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Module 5: Technical analysis
Fundamental analysis asks, “Is this a good business?” Technical analysis asks, “What are buyers and sellers doing right now?” It reads price and volume on a chart. It guides your timing. It does not predict the future.
How it connects. In Beginner you learned to read a chart. Module 4 · Mutual funds, SIPs, ETFs showed how to choose funds. Here you add tools to read a chart in detail. All prices below are made-up examples.
Tap or hover a picture to see what it means.
1. What technical analysis is
The everyday idea. At a vegetable market you can tell the mood of the crowd from the rush at one stall. A chart does that for a share: the price shows what people paid, and the volume shows how many people took part.
Technical analysis studies price and volume to read how buyers and sellers feel.
Every chart tool in this module is a way of reading that crowd mood more clearly.
Common trap. Treating a chart signal as a certainty. A signal only says “this has often happened before”. Always ask, “What would show me I am wrong?”
2. Trend
The everyday idea. A river flows in a direction. A share tends to move in a direction too, for weeks or months. That direction is the trend.
Uptrend: each high and low is higher than the last. Downtrend: each is lower.
In plain words. In an uptrend, every peak is higher than the last peak and every dip is higher than the last dip. In a downtrend it is the opposite. In a sideways phase, price stays inside a range.
Why it matters. It is easier to move with the trend than against it. Always check the trend first.
Common trap. Calling a trend from two or three days. Look at a longer period before you decide.
3. Support and resistance
The everyday idea. A ball bounces off the floor and hits the ceiling. A share often bounces too. Support is a price zone where buyers keep stepping in and the price stops falling. Resistance is a zone where sellers keep appearing and the price stops rising.
Price often bounces inside a zone. Zones, not exact lines.
Worked example. A share fell to about ₹100 three times in six months and bounced each time. So ₹98 to ₹102 is a support zone. If it later closes well below this zone, the floor has broken, and the old idea is wrong.
Role swap. When price breaks above resistance, that old ceiling often becomes the new floor.
Common trap. Drawing exact lines. Real support and resistance are zones. A small dip through a line does not always mean a break.
4. Candles
The everyday idea. One candle is the story of one period (a day, a week). It shows four prices: open (first), close (last), high and low.
Body = open to close. Thin lines (wicks) = the highest and lowest price of the period.
- Long body: buyers (or sellers) were firmly in control.
- Long wick: price went far, then came back. Strength was rejected.
- Tiny body: a tug of war. Neither side won.
Common trap. Memorising dozens of fancy candle names. A single candle means more at a support or resistance zone than in the middle of nowhere.
5. Volume
The everyday idea. A rumour that only one person believes does not matter. A rumour that a thousand people believe moves the market. Volume is the number of shares traded. It shows how many people agree.
A price move on high volume is more believable than one on low volume.
Worked example. A share is stuck below ₹250 for weeks, then closes at ₹256 on three times its usual volume. That is a stronger breakout than the same move on low volume.
Common trap. Trusting a breakout on thin volume. It often falls back.
6. Moving average and RSI
Moving average (MA). The average of the last few closing prices, recalculated every day. Daily noise gets smoothed out and the trend becomes visible.
A moving average smooths the noise.
Worked example. Closes of ₹100, 102, 101, 103 and 104. The 5-day average is (100 + 102 + 101 + 103 + 104) ÷ 5 = ₹102. Tomorrow the oldest price drops out and the newest comes in.
Common choices are the 50-day and 200-day averages. Price above them usually means an uptrend.
RSI (relative strength index). A number from 0 to 100 that shows how fast and how far price has moved recently. Above 70 is called overbought (a very strong run). Below 30 is called oversold (a very weak run).
RSI measures how fast and how far price has moved recently.
Common trap. Selling just because RSI crossed 70. In a strong uptrend RSI can stay high for weeks. It is a warning to look closer, not a sell button.
7. Putting it together
Use the same five steps on any chart.
Go left to right. Start with the big picture, finish with the helpers.
- Trend. Which direction is the bigger picture?
- Zones. Mark the nearest support and resistance.
- Candles. What happened at those zones?
- Volume. Did many people take part?
- Check. Does the moving average or RSI agree?
Worked example. Uptrend, price bounces at the ₹100 support zone, a long-bodied candle forms, volume is double the usual, and price is above the 50-day average. Everything agrees. The reasoning is: “I expect a bounce. If price closes well below ₹98, I am wrong.” That last sentence is the most important part.
Takeaway: a chart gives you a plan and a way to be proved wrong, not a prediction.
Try it live
Open a daily chart of a share you know in your broker app or any free chart tool. Mark one support zone and one resistance zone, and write one sentence on why.
Practice lab
Do these on a real chart. Tick each one when done. 0 of 3 done
Disclaimer: WealthyTrees is for education only. Nothing here is investment advice or a recommendation to buy, sell or hold any share or product. Numbers and examples are made up. WealthyTrees is not a SEBI-registered investment advisor. Please speak to a SEBI-registered advisor before you invest.