Introduction to Technical Analysis

For Presentation Notes in PDF format click here.

For better understanding through video tutorial click here.

Technical Analysis is

•       The method of Forecasting the direction of prices.

•       By studying the past market data.

•       Market data comprise of Price and Volume.

•       With the help of charts showing the trading history and statistics.

•       To make buy or sell decisions.

Definition of Technical Analysis

•       Technical analysis is a method of evaluating securities by analyzing statistics generated by market activity, past prices, and volume.

•       Technical analysis is a security analysis methodology for forecasting the direction of prices through the study of past market data, primarily price and volume.

•       Technical analysis is a methodology that makes buy and sell decisions using market statistics. It primarily involves studying charts showing the trading history and statistics for whatever security is being analyzed.

Fundamental Analysis

•       A method of evaluating a security that entails attempting to measure its intrinsic value by examining related economic, financial and other qualitative and quantitative factors including macroeconomic factors and company-specific factors

•       The end goal of performing fundamental analysis is to produce a value that an investor can compare with the security's current price, with the aim of figuring out what sort of position to take with that security (under-priced = buy, overpriced = sell or short).

Difference between the two

Assumptions of TA

1.     The market discounts everything.

2.     Price moves in trends.

3.     History tends to repeat itself.

The Importance Of Volume

•       What is Volume?

Volume is simply the number of shares or contracts that trade over a given period of time, usually a day. The higher the volume, the more active the security.

•        Any price movement up or down with relatively high volume is seen as a stronger, more relevant move than a similar move with weak volume.

In the other blogs we will study the Concepts related to TA

•       Trend Analysis

•       Support and Resistance

•       Charts and their types

•       Chart patterns

•       Technical Indicators and so on…

My Youtube Tutorial Videos

My YouTube Channel link :-

BBA MBA Concepts by Neha Sharma

Topicwise List of  YouTube Tutorial Videos :-

Technical Analysis

Part 1 - Introduction to TA

https://youtu.be/6eFw1oCnhaI

CVP Analysis

For understanding the concept of CVP Analysis:- 

Part 1

https://youtu.be/ZUD1ygOdPU8

For more numerical go to the following parts of the series :-

Part 2

https://youtu.be/sHXEdXdrFJE

Part 3

https://youtu.be/TM_I3Ox-v6s

 Part 4

https://youtu.be/1Pa6ocR7_xA

Part 5

https://youtu.be/RxBmbyNxczw

Understanding Fixed and Variable cost

https://youtu.be/s5Y5Aeh_dZc

Cost of Capital Part 1

https://youtu.be/TE1xIGHKyrM

Introduction to Organisational behaviour

https://youtu.be/u5iFxzB_wsg

Henri Fayol’s Principles of Management

https://youtu.be/FfaDWT46vCY

Concept of C-V-P Analysis

C-V-P Analysis means Cost Volume Profit Analysis

It is the Relation between Cost incurred to manufacture a product, Volume or number of units produced and Profit generated by selling the product.

Lets understand with the help of a graph

It is the graph between amount and the number of units.

You can see that there is a Fixed Cost Area and Variable Cost Area.

Fixed cost is the cost which is independent of the number of goods or services produced. For example cost incurred to buy land, machinery etc. or the rent of the place or office etc.

Variable cost is the cost which varies with the number of goods produced. For example the cost of raw material or cost of packaging etc.

Now you can also see a Total Cost Line and a Total Sales Line.

If you observe, you can see that the income or sales line starts from zero and the cost line starts from $ 1,000,000, it is because when a first product is sold then the company will start earning profit , before that there was no profit but before the company starts manufacturing the product they already have spend their fixed cost in establishing the plant and machinery.

now you see as the goods are manufactured their variable cost increase with the number of goods produced and as they are sold the income generated in increased and hence there is one point where the cost incurred becomes equal to the income generated and this point is called Break Even Point.

Break Even Point

It is the point at which there is no profit and no loss and the revenue equals the expenditure. We can see in the graph that we get two BEP points , one on X axis in terms of number of units produced to cover all the cost with income and the other on the Y axis, which shows the amount of sales required to cover all the cost incurred.  You will notice that after this point the company will start generating profit.

Red and Green shaded area

Red area is the area of loss and green area is the area of profit.

In this chapter you will find few formulas , so let me revise few concepts and correlate them with the new concept.

So, lets recall the income statement format.

Sales

- Variable cost (also called Marginal cost)

-------------------------------------------------

Contribution

- Fixed cost

-----------------------------

EBIT ( Earning before Interest and tax)

- Interest

-----------------------------

EBT  (Earnings before tax)

Just remember this format as this will help you in deriving the unknown figures from the known ones.

Here we will study the relation between profit and volume of sales known as P/V Ratio.

P/V Ratio  (%) = Contribution * 100

                                       Sales

If the income statement of two different years is given then

P/V Ratio  (%) =  Change in contribution * 100

                                       Change in Sales

Now another concept which we must know is concept of BEP or  Break Even Point. As we have already discussed while discussing the graph that we will get two BEP points one on X axis (in terms of Number of units produced and another on Y axis ( in terms of Amount of sales)

BEP (in units) =              Fixed cost       

                            Contribution per unit

BEP (in amount) =              Fixed cost       

                                             P/V Ratio

In the next concept we will learn to find out how much Sales has to be done to earn the desired profit. For example , we decide that this year we decide to earn a profit of $1,000,000 , now we will have to find out the amount of sales to be done to earn this amount as profit. For this we will apply the following :-

Sales to earn desired profit (in units) =    Fixed cost + Desired profit  

                                                                   Contribution per unit

Sales to earn desired profit (in amount) = Fixed cost + Desired profit 

                                                                               P/V Ratio

Last concept of this chapter is MOS ( Margin of Safety)

MOS = Actual Sales - BEP Sales

Its the time for you to revise all the above concepts and get prepared for the Numerical problems.

Basics of Technical Analysis

For Downloadable Notes in PDF format Click :- Introduction To Technical Analysis

Product Life Cycle

For Downloadable Notes in PDF format click :- PLC
For Power Point Presentation click :-  Product Life Cycle
For Video Tutorial Click here.

What is Product Life Cycle?

•       A new product progresses through a sequence of stages from introduction to growth, maturity and decline and this sequence of stages is known as Product Life Cycle.

•       PLC is directly related to Market Situations (like competitors) and hence it directly affects the marketing strategies and marketing mix.

Graphical representation of PLC

Introduction Stage

•       Product is introduced in the market for the first time.

•       Thus, there may not be ready market for the product.

•       Build Product awareness and create demand for the product.

•       Low sales and profit.

Marketing Mix at Introduction stage

•       Product branding and quality level is established and intellectual property protection such as patent and trademarks are obtained.

•       Pricing strategy to be obtained is either market skimming or market penetration.

•       Distribution is selective until consumers show product acceptance

•       Promotion aims at building product awareness and educate consumers about the product.

Growth Stage

•       Demand of the Product increases and size of the market grows.

•       Sales and profit also goes up.

•       Competitors enter the market.

•       Follow competition oriented pricing strategy.

•       Marketing and distribution become decisive.

Marketing Mix at Growth stage

•       Product quality is maintained and additional features and support services may be added.

•       Pricing is maintained as demand increases with little competition.

•       Distribution channels are added as demand increases and consumers accept the product.

•       Promotion is aimed at a broader audience.

Maturity Stage

•       Demand reach the saturation point.

•       Supply from competitive firms increase.

•       Price competition becomes intense and exploits the brand loyalty.

•       Product and packaging modification.

Marketing Mix at Maturity stage

•       Product features may be enhanced to differentiate the product from that of competitors.

•       Pricing may be lower because of the new competition.

•       Distribution become intensive.

•       Promotion emphasizes product differentiation.

Decline Stage

•       Sales and profit begins to fall.

•       Demand shrinks.

•       Prices and margin gets depressed.

•       Firms try to link up the sales of these product to some other premium product.

Marketing Mix at Decline stage

•       Maintain the product, possibly rejuvenating it by adding new features and finding new uses.

•       Harvest the product, reduce cost and continue to offer it possibly to the loyal niche segment.

•       Discontinue the product, liquidating remaining inventory or selling it to another firm that is willing to continue the product.

Introduction To Managerial Economics

For Downloadable Notes in PDF Format click :- Introduction To Managerial Economics

Concept of Management

For Downloadable Notes in PDF format Click :- Concept of Management