understanding price behaviour by using candlestick...

Abstract

UNDERSTANDING PRICE BEHAVIOUR BY USING CANDLESTICK CHARTS – A STUDY

ON SELECT EQUITIESSubmitted

FOR THE AWARD OF

DOCTOR OF PHILOSOPY

By

B.LAXMAN

Under the supervision of

PROF. S. PARDHASARADHI

DEPARTMENT OF BUSINESS MANAGEMENTOSMANIA UNIVERSITY

HYDERABAD-5000 07

AUGUST-2015

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Index

Description Page No

1.1 Introduction………………………………………………………………….1

1.2 History of Candlestick Charts ……………………………………………… 1

1.3 Candlestick Patterns……………………………………………………...…. 2

1.4 About Technical Analysis………………………………………………....... 4

1.5 Statement of the Problem…………………………………………………… 4

1.6 Need of the Present Study ………………………………………………...... 5

1.7 Objectives of the Study…………………………………………………....... 5

1.8 Research Methodology………………………………………………………5

1.8.1 Research Design……………………………………………………..5

1.8.2 Sample Design……………………………………………………... 6

1.8.3 Time Period of the Study……………………………………………7

1.8.4 Statistical Tools Used……………………………………………… 7

1.8.5 Limitations of the Study…………………………………………… 8

1.8.6 Organization of the Study…………………………………………. 8

1.9 Review of Literature…………………………………………………………9

1.10 Data Analysis……………………………………………………………… 12

1.11 Findings…………………………………………………………………....21

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Chart No Description Page No

1.10.1 Long Term Behavior of Bajaj Auto Limited…………………………… 12

1.10.2 Long Term Behavior of ICICI Bank……………………………………..12

1.10.3 Long Term Behavior of Bharat Petroleum Corporation Limited………. 13

1.10.4 Long Term Behavior of Britannia Limited…………………………….. 13

1.10.5 Long Term Behavior of HCL Technologies Limited…………...........…14

1.10.6 Short Term Behaviour of Maruti India Limited…………………............14

1.10.7 Short Term Behaviour of Bank of Baroda……………………………….15

1.10.8 Short Term Behaviour of Oil & Natural Gas Corporation………............15

1.10.9 Short Term Behaviour of ITC Limited………………………………….16

1.10.10 Short Term Behaviour of Tata Consultancy Services Limited………...16

Table No Description

1.10.1 Cronbach's Alpha…………………………………………………………17

1.10.2 Gender of the Respondents. ……………………………………………..17

1.10.3 Age of the Respondents…………………………………………….……17

1.10.4 Education of the Respondents……………………………………………17

1.10.5 Investment Objective of the Respondents…………………………..……18

1.10.6 Investment Experience of the Respondents………………………...……18

1.10.7 Technical Analysis Helps to Analyze Shares…………………………… 18

1.10.8 Experience in Technical Analysis…………………………………..……19

1.10.9 Candles Give Future Price Prediction……………………………………19

1.10.10 Chi Square of Qualification and Investment Objective…………..……20

1.10.11 ANOVA for Age and 3 Dimensions……………………………….……20

1

1.1 Introduction

A candlestick chart is a style of financial chart used to describe price movements of equity. It is

like a combination of line-chart and a bar-chart: each bar represents all four important pieces of

information for that day: the open, the close, the high and the low prices. Candlestick charts are

most often used in technical analysis of equity and currency price patterns. Candlestick charting

offers several advantages over other investment techniques. It helps investors enormously when

they try to pin down the best trading stocks in the market. Candlesticks are especially popular

because they give investors a very clear visual image of a stock’s progress. They provide deeper

insight into the direction of the market as compared to other types of charts. Most investors feel

that candlestick charts are more visually informative and appealing; therefore it is easier to draw

inferences from them. A candlestick provides an encapsulated picture of the stock movement so

investors can easily compare the opening and closing prices, as well as the high and low. This

highly popular method intuitively reveals the investment trends in a particular stock.

1.2 History of Candlestick Charts

Candlestick analysis had been developed over the years simply due to the tracking of rice price

movements. However, in the mid 1700's they were really fully utilized. "The god of the markets"

Homna came into the picture. Munehisa Homna, the youngest son of the Homna family, inherited

the family's business due to his extraordinary trading savvy. Homna's research into historic price

moves and weather conditions established more concrete interpretations into what became known

as Candlesticks. His research and findings, known as "Sakata Rules" became the framework for

Japanese investment philosophy. Japanese Candlestick analysis was never a hidden or secretive

trading system. It was successfully used in Japan for hundreds of years. It has been only recently,

about 25 years ago, that it first made its way into the U.S. trading community. Until then, there

just wasn't any interest from Western cultures to investigate the Candlestick Technique. Until

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recently, the investment community knew about Candlesticks, they just didn't know how to use

them effectively. Interest has been increasing dramatically now that the roaring markets have

collapsed. Investors, new and old are now trying to investigate methods that protect them from

the severe losses that occurred from March 2000 until now.

1.3 Candlestick Patterns

Doji: The Doji occurs when the open and close occur at the same price. This signals indecision

when open and close occur in the middle of the trading range. The dragonfly is a Doji where the

open and close occur near the top of the trading range.

Star Position: A candlestick that gaps away from the previous candlestick is said to be in star

position. The first candlestick usually has a large real body, but not always, and the second

candlestick in star position has a small real body. Depending on the previous candlestick, the star

position candlestick gaps up or down and appears isolated from previous price action.

Harami Position: Harami means ‘pregnant’ in Japanese and the second candlestick is nestled

inside the first. The first candlestick usually has a large real body and the second a smaller real

body than the first.

Reversal Signals: The hammer signals a reversal after a downtrend - control has shifted from

sellers to buyers. The shadow should be at least twice the height of the body. If it occurs after an

uptrend, it is called a 'hanging man' and is a bearish signal

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Dark Cloud Pattern: A Dark Cloud pattern encountered after an Up Trend is a reversal signal

warning of "rainy days" ahead.

Piercing Line: The Piercing Line is the opposite of the Dark Cloud pattern and is a reversal

signal if it appears after a downtrend.

Engulfing Patterns: Engulfing patterns consist of two bodies without any shadows and where

the second body 'engulfs' the first. These signals are only significant after a prolonged trend.

Stars: Stars are made up of a long body followed by a short body with a much smaller shadow

(trading range). The bodies of the two must not overlap, though the shadows may.

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1.4 About Technical Analysis

Technical analysis is a method of analyzing of past price behaviour of stock, where it gives the

way to predict the future price of stocks by applying suitable technique. Many technical tools are

available to study the behavior of prices of stocks but the present study is analyzed using

candlestick charts because of the following reasons.

∑ Only by using technical analysis and charts it can be read the historical performance of

stock movements within specific period.

∑ Only by using charts turning points and identify patterns can be predicted based on the

stock history, behaviour and characteristics.

∑ Only charts, indicator, patterns repetitions and setups reflect the reality of the market.

Without them, you trade in the dark.

1.5 Statement of the Problem

Every day individual investors come across many issues for the investment activities and fail to

find a tool to understand prices patterns of stocks for estimation of returns for prescribed time

period and the right time to invest. There is no evidence of any study that has taken place

supporting that candlestick charts definite role in predicting the behaviour of share price and also

to see the extent of utility and validity (how far reliable) of technical tools in Indian stock

market. The present study will focus on the different types of technical charts that help in

analyzing the price behaviour and study broadly the long-term and short-term price behaviour of

the select stocks in Indian scenario and further it will also examine the validity of the Technical

analysis with special reference to candlesticks and the individual investors awareness level,

perception and expertise in using the candlesticks for the evaluation of their investments interest.

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1.6 Need of the Present Study

Capital market is a place where lot of investors invests their money with a motive to maximize

their profit and minimize the risk, investor should be having the experience of investing further

they should also take the help of any technical analysis tool to serve their purpose. For which the

present study has been undertaken to study the utility and reliability of the candlestick charts

which is one of the technical analysis tool.

1.7 Objectives of the Study

The objectives of the present are:

1. To study about various technical charts in understanding price behavior of select equities.

2. To study the long term price behavior of select equities by using candlestick charts.

3. To study short term price behavior of select equities by using candlestick charts.

4. To study the perception and awareness levels of retail investor towards technical analysis.

1.8 Research Methodology

This study is an endeavor to find the importance for technical analysis in predicting the price

behaviour of the selected equities, using candlestick charts. For this purpose five different

companies are selected each form four different industry segments. After selection of the

companies they are individually analyzed using the candlestick charts to know about the validity

and utility in prediction of the future prices. Further investors awareness level, perception and

expertise level of understanding of candlestick analysis is studied.

1.8.1 Research Design

The present study has verified the theories of technical analysis on the basis of observations. It

has examined the overall performance and profitability of equities of different companies with

the help of candlestick charts for the analysis.

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Candle Patterns: The present study covers the four major traditional patterns such as 1) Head

and Shoulders 2) Inverted Head and Shoulders 3) Up flag 4) Down Flag. Factors common to all

the patterns are established and interpreted in the study.

Recognition of Signals: The Breakout of prices from neckline is recognized as the signal to

action-buy or sell. If they breakout from down, the price is expected to rise and hence is a signal

to buy. If they breakout from up, it is foreseeing a fall and hence is a signal to sell. Breakout of

upper boundary of a Up flag pattern or breakout of lower boundary of a Down flag pattern is

considered as a valid signal to act upon.

Classification of Successful and Unsuccessful Patterns: The pattern analysis involves an

assessment of the achievement of traditional price objective by each pattern. This is used to

gauge how far each individual pattern is successful in the prediction process as per the traditional

view. The success is revealed by the direction and extent of price change after the breakout

(signal for action) from each pattern.

If a pattern gave a valid signal of its post-pattern price behaviour and if price moved as predicted

by the pattern, such a pattern is called a successful pattern. A pattern is said to be unsuccessful or

failed when the post-pattern price behaviour is in opposite direction.

1.8.2 Sample Design

In the present study, five different sectors have been chosen and four different companies from

each sector i.e., total sample of 20 companies from Nifty have been considered for the study to

analyze for short term (1 year) and for long term (5years) separately. The selected 20 companies

for the present study are as follows:

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1. Automobile Sector (Bajaj Auto Limited, Hero Motor Corporation Limited, Mahindra &

Mahindra Limited, Maruti India Limited)

2. Banking Sector (Bank of Baroda, State Bank of India, HDFC Bank, ICICI Bank)

3. Energy Sector (GAIL, ONGC Limited, BPCL, Reliance Industries Limited)

4. FMCG Sector (HUL, ITC Limited, Britannia Limited, Godrej CP Limited)

5. Information Technology (IT) Sector (HCL Technologies Limited, Infosys Technologies

Limited, TCS, Wipro Technologies Limited)

Sample Size

Primary Data: The present study has considered 400 investors on the basis of convenience

sampling and the instrument is administered to them. But due to response errors, only 300 sample

have been considered for the final study, the primary data was collected from the investors. The

structured questionnaire was administered to the individual investors in around Hyderabad and to

analyze the behavior of investor towards technical analysis, specifically to know about their

perception and awareness level about the technical analysis and their expertise in usage of the

candlestick charts.

1.8.3 Time Period of the Study: The secondary data was collected and interpreted for the period

of five financial years from 1st April, 2009 to 31st March, 2014 for the secondary data to study the

price behavior of selected stock. The primary data was collected in the year 2014 through the

questionnaire from investors.

1.8.4 Statistical Tools Used: The tools used for the secondary data for the purpose of technical

analysis candlestick charts with candle patterns and price patterns, Exponential Moving Averages

for 5 days, 13 days and 26 days have been used and the volume traded. To analyze the primary

data collected using questionnaire statistical techniques like Chi-square analysis and ANOVA

have been used.

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1.8.5 Limitations of the Study: The present study has following limitations:

∑ The stocks selected for this study are taken only from the NSE Nifty and not for many

other indices.

∑ Only few candle patterns and chart patterns were used to study the price behavior of

selected stocks not all the patterns.

∑ As primary data was collected from the investors in Hyderabad city and the results may

not be generalized to other parts of the country.

1.8.6 Organization of the Study

Chapter I: Covers introduction about Candlesticks, need of the study, and scope of the study,

objectives and research methodology, Limitations of the study and organization of

the study.

Chapter II: Review of Literature.

Chapter III: Theoretical framework of Candlestick Charts, candle patterns, price patterns

Chapter IV: Data Analysis on long term and short term price behaviour using Technical

analysis.

Chapter V: Data Analysis on perception and awareness of Technical Analysis

Chapter VI: Findings, Conclusions and Suggestions

Bibliography, References, Questionnaire

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1.9 Review of Literature

In the present study review of literature has been divided into 3 segments which are as follows

1) Technical Analysis

Alexander (1964) applied his famous filter rules to identify nonlinear patterns in security prices

(S&P Industrials, Dow Jones Industrials). He found that the small filter rules generated larger

gross profits than the buy-and-hold strategy, and these profits were not likely to be eliminated by

commissions.

Jensen (1967) highlighted the danger of data snooping in technical trading research; Technical

trading profits were often compared to one of several benchmarks, such as the buy-and-hold

returns, geometric mean returns, or zero mean profits, to derive implications for market

efficiency.

Van Horne and Parker (1967) found that trading rules based up on moving averages of past

prices did not yield profits greater than that of buy and hold policy.

Levy (1967) Found out the possibility for superior return using relative strength analysis. He

refuted random walk hypothesis.

Sweeney and Surajaras (1989) Found that most trading systems generated risk-adjusted mean

net-profits after transaction cost. Single moving average rule performed best.

Taylor and Helen (1992) Found that around 90 per cent investors depend on technical analysis

in forming their views at different time horizons. The results show that technical analysis is

applied mainly for the shorter time frames for entry and exit timings. Moreover, technical

analysis tools are found to be the best tools for trading currencies. The survey results also reveal

that fundamentals are reliable for the long term picture, whereas others rely on both fundamental

and technical analysis in taking trading decisions.

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2) Investor Behavior

Kent (1998) Developed a theory of securities market under and over reactions based on two well-

known psychological biases investor overconfidence about the precision of private information;

and biased self-attribution, which causes asymmetric shifts in investors' confidence as a function

of their investment outcomes.

Grable and Lytton (1999) Highlighted the role of financial education in determining risk taking,

with the more financially educated participants more likely to take risk.

Barber & Odean( 1999) Found that the potential for overconfidence in the valuation of

securities may push men to choose riskier strategies or make them more likely to rebalance away

from default investments.

Barber, Lee, Liu, and Odean (2010) Viewed that Day traders with strong past performance go

on to earn strong returns, though only about 1% of all day traders are able to predictably profit

net of fees.

Grinblatt, Keloharju, and Linnainmaa (2010) Studied Finnish Stock Exchange 1995-2002 and

resulted that Stocks bought by high IQ investors earn strong returns at horizons up to one month.

Huang (2010) US Discount Broker 1991-1996 found Investors are more likely to buy a stock in

an industry if their previous investments in this industry have earned a higher return than the

market.

3) Candlestick Charts

Levy (1971) Documented the profitability of 32 five-point chart formations for NYSE securities.

He found that none of the 32 patterns for any holding period generated profits greater than

average purchase or short-sale opportunities.

Leigh, Paz, and Purvis (2002) Noted that bull flag patterns for the NYSE Composite Index

generated positive excess returns over a buy-and-hold strategy before transaction costs.

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Lucke (2003) All showed limited evidence of the profitability of technical patterns in foreign

exchange markets, with trading profits from the patterns declining over time.

Omrane and Oppens (2004) Use technical trading strategies. They examine the presence of

price chart patterns in intra-day EUR//USD, using both close and high-low prices. They search

for 12 chart patterns and study them, based on the two criteria of profitability and predictability.

Using the statistical methodology of Monte Carlo simulation to calculate results’ statistical

significance, the authors find evidence of chart patterns in the foreign exchange market. The

results reveal that more than 50 per cent of the charts that are identified, has high predictability.

Haibin, Zhao and Wang (2012) Examine the performance of the Japanese candlestick patterns

in predicting equity returns using both in-sample and out-of-the-sample forecasts. The

researchers find that the Japanese candlestick patterns do have predictive power in both in-sample

and out-of-sample forecasts. In all the cases, the Japanese trading rules are found superior to the

simple buy-and-hold. Also, it is found that there is important information that spreads out from

the US stock market to the other financial markets.

Gap Analysis

After extensive reviews of the literature it was found that many studies have been done on

different aspects of technical analysis with special reference to candlestick charts and impact of

demographic variables and trading decisions of individual investors. There has been extensive

study carried out in foreign countries about the above contexts but not in Indian scenario and

there is a hardly any study that has been done on the candlestick charts. Here the present study

titled “Understanding price behavior by using candlestick charts – a study on select equities” is

undertaken to the address the research gap which has been found after extensive review of

literature.

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1.10 Data Analysis and Interpretation:Chart 1.10.1 Long Term Behavior of Bajaj Auto Limited

In Bajaj Auto Limited Company Uptrend and Sideways Trends have formed in the chart for the

financial years 2009-14 and 11 candle patterns have formed on the chart and the below 4 candle

patterns have repeated for multiple times.

1. Doji (8 Times)

2. Shooting Star (2 Times)

3. Bearish Harami (8 Times)

4. Bearish Engulfing (13 Times)

The price of Bajaj Auto Limited moved in between Rs.607 and Rs.2028 with net change of

Rs.1421. with overall growth during 2009-14 is 234%. Average annual growth is 46.8%.

Chart 1.10.2 Long Term Behavior of ICICI Bank

In ICICI Bank Head and Shoulder and Inverted Head and Shoulder patterns have formed for

financial years. 2009-14 and 10 candle patterns have formed on the chart and the below 4 candle


1. Gravestone Doji (3 Times)

2. Hanging Man (2 Times)

3. Dark Cloud Cover(2 Times)


The growth of the ICICI Bank for long term 2009-14 is 209% where price starts at Rs.397.8 and

ends at Rs.1230.45 and the net change is Rs.832.65.the annual growth rate is 41.8%.

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Chart 1.10.3 Long Term Behavior of Bharat Petroleum Corporation Limited

In Bharat Petroleum Corporation Limited Head and Shoulders and Sideways Trend have formed

for the financial years 2009-14, and 8 candle patterns have formed and the below 4 candle


1. Doji (13 Times)

2. Hammer (1 Time)

3. Bearish Harami (1 Time)


The price starts at Rs.384.3 and ends at Rs. 443.6 and net change is RS.59.3with the growth rate

of 15.4% for long term and average annual growth rate is around 3%.

Chart 1.10.4 Long Term Behavior of Britannia Limited

In Britannia Limited Sideways and Uptrend patterns have formed for financial years 2009-14

and 9 candles have formed on the chart and the below 4 candle patterns have repeated for

multiple times.

1. Doji (20 Times)

2. Dragonfly Doji (3 Times)


4. Inverted Hammer (3 Times)

Britannia limited shows the negative growth of -40.4% where the prices moved between

Rs.1446.9 and Rs. 860.95 ant net negative change is Rs. 585.95.

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Chart 1.10.5 Long Term Behavior of HCL Technologies Limited

In HCL Technologies Sideways Trend and Uptrend have formed on the chart for the financial

years 2009-14 and 5 candle patterns have formed

1. Doji (14 times)

2. Hanging Man (2 times)

3. Bearish Engulfing (11 times)

4. Bearish Harami (10 times)

The growth rate of HCL is 1043% for long term where price moved between Rs. 122 and

Rs.1397, the net change in the price is Rs. 1275. The average annual growth is 208%.

Chart 1.10.6 Short Term Behaviour of Maruti India Limited

In Maruti India Limited Down Flag and Inverted Head and Shoulders patterns have formed for

the financial year 2013-14. And seven candle patterns have formed on the chart and the following

4 patterns have formed multiple times.

1. Doji (17 Times)


3. Bullish Engulfing (3)

4. Hanging Man (1 Time)

The growth of Maruti India Limited for the financial year 2013-14 is 53% where the prices

changed from Rs.1283.8 Rs.1971.75 for the financial year 2013-2014, with a net change of

Rs.687.95.

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Chart 1.10.7 Short Term Behaviour of Bank Of Baroda

In Bank of Baroda Down flag and Up Flag have formed for the financial year 2013-14 and six

candle pattern have formed on the chart and the below four charts have fomed multiple times .

1. Doji (17 Times)


3. Bullish Engulfing (3 Times)


The overall performance of Bank of Baroda for 2013-14 is only 5.26% growth

Chart 1. 10.8 Short Term Behaviour of Oil & Natural Gas Corporation

In Oil & Natural Gas Corporation Limited Down Trend and Head and Shoulders have formed for

financial year 2013-14 and seven candle pattern have formed.

1. Doji (14 Times)

2. Gravestone Doji (1 Time)



Oil & Natural Gas Corporation limited has shown a minute positive growth rate which is very

negligible for the financial year 2013-14 where it has changed its prices from Rs.308 to Rs. 318

and change between opening and closing price of the stock is only Rs. 9.85 whose growth rate is

3.18%.

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Chart 1.10.9 Short Term Behaviour of ITC Limited

In ITC Limited Up Flag and Sideways Trends have formed for the financial year 2013-14 and

eight candle pattern have formed on the chart and the four patterns have repeated multiple times.

1. Doji (15 Times)

2. Hanging Man (2 Times)



The price starts at Rs.307.2 and ends at Rs.352. with net change in price is Rs.45.65 for the

financial year 2013-2014. The overall growth rate of ITC Limited is 14.06%.

Chart 1.10.10 Short Term Behaviour of Tata Consultancy Services Limited

In Tata Consultancy Services Uptrend and Head and Shoulders patterns have formed for the

financial year 2013-14 and six candle pattern have formed on the chart and the below four

patterns have repeated on chart for multiple times.

1. Doji (17 Times)

2. Hanging Man (1 Time)



The price starts at Rs.1556.85, ends at Rs.2133.15 and the net change in Rs.576.3, the growth of

the TCS for is 37%.

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Primary Data Analysis

Table 1.10.1 Cronbach's Alpha

The Table 1.10.1 shows the reliability of the instrument administered for the purpose of studying

the awareness and perception of investor about the technical analysis and candlestick charts.

Total 25 items were considered for the study and the consistency among these items is calculated

by Cronbach’s Alpha which is 0.912.

Table 1.10.2 Gender of the Respondents

Description Frequency Percentage % Cumulative PercentageMale 228 76.0 76.0Female 72 24.0 100.0

Total 300 100.0

The Table 1.10.2 reveals the Gender of the respondents which has two categories, Out of 300

respondents, 228 respondents (76%) are male and 72 respondents (24%) are female.

Table 1.10.3 Age of the Respondents

Description Frequency Percentage % Cumulative PercentBelow 30years 75 25 25

30-40 years 126 42 6740-50 years 72 24 91

Above 50 years 27 9 100Total 300 100

Out of total 300 respondents, 75 respondents (25%) fall in the age-group below 30 years, 126

respondents (42%) fall in the age group of 30-40 years, 72 respondents (24%) fall in the age

group of 40-50 years and the rest of 27 respondents (9%) fall in the age group of above 50 years.

Table 1.10.4 Education of the Respondents

Description Frequency Percent % Cumulative percentSSC/Inter 30 10.0 10.0

Degree 108 36.0 46.0PG 123 41.0 87.0

Professional course

39 13.0 100.0

Total 300 100.0

Cronbach's Alpha No of Items

.912 25

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Among the respondents the education levels are known from the Table 1.10.4, with SSC/Inter

qualification are 30(10%), Graduates are 108(36%), Post Graduates are 123(41%) and

professionals are 39(13%) out of total 300 respondents.

Table 1.10.5 Investment Objective of the Respondents

Description Frequency Percentage % Cumulative PercentShort Term(Below 1year) 78 26.0 26.0

Mid-Term (1-3year) 162 54.0 80.0Long Term (Above 3year) 60 20.0 100.0

Total 300 100.0

The Table 1.10.5 represents the investment objective of the respondents, out of total 300

investors, short term investors are 99 (33%), mid-term investors are 135 (45%) and the long term

investors are 66 (22%) .

Table 1. 10.6 Investment Experience of the Respondents

Description Frequency Percentage % Cumulative percent1-3 years 72 24.0 24.03-5 years 99 33.0 57.05-10 years 87 29.0 86.0

Above 10 years 42 14.0 100.0Total 300 100.0

The experience of investor. Out of 300 investors, 72 respondents (24%) with 1-3 year, 99

respondents (33%) with 3-5 year, 87(29%) with 5-10 year group and rest 42(14%) are above 10

year experience.

Table 1. 10.7 Technical Analysis Helps to Analyze Shares

Description Frequency Percentage % Cumulative percentVery Low 15 6.3 6.3

Low 9 3.8 10.1Moderate 42 17.7 27.8

High 117 49.4 77.2Very High 54 22.8 100.0

Total 237 100.0

The Table 1.10.7 reveals the percentage of respondents utilizing the technical analysis to analyze

shares out of the total 237 respondents , 54 respondents (22.8%) said it helps them very high,

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117 respondents (49.4%) answered high, 42 respondents (17.7%) moderate, 9(3.8%) low and

rest of them 15(6.3%) said it helps very low.

Table 1.10.8 Experience in Technical Analysis

Description Frequency Percentage % Cumulative percent0-1 Years 24 10.1 10.11-3 Years 57 24.1 34.23-5 Years 87 36.7 70.95-7 Years 36 15.2 86.1

Above 7 Years 33 13.9 100.0Total 237 100.0

The table 1.10.8 shows the Experience of respondents in Technical Analysis, out of which the

respondents having experience 0-1 year is 24 (10.1%), 1-3 years experience are 57 (24.1%),

experience of 3-5 years are 87(36.5%) and 5-7 years and above 7 years experience respondents

are 36 (15.2%), 33(13.9%) respectively.

Table 1. 10.9 Candles Give Future Price Prediction

Description Frequency Percent Cumulative percentVery Low 18 7.6 7.6

Low 27 11.4 19.0Moderate 36 15.2 34.2

High 78 32.9 67.1Very High 78 32.9 100.0

Total 237 100.0

In table 1.10.9 gives information about the future price indication given by candlestick chart is

observed, out of 237 investors, 78 investors (32.9%) said candlestick chart give the very high

level of prediction of future price and also same percent of investors said high level and 36

investors said it will give moderate, 27 investors said low and only 18 investors (7.6%) said it

give very low level of future price prediction.

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Table 1.10.10 Chi Square of Qualification and Investment Objective

To know the association between Qualification and investment objective Chi Square is conducted

and results are interpreted in table 1.10.10.

Qualification Short Term Midterm Long Term Total Pearson Chi-Square

Degree 18 27 34 79

.000 PG 57 48 12 117

Professional Course 15 15 11 41 Total 90 90 57 237

The chi square value is 0.000 which is found to be significant, hence that there is a significant

relationship between qualification and investment objective.

Table 1.10.11 ANOVA for Age and 3 Dimensions

Dimension Age N Mean Std.dev Std.Er F Sig.

Awareness

Below 30years 45 8.73 3.434 .512

47.5 .00030-40 Years 111 14.03 2.893 .27540-50 Years 57 13.79 2.328 .308

Above 50 Years 24 15.38 1.610 .329Total 237 13.10 3.510 .228

100.6 .000Perception

Below 30years 45 4.07 1.864 .27830-40 Years 111 7.84 1.541 .14640-50 Years 57 8.32 .929 .123


Expertise inCandlestick Chart

Below 30years 45 5.00 2.246 .335

102.8 .00030-40 Years 111 11.03 2.606 .24740-50 Years 57 11.47 1.441 .191


With reference to the influence of age on awareness, perception and expert in candlestick

charts the F values are 47.5, 100.6, 102.8 and whose P values are 0.000, 0.000 and 0.000 which

are found to be significant hence that there is significant influence of age on the three

dimensions.

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1.11 Findings

Findings on Technical Analysis

∑ In the present study 12 candle patterns have formed they are Doji, Dragon fly Doji, Grave

Stone Doji, Hammer, Inverted Hammer, Hanging Man, Shooting Star, Dark Cloud Cover,

Bearish Harami, Bullish Engulfing, Bearish Engulfing, Piercing Line.

∑ The study has found that total 4 different chart patterns are formed those are Head and

Shoulders, Inverted Head and Shoulders, Up Flag and Down Flag.

∑ For the long-term price behaviour of Bajaj Auto Limited the candlestick chart has shown the

formation of uptrend and sideways trend twice. The overall growth rate of the Bajaj Auto

Limited is 234% for five years. The annual growth rate is 46.8 % which is considered to be

above normal growth.

∑ For the long-term price behaviour of ICICI bank the candlestick chart has shown the

formation of Head and Shoulders and Inverted Head and Shoulders twice The overall growth

rate of ICICI is 209 % for five years. The annual growth rate is 41.8 % which is considered

to be above normal growth.

∑ For the long-term price behaviour of Bharat Petroleum Corporation Limited the candlestick

chart has shown the formation of Head and Shoulders and sideways trend . The overall

growth rate of the Bharat Petroleum Corporation Limited is 15.4% for five years. The annual

growth rate is 3% which is considered to be below normal growth.

∑ For price behaviour of Britannia Limited the candlestick chart has shown the formation of

sideways trend twice and uptrend. The overall growth rate of the Britannia Limited is found

to be negative which is considered to be -40.4% for five years.

∑ For the long-term price behaviour of HCL Technologies Limited the candlestick chart has

shown the formation of sideways trend and uptrend. The overall growth rate of the HCL

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Technologies Limited is 1043 % for five years. The annual growth rate is 208 % which is

considered to be abnormal growth.

∑ For the short-term price behaviour of Maruti India Limited the candlestick chart has shown

the formation of down flag and Inverted Head and Shoulders The overall growth rate is 53%

during 2013-14 which is considered to be above normal growth.

∑ For the short-term price behaviour of bank of Baroda the candlestick chart has shown the

formation of up flag and down flag. The overall growth rate is 5.26% during 2013-14 which

is considered to be very minimal growth.

∑ For the short-term price behaviour of Oil & Natural Gas Corporation Limited the candlestick

chart has shown the formation of down trend and Head and Shoulders. The overall growth

rate is found to be 3.18% during 2013.

∑ For the short-term price behaviour of ITC Limited the candlestick chart has shown the

formation of sideways trend and up flag The overall growth rate of the ITC Limited is 14.06

% during 2013-14 which is considered to be having below normal growth rate .

∑ For the short-term price behaviour of Tata Consultancy Services Limited the candlestick

chart has shown the formation of uptrend twice and Head and Shoulders . The overall

growth rate of the Tata consultancy services is 37 % during 2013-14 which is considered to

be above normal growth rate.

Findings on Perception and Awareness of Investors

∑ According to the data collected among the total respondents 228 (76%) were male and the

72(24%) were female, from which it can be observed that investing is mostly a man's game

although women are doing their investment in some way or other .

∑ Majority of the respondents were in the age group of 30-40 which suggests that younger

generation of India are aware about the wide investment opportunities available.

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∑ People like to invest in Stock market as compared to any other markets, even though high

risk factor is involved in it.

∑ For the data collected it is observed that out of the total 300, 198(66%) respondents are

married and 102(34%) are unmarried.

∑ .For qualification of SSC/Intermediate is 30(10%), for degree it is 108(36%), for PG it is

123(41%) and for professional courses it is 39(13%) which helps in stating that majority of

the respondents who are highly educated get into the business of investing in equity.

∑ Among the respondents it is found that the maximum numbers of investors have 3-10 years

of investment experience.

∑ According to the respondents it was found that 79% of investors are aware of and having the

knowledge about technical analysis.

∑ Among the investors more than 70% of them have very high level knowledge of technical

analysis.

∑ According to the respondents 72% of them do believe that technical analysis help them to

analyze equity.

∑ Out of total 237 investors who know technical analysis, 70% of them have a investment

experience between 1-5 years.

∑ Among the respondents, it is found that more than 65% of them said that candlestick charts

can predict future price of the equities.

∑ The association between qualification of respondents and investment objective is found to be

significant which 0.000 is.

∑ The results of the ANOVA for age and three dimension which are awareness, perception and

expertise in candlestick chart is found to be significant where the P values for the three

dimensions are found to be 0.000, 0.000 and 0.000.

understanding price behaviour by using candlestick...

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