The stock price depends on the demand and supply. The market is bullish when there is a demand for buying the stock. The market is bearish when there is a selling pressure.
The demand for buying a stock arises when there is a positive news, corporate acquisition, economic and financial data, introduction of new product, etc.
The selling pressure arises when there is negative news, rumours, manipulation of stock price, etc.
There are two types of analysis :Fundamental analysis and technical analysis. Fundamental analysis is used to measure a security’s intrinsic value by examining related economic and financial factors. Technical analysis is the art and science of forecasting future prices based on an examination of the past price movements.
Input required for fundamental analysis are economic, financial aspects and growth of the Company.
Input required for technical analysis is price movement of the stock and volume.
In Technical Analysis, there are four types of charts. They are :
1. Line chart
2. Bar chart
3. Point and figure chart
4. Candlestick chart
Candle stick charts are predominantly used by traders. Candlestick charts are a tool for displaying market data. The candlesticks on the chart display the high, low, open and close prices for the time period chosen and the direction of the price movement. Candlestick charts can go as low as a 1 minute chart to as large as a monthly chart.
The Line chart gives only the the closing price.
Manipulation of stock price takes place by the action of a group of traders in spreading rumours, fake buy and sell action, etc.
The traders have to use the fundamental analysis to know the company and the technical analysis to know the price and volume of the stock to predict the future price using candle stick chart.
