Investors Perception & Contrarian View on Market Movement During Peaks & Troughs

8/12/2019 Investors Perception & Contrarian View on Market Movement During Peaks & Troughs

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Investors Perception & Contrarian view on Market Movement during Peaks & Troughs

Introduction of title

Investors Perception & Contrarian view on Market Movement during Peaks &

Troughs

My project focus more on the technical part of market analysis so in the beginning I wouldcover some basics of technical analysis and a bit of fundamentals and how these two conceptare different but still they are incomplete without each other.

Then I would be focusing on different chart pattern and different market movement w.r.t. toIndian stock market indices.

There are different market players and each have different goals and objectives. ome are fora short period of time! some are for long term. ome of the players are termed as "#

$% speculators

% arbitrageurs

'% swing traders

Then I will be covering the sentiment part of it. (ow do different emotions like ) fear andgreed affect the trading decisions.

*hat is market peak or top out effect++++

*hat happens at market peak +++

*hat is trough or bottom out effect +++

*hat happens at troughs +++

BSE Institute Limited, Mumbai Page 1


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*ith the help of certain sentimental indicators how can a professional trader becomes acontrarian. ,ut this doesn-t mean than one should always be a contrarian even when market istrending.

*hen the market top out majority of the market players would always be bullish and thusthey suffer heavy losses when the bubble finally bursts. t that time no one could be at fault

because even the business news channels also show all the good news and create morepositive environment. It takes a lot of courage to be a contrarian because even with the helpof certain tools and indicators the market is still with the favor of the following trend.



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Rational of the study

There are certain concern in the field of technical analysis that has altered the basic meaning

of chart pattern analysis. Certain /uestions which are being recently being asked by theprofessional traders are"#

"Why does it appear that conventional technical indicators are falling one as one

approach the twenty-first century ? What has changed "

Traders affected by this change have to focus on the fact that technology alone has changedthe pace and speed of technical analysis. kills of judgement and interpretation creates a thinice between retail traders and professionals. The small investor is now armed with rapidaccess to market through internet! technical softwares "#

$% prider

% 0eliable

'% Metastock

1% Tradetigers

They have even access to instant new from "#

$. C2,C

. 3T 24*

'. 25T6 Profit

1. C22 I,2

7. 8T6 ,944M,30:.

:one are the days when there was price uncertainty in different cities. ;or e


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In the phase between ==' and ==1 market was e


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Literature Review

1) Investment Psychology 3


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% IRRATIONAL EXUBERANE

,y 0obert hiller

Irrational Exuberanceis a March === book

written by 2obel Pri>e#winning Eale8niversity professor 0obert hiller! named after lan :reenspanAs Dirrational e


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1% o%e Into &y Tradin$ Roo%# A o%"lete 'uide to Tradin$byle


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()The Art of ontrary Thinin$by(umphrey ,ancroft 2eill

Distributed by the niversity of !ebrasa #ress for $axton #ress

D*hen everybody thinks alike! everyone is likely to be wrong.D The ten words /uoted aboveare! according to (umphrey ,. 2eill! a potent factor behind the economic booms and buststhat blight our civili>ation. The DMississippi ,ubbleD! (ollandAs incredible DTulipmaniaD andthe 2ew Eork stock market crash of $BB are historic ee the dangers that Dfollowing the packD can pose to thediscerning investor.

*)Trading for a 9iving" Psychology! Trading Tactics! Money Managementle


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N more shares or contracts are bought than sold

N I and IIN II and IIIN II and I6

N III and I6nswer ,. II and III. 3very change in price reflects what happens in the battle between bullsand bears. Markets rise when bulls feel more strongly than bears. They rally when buyers areconfident and sellers demand a premium for participating in the game that is going againstthem. There is a buyer and a seller behind every transaction. The number of stocks or futures

bought and sold is e/ual by definition.



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4bjectives of the study

1. In my study I would focus on how contrarian view wors on maret !eas andtrough.

". Investors !erce!tion about the contrary view.

#. Effectiveness of technical analysis at maret !eas and trough.

$. Emotions lie fear and greed and their levels at marets to!s and bottoms.

%. Present scenario of sentiment indicators w.r.t. Indian stoc maret.

&. 'ow do !rofessional traders identify the maret trend(

). *hat style do they use to identify the trend and be the first one to enter into thattrade(

+ classic !atterns of technical analysis and how do they actually wor on maret!ea and trough(



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Tools and techni+ue

In this study I have used certain tools and techni/ues which would in determining the marketturning points and how in each of this turning points different players would react.these toolsare also known as sentiment indicators

$%. Bullish ,ercent Inde-

The ,ullish Percent Inde< J,PI% was originally created by be Cohen back in the $B7=s andis derived from point & figure charts! which is more than a $==#year old technical analysistechni/ue that plots security prices against changes in direction instead of time Jas all other

techni/ues do%. The calculations behind this indicator may be over your head! but itsapplication is /uite easy to understand"

This indicator measures the percentage JF% of e/uities listed on the 2E3 that are e


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. New .i$hs/Lows Inde-

The 2E3 2ew (ighs#9ows Inde< is similar to the 2E3 ,PI in the sense that it captures

overall price action! allowing for investors to identify instances of sentiment e


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involved in the production or distribution of the underlying commodities or assetsK in otherwords! the C4T report can show you how the big playersQ on *all treet are positioningthemselves in the futures markets. The single greatest limitation of the C4T report is the factthat it-s inherently delayed because it is published on ;ridays! but is based on open interestinformation from the previous Tuesday

4) &utual 2und 2lows

0etail investors are notorious for being the worst market timersK they usually arrive right

before the party crashes and they also have a tendency to cut lossesQ right before the marketbottoms out. Contrarian investors have long relied on mutual fund flows data to spot whichway the dumb moneyQ is goingK the premise here is that when mutual fund outflows are attheir worst! smart money starts to buy in again in anticipation that the e

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Investors Perception & Contrarian View on Market Movement During Peaks & Troughs