Technical Analysis
Chart reading from candlestick patterns and support and resistance to trend, volume and structure. The visual analysis toolkit.
Rohit Singh · SEBI Registered Research AnalystWhat is Technical Analysis?
Technical Analysis (TA) is the study of past price and volume data to predict future price movements. It's based on three core assumptions: (1) The market discounts everything — all known information is already reflected in the price, (2) Prices move in trends — uptrends, downtrends, and sideways trends, (3) History tends to repeat itself — because human psychology (greed and fear) doesn't change. Unlike fundamental analysis which asks 'what to buy', technical analysis answers 'when to buy and sell'.
Candlestick Charts — The Complete Guide
Japanese candlestick charts are the most powerful and widely used charting method in the world. Developed by Munehisa Homma, a legendary Japanese rice trader in the 1700s, candlestick patterns capture the battle between buyers and sellers in a visual, intuitive format. Each candlestick tells a story of the open, high, low, and close (OHLC) within a specific time period.
Support & Resistance — The Foundation
Support and Resistance (S&R) are the most fundamental concepts in technical analysis. Every chart pattern, every indicator, every trading strategy ultimately relates back to these two price levels. Support is a price level where demand (buying) is strong enough to prevent further decline. Resistance is where supply (selling) caps upward movement. Think of support as a floor and resistance as a ceiling.
Trend Lines & Channels
Trend lines are the simplest yet most effective tool in technical analysis. A trend line connects two or more price points and extends into the future as a potential support or resistance line. When two parallel trend lines contain price action, they form a channel — one of the most tradeable patterns in markets.
Chart Patterns — Reversal Patterns
Chart patterns are formations created by price movements that signal potential trend continuations or reversals. Reversal patterns appear at the end of a trend and signal that the trend is about to change direction. These patterns form because the dominant group (buyers in uptrend, sellers in downtrend) is losing control and the other side is gaining strength.
Chart Patterns — Continuation Patterns
Continuation patterns are temporary pauses within an existing trend before price resumes in the same direction. Think of them as the market 'catching its breath' before the next leg. These patterns are generally more reliable than reversal patterns because they trade with the existing trend (path of least resistance).
Moving Averages — The Trend Compass
Moving Averages (MAs) are the most widely used technical indicators in the world. They smooth out price data to reveal the underlying trend direction. While price is noisy and zigzags constantly, a moving average gives you a clean line that tells you: 'Overall, is this stock going up, down, or sideways?' Institutional traders, mutual fund managers, and algo systems all use moving averages as core decision-making tools.
RSI — Relative Strength Index
The RSI is a momentum oscillator that measures the speed and magnitude of recent price changes. Created by J. Welles Wilder in 1978, it oscillates between 0 and 100, helping traders identify overbought and oversold conditions. But RSI is widely misunderstood — most traders use it wrong. Here's how to use it like a professional.
MACD — Moving Average Convergence Divergence
MACD is one of the most versatile indicators in technical analysis, combining trend-following and momentum in a single tool. Created by Gerald Appel in the 1970s, MACD uses the relationship between two moving averages to generate trade signals. It's the go-to indicator for identifying trend direction, momentum, and potential reversals.
Bollinger Bands & Volatility
Bollinger Bands, created by John Bollinger in the 1980s, measure price volatility and identify potential overbought/oversold conditions. The bands expand when volatility increases and contract when volatility decreases. This 'breathing' behavior gives traders powerful signals about potential breakouts and mean-reversion opportunities.
Volume Analysis — The Truth Teller
Volume is the most underrated and most important aspect of technical analysis. Price tells you WHAT happened, but volume tells you WHO was behind the move and HOW SERIOUS they are. A breakout on low volume is a whisper — it's unreliable. A breakout on 3x average volume is a shout — the market is making a statement. Professional traders never make a trade without checking volume.
Supertrend Indicator
Supertrend is one of the most popular trend-following indicators in Indian markets, especially among swing and positional traders. It's simple, visual, and effective — a green line below price means 'buy', a red line above price means 'sell'. Many traders in India use Supertrend as their primary entry/exit system because it removes emotional decision-making.
Fibonacci Retracements & Extensions
Fibonacci retracement levels are horizontal lines that indicate where support and resistance are likely to occur, based on the Fibonacci number sequence discovered by Leonardo Fibonacci in the 13th century. These ratios (23.6%, 38.2%, 50%, 61.8%, 78.6%) appear repeatedly in nature, mathematics, and remarkably, in financial markets. The 61.8% level (the 'golden ratio') is the most important level in all of Fibonacci analysis.
Multiple Timeframe Analysis
Multiple Timeframe Analysis (MTA) is the practice of analyzing the same stock across different time horizons to get a complete picture before taking a trade. This is how professional traders and institutional desks approach the market. A trade that aligns across weekly, daily, and hourly charts has a significantly higher probability than one that only looks good on a single timeframe.