Traders.

Information Traders.



MARKET EFFICIENCY

The accuracy and the quickness in

which the market translates theexpectation into prices are termed asmarket efficiency.



The Random Walk Theory In 1970, FAMA stated that efficient

markets fully reflect the available

information. If markets are efficient, securities

price reflect normal returns for theirlevel of risk.

FAMA suggested that efficient markethypothesis can be divided into 3categories.



1.Weak form of EMH The type of information used in the weak form

of EMH is the historical prices.

Current prices reflect all information found in

the past prices and traded volumes. Future prices cannot de predicted by analyzing

the prices from the past.

In the weak efficient market short term traders

may earn a positive return.



2.Semi strong form

The semi strong form of the efficient markethypothesis states that the security priceadjusts rapidly to all publically available

information. The prices not only reflect the past price data,

but also the available information regarding theearnings of the corporate, dividend, bonusissues, right issues, mergers and acquisitions

and so on.



3.Strong form

The strong form states that allinformation is fully reflected on

security prices.

moving avg 1

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