ASSIGNMENT

BASICS OF SECURITY ANALYSIS (FIBA205)

FACULTY- Ms Manisha Dey
TOPIC- TECHNICAL ANALYSIS OF ICICI BANK
NAME- AAKANKSH GUPTA
ENROLLMENT NO. – A90821522003
 WHAT IS TECHNICAL ANALYSIS- A BRIEF OUTLOOK

Technical analysis is a method of evaluating and predicting future price movements of

financial assets, such as stocks, based on the analysis of historical price and volume data. It is
one of the two primary methods used in financial markets analysis, with the other being
fundamental analysis.

Some key principles and concepts of technical analysis:

Price Charts: Technical analysts primarily use price charts to visualize and analyse historical
price data. The most common types of charts are line charts, bar charts, and candlestick
charts. These charts display price movements over time, with each data point representing a
specific time period (e.g., daily, hourly, etc.).

Patterns: Technical analysts look for recurring patterns and formations in price charts, such as
head and shoulders, double tops, and triangles. These patterns are believed to provide insights
into potential future price movements.

Indicators: Various technical indicators are used to supplement chart analysis. These
indicators are mathematical calculations based on price, volume, or open interest data.
Examples include moving averages, Relative Strength Index (RSI), Moving Average
Convergence Divergence (MACD), and stochastic oscillators.

Support and Resistance: Technical analysts identify key support and resistance levels on price
charts. Support levels are where prices tend to find buying interest, preventing them from
falling further. Resistance levels are where prices encounter selling pressure, preventing them
from rising further.

Trends: The concept of trend is central to technical analysis. Analysts identify trends by
looking at the direction of price movement over time. Trends can be upward (bullish),
downward (bearish), or sideways (range-bound).

Volume Analysis: Volume is the number of shares or contracts traded in a given period.
Technical analysts pay attention to volume to confirm or contradict price movements. Higher
trading volumes often confirm the validity of a price trend, while low volumes may suggest a
lack of conviction in the market.

Timeframes: Technical analysis can be applied to various timeframes, from intraday (minutes
or hours) to long-term (weeks or months). The choice of timeframe depends on the trader's or
investor's objectives.

Behavioural Assumptions: Technical analysis is based on the assumption that historical price
movements reflect all available information and that market participants tend to exhibit
certain behavioural patterns, leading to repetitive price movements.

It's important to note that technical analysis is a tool used by traders and investors to make
decisions about buying and selling financial assets. While it can be a valuable part of a
trading strategy, it is not without its critics, who argue that it may not always provide accurate
predictions and that it relies on historical data rather than fundamental factors like a
company's financial health and earnings. Many market participants use a combination of both
technical and fundamental analysis to make informed investment decisions.

TECHNICAL ANALYSIS OF ICICI BANK

FIRST PATTERN- HEAD AND SHOULDER

The head and shoulders pattern is a significant technical chart pattern used in stock market
analysis to predict potential trend reversals. It is considered a reliable indicator of a reversal
from a bullish (upward) trend to a bearish (downward) one. The pattern gets its name from its
visual appearance on a price chart, which resembles a head and two shoulders. There are two
variations of the head and shoulders pattern: the head and shoulders top (bearish reversal) and
the head and shoulders bottom (bullish reversal).

FIG- HEAD AND SHOULDER PATTERN FOR ICICI BANK STOCK FROM 10 TH MAY
2007 – 10TH JUNE 2008

INTERPRETATION/COMMENTS
1.Since it’s a downward sloping confirmation line it is generally seen as a more powerful
Head & Shoulders pattern, mainly because a downward sloping confirmation line means that
prices are making lower lows.
2. When the confirmation line of a Head & Shoulders pattern breaks to the downside, a large
amount of volume should occur as well.
3.If prices break the confirmation support line, it is clear that the bears are in charge; thus,
when price closes below the confirmation line, a potential sell signal is given
SECOND PATTERN- INVERSE HEAD AND SHOULDER
The Inverse Head and Shoulders pattern, sometimes referred to as a "head and shoulders
bottom," is a bullish reversal pattern used in stock market and technical analysis. It is
essentially the inverse or mirror image of the regular Head and Shoulders pattern and is
characterized by three lows on a price chart, with the middle low (the "head") being lower
than the two outer lows (the "shoulders"). This pattern indicates a potential reversal from a
downtrend to an uptrend.

FIG- INVERSE HEAD AND SHOULDER OF ICICI BANK STOCK FROM 31 ST JAN 2013
– 5TH MARCH 2014
INTERPRETATIONS/COMMENTS
1.Usually, an upward sloping confirmation line is seen as a more powerful Reverse
Head & Shoulders pattern, mainly because an upward sloping confirmation line
means that prices are making higher highs.
2. The break of the confirmation line should be accompanied by an increase in
volume.
3. When the price closes above the confirmation line, a potential buy signal is given.

THIRD PATTERN- DOUBLE TOP

The double top pattern is a bearish reversal pattern that can occur in the stock market or any
financial market. It is characterized by two peaks in the price chart, with the second peak
being roughly equal in height to the first. This pattern is considered a sign that an existing
uptrend may be losing momentum and is likely to reverse into a downtrend.
FIG- DOUBLE TOP PATTERN OF ICICI BANK STOCK FROM 6TH FEB 2015 – 20TH
MARCH 2015

INTERPRETATIONS/COMMENTS

 the double top chart pattern signals a possible move to the downside and potential
selling opportunities.
 one can trade the pattern on the break of the neckline, placing the stop loss above the
pattern and the profit target the same distance as the height of the pattern, down from
the neckline.
 one can also enter after the price has already broken through the neckline and has
retested it as resistance. You place the stop loss above the resistance level and the
profit target the same distance as the height of the pattern, down from the neckline.

FOURTH PATTERN- DOUBLE BOTTOM

A double bottom pattern is a bullish reversal pattern that often occurs in the stock market. It is
characterized by two distinct troughs (or bottoms) in the price chart that are separated by a
peak (or a peak that is relatively lower than the previous peak), creating a pattern that
resembles the letter "W." This pattern suggests that a downtrend may be coming to an end
and that a new uptrend is likely to follow.
FIG- DOUBLE BOTTOM PATTERN OF ICICI BANK STOCK FROM 20TH APRIL 2022 –
12TH JULY 2022

INTERPRETATION/COMMENTS
A double bottom is suggestive of a change in direction higher and possibly the start of a new
uptrend. To put it in buyers/seller’s terms, the sellers have created a downtrend that came to
a low point (support), which led to a rebound or short-covering. The rebound that follows is
considered corrective within the overall downtrend, meaning the sellers are still in place, and
they eventually make another try for the downside. However, the previous low/support level
manages to hold again, meaning the fundamentals may have changed and the selling
pressure may have been exhausted, leaving the sellers suddenly on the wrong side of the
downward move.

FIFTH PATTERN- ROUNDING BOTTOM

The rounding bottom, also known as the saucer or bowl pattern, is a bullish reversal chart
pattern observed in the stock market. It typically forms after an extended downtrend and
signals a potential shift in the trend from bearish to bullish.
FIG- ROUNDING BOTTOM PATTERN OF ICICI BANK STOCK FROM 20TH FEB 2020 –
1ST FEB 2021

INTERPRETATIONS/COMMENTS
 The rounded bottom are reversal patterns which identify the completion of the trend
and indicate a possible reversal point on price chart.
 The rounded bottom signals that the existing downtrend is about to finish and the
possibility of an uptrend to commence. It resembles a clear “U” image.
 Initially, A patterns move in one direction. Then the stabilization of price takes place.
There is a price breakout of the neckline in the opposite direction.
 Enter the market when the neckline of the pattern is broken. Look for candle closes
above (for rounded bottom) the neckline.
 The stop loss is placed below the neckline when trading the rounded bottom.
 For profit target, the measurement taken involves height of the actual pattern and
extending that distance from the break of the neckline.

SIXTH PATTERN- THE CUP AND THE HANDLE

The cup and handle pattern is a bullish continuation pattern that is commonly observed in
stock market charts. It signifies a temporary pause in an existing uptrend before the price is
expected to resume its upward movement. The pattern gets its name from its resemblance to a
teacup and handle.
FIG- THE CUP AND THE HANDLE PATTERN OF ICICI BANK STOCK FROM 1ST DEC
2022 – 7TH JULY 2023

INTERPRETATIONS/COMMENTS
A Cup with Handle pattern is a bullish continuation pattern that marks a consolidation period
followed by a breakout.
A Cup with Handle pattern has two parts—a cup and a handle. The cup forms after an
advance in price. This prior trend is important as is the duration of the trend. The trend should
only be a couple of months old. After completing the cup pattern, a trading range develops on
the right side and the handle is formed. When price breaks out of the handle's trading range, it
signals a continuation of the prior trend.
Once you spot a chart with a Cup with Handle pattern, it's best to wait for price to break out
of the handle before entering a long position. But before you do, make sure that trading
volume is strong. This confirms that price will follow through to the upside.
As the stocks in this pattern test old highs, they are likely to face pressure from investors who
have previously purchased at this level. It will most likely consolidate into a decline for 4 to 4
weeks before rising due to selling pressure. It is a sort of bullish continuation pattern that is
used to spot purchasing opportunities.
A cup and handle is a technical indicator where the price movement of a security resembles
a “cup” followed by a downward trending price pattern. This drop, or “handle” is meant to
signal a buying opportunity to go long on a security. When this part of the price formation is
over, the security may reverse course and reach new highs. Typically, cup and handle
patterns fall between seven weeks to over a year.