Technical Analysis Of Pakistans Stock Prices Finance Essay - Free Essay Example

Sample details Pages: 6 Words: 1879 Downloads: 7 Date added: 2017/06/26 Category Finance Essay Type Research paper Did you like this example? Stock market and the techniques for demonstration of share prices has always been a topic of public and academic interests. A stock market or share market is an organization that provides trading facilities for stock brokers and traders to trade share of listed companies. The role of the stock market is to raise long-term funds for corporations (primary market) while providing a platform for the trading of securities (secondary market). Don’t waste time! Our writers will create an original "Technical Analysis Of Pakistans Stock Prices Finance Essay" essay for you Create order Stock exchanges encourage investment through pooling of resources, enabling corporations to obtain funds to expand their businesses. The stock exchange also serves as an economic barometer and can give important signals to economic policy makers regarding how their decisions related to interest rates, taxes and currency volatility impacts different sectors of the economy. Historically, the KSE has been a leading indicator to changes in the real side of the economy and an effective predictor of growth. Using techniques to decide in what stocks to invest in order to get huge profits has always been a topic among investors but still it is not sure whether fundamental analysis will fulfill this purpose or technical analysis. What is wrong now days is that market players are adopting wrong tactics. On one hand we have fundamentalists who are normally inclined towards unrealistic presumptions while on the other hand; we have chartists who often tend to misinterpret their charts. F undamental and technical analysis is two techniques for predicting the performance of a company stock. My main research will be conducted to understand the basic techniques of technical analysis but I will also looking to find out the most effective technique among the 2 school of stock analysis and to check how far they are effective and reliable by observing their limitations. Stock market moves in a cyclical pattern, at certain time stock prices will rise and then at certain time they will fall, the market is always swinging upwards or downwards like a pendulum so, expectations are not based on presumptions but are concluded from certain conditions and activities that had happened previously. Background of study: Historically the first brokers came in 11 century frame. They managed the debts of agricultural communities on behalf of banks (Viktor Ka, 2008). In an article of David Escobar, Hades Smith, Robert Grazion and Kelly Clifford discussed that the first stock exchange was founded in 12th century. Next places to facilitate exchanges were in Venice and Belgium. The first company ever formed as JSC was Dutch East India company who issued its first shares, it was the first ever IPO.later in 1688 London Stock exchange came. First official stock exchange was established in New York, America. It was the result of button wood agreement which was signed by 24 brokers and a merchant to trade securities (Arkaitz Artega, 2008).In 1929 the greatest economic crises came (Hades Smith, 2009).GK Awadhiya and Arkaitz Artega (2008-2009) describes that after the creation of NYSE fee has been charged for trading shares. Today in the same structure the fee is known as brokerage. Kelly Clifford (2010) in her article stock market growth and expansion showed that 1800 was the time of great growth and innovation for stock market. At that time government bonds, insurance and bank stocks trading was in action and 1900 were the time of industrial revolution and much expansion than 1800 was seen in the stock market. Mike Singh and Micheal James in their article explains that stocks are the foundation on which the stock market works as it is the basic and main commodity being traded and bought and sold in billions daily. David Escobar and Micheal James (2009-2010) defines stock exchange as a stock market or share market is a platform for the trading of companies stocks. It allows individuals and businesses a place to trade at an agreed price. It provides companies and government to issue or redeem securities on stock exchange. The companies are facilitated by buying and selling of stocks and the stocks quotes are determined by the forces of demand and supply. Mike Singh in his arti cle (2009) has raised the question of how does stock market works? he explained it that the broker execute transaction on our order which means we have still control on our stocks. Brokers get commission and of course our profit will be the difference between the purchase price and our selling price. The question arises how to succeed in stock market an article presented by Priyanka Grey and Deep Kandal explains that there are mixture of approaches to take on by different advisors to build profitable portfolios, market forecasting is challenging part of stock market analysis in order to choose the type of security, time to buy or sell, and what amount should be invested. The article technical analysis in stock market trading by Branden Moskwa (2006) defines that the methods used to analyze stocks to make investments decisions are very vast but they fall in one of two categories knows as fundamental and technical analysis. Deep Kandal, Ray Johns, J Finnis describes that fundame ntal analysis is the study of companys financial statements, economic conditions, assets, debt, management, product and completion which means that it is based on financial and industry information of the company to predict the price movements and there is no involvement of exotic formulas. Where as technical analysis is the analysis of market data, volume and interest, by studying the companies past performance and charts all this above mentioned information are displayed graphically which further help us to determine when to buy or sell a security. Micheal Glass and Jason Nq says that fundamental analysis is capable of telling companies long term growth potential and usually results in long term investments where as technical analysis is useful in trading short term trends by telling when price will rise or go for a fall with the help of support and resistance levels. Another article introduction to technical analysis and fundamental analysis (2010) elaborated that fundament al analysis is to analyze companies business prospects like financial statements, ratios, cash flows, EPS etc where as technical analysis believes that companys fundamentals are reflected all in the charts. Question arises what is the best analysis style and tool for stock trading. Johny Stock Burger (2010) says that fundamental and technical analysis relates to each other like brothers and sisters but both have their own pros and cons. Jun Wei Tan (2010) says that technical analysis is form of guessing and gambling and putting lines here and there like little kids can not predict the market. On the other hand fundamental analysis is value traps and based on fake information. Another study of BM Davis (2007) says that technical analysis features: Market discounts every thing. Price moves in a trend. History tends to repeat itself. Concluding all is that among fundamental and technical analysis it is not important what to use but it is important that what stocks we buy, what the investment criteria, what is the risk relating to it and then we need both technical and fundamental analysis by looking at their benefits and limitations will enable us to get better profits through better trading. Problem statement: In this high technological era, the increased interests of making huge profits in Pakistan Stock market day by day requires strong plan of action, regarding understanding, consumption and interpretations of techniques. In short, simple gauging tools will ease us in getting down to the basics of making good investment and will help us in making fast decisions in order to excel in the game of stocks and shares investment. Research objectives: The objectives relating to the topic of my thesis Technical analysis of stock prices are: To compile and assemble all the possible data and information relating to KSE. To understand the stock exchange as a concept in total. To identify tools and techniques which are necessary for selecting and investing in profitable stocks using prices. To assemble and try the implementation of technical concepts in such a manner that it should provide a beginner like me to play and earn successfully from the stock market as a professional investor. Approach: The research on this topic is series designed for all those beginners like me to develop their capabilities as investors. The fact that many people want to become good investors is not new and many approaches to such learning and development has been available. At times, ideas evolve and as i will proceed with my research of course plans and actions and approaches will evolve but i will be looking at following things: To gather all pertinent details and information regarding stock exchanges in Pakistan that will be: Stock exchange history. Stock exchange introduction and concepts. What is a stock exchange? Primary and secondary market. Instruments of market. Why do companies go public? What are shares? IPOs Measures of market performance Functions and characteristics of stock exchanges. Stock exchanges in Pakistan. KSE Compiling and evaluating companies listed in KSE. LSE ISE Role of CDC. How to find a stock broker? How to keep the acquired shares? How much is the costs? How are settlement and clearing done? Understanding investments. Reasons for buying and selling stocks. Which shares to buy? Why do individuals invest? Why do we measure rate of return? Why do we measure risk relating to investments? Investments alternatives Investments process. Investment policy. Security analysis. Making portfolio. Analyze performance. Revising portfolios. Security analysis. Market analysis Industry analysis Company analysis Technical analysis Stock market trends and trading principles. Long term and medium term trends. Forecasting indicators.( short term and medium term) Psychological barriers. Trading principles. The extent to which technical or fundamental analysis will be relevant. etc Methodology: The first part of my research on Technical analysis of stock prices will be done by Compiling and evaluating companies that are listed in KSE. For this purpose all possible and relevant data will be taken as follows: Annual reports. General point of views and experiences will be gathered. Reports from brokerage houses. Pool a group of companies from stock exchange and will apply technical analysis tools and techniques. Will select a pool of companies and will calculate and compare max/min historical prices with current stock prices. For the other part of research, the main thing is to find the effect of using tools, techniques and indicators on stock prices. This purpose will be fulfilled by extracting and gathering data from: Internet. Articles. Annual reports. Journals. Books. The limitations that are part of my research methodology are: Data will be taken and compiled at a particular period of time so gaps and differences might appear. O ther factors such as political, economic, social, news, rumors and day timings will affect investors responses. Forecasting: At the end, i will be making a forecast by applying all the possible and relevant tools and techniques of technical analysis concerning management, business plans, graphs, charts and examples in order to conclude what can be earned and gained by a beginner like me from the year 2011-2015. For the above mentioned purpose, I will be selecting Honda motors and Suzuki motors from automobile industry of Pakistan and will be looking at the following things: Industry overview Economic condition Group selection Narrow with in group Company overview Market share Market growth rate Business plan management Technical analysis of Honda and Suzuki MACD Bollinger bands RSI Current performance Comparison from an investors eye.