MACD

• Moving Average Convergence Divergence (MACD) identifies the trend between two moving averages, the 12-period and 26-period exponential moving averages
• Exponential moving averages give higher weightage to recent price movement and are more sensitive to recent prices than simple moving averages
• To calculate MACD, two factors are used- MACD line and Signal line
• MACD line is the difference in the two moving averages and the Signal line is average of the difference over the past few periods
• When MACD line moves above the Signal line it is a bullish indicator and when MACD line goes below the Signal line it is a bearish indicator

RSI

• Relative Strength Index (RSI) is used to identify whether due to recent movement in stock price has the stock moved into over-bought or over-sold territories
• The value of RSI ranges between 0 to 100
• In case the RSI reaches the upper band it indicates the stock is over-bought at these levels and may fall, and in case RSI reaches the lower band it indicates the stock is over-sold and may rise back up
• In between the two bands the RSI does not give any indication

Bollinger Bands

• Bollinger bands plot the range from mean basis the standard deviation of prices
• Since standard deviation measure volatility, the bands widen when volatility increase and become narrow when volatility falls
• When stock prices move out of the bands, it signals a potential ‘breakout’ from the current levels
• In times of very low volatility the bands ‘squeeze’ and become very close to the mean

Averages

• Moving averages is the only indicator that we track on a daily basis
• We use 50-day moving average (DMA) and 200 DMA for our calculation
• 50 DMA moving above the 200 DMA is a bullish indicator and vice versa

KST

• Know Sure Thing (KST) captures the momentum of the stock by combining the price return in different periods
• We give higher weightage to the more recent periods
• Like MACD, KST also uses the KST line and signal line which is moving average of KST line over recent periods
• When KST line moves above the Signal line it is a bullish indicator and when KST line goes below the Signal line it is a bearish indicator

What is Dow Theory?

• Dow theory tracks the stock movement basis its previous movements and identifies the points where it beats the previous highs or falls below its previous lows
• It identifies the trends and key levels for the stock movement
• Dow theory is considered the base on which all modern technical analysis is based

OBV

• On Balance Volume (OBV) measures the changes in volume with change in prices to identify where the smart money (institutional investors) is moving
• It tracks rise and fall in volumes before price catches up to identify whether institutional investors are building or reducing positions in the stock