At a Glance

Who this is for:

• Active equity investors, swing traders, positional traders

• Finance bloggers, research desks, fintech platforms

What this explains:

• Core assumptions of technical analysis

• Foundational and advanced theories

• Practical application in Indian markets (NSE & BSE)

Time Horizon Covered:

• Intraday (execution concepts)

• Swing (days to weeks)

• Positional (months)

Objective: Not prediction, but probability, structure, and risk management.

Introduction: Why Technical Analysis Is Indispensable in India

Indian equity markets are uniquely characterised by high retail participation, rapid information asymmetry, derivative-led volatility, and sentiment-driven price expansion and contraction. In such an ecosystem, technical analysis (TA) serves as the market participant’s primary framework to decode crowd behaviour, institutional activity, and trend sustainability.

Unlike fundamental analysis—which answers what to buy—technical analysis focuses on when, where, and how much risk to take.

Discover Insight: Articles with early clarity on reader benefit and market relevance show higher dwell time and scroll depth.

Core Assumptions of Technical Analysis (Foundational Pillars)

1. The Market Discounts Everything

Principle: All publicly and privately available information—earnings, macro data, policy expectations, sentiment—is reflected in price.

Indian Market Context:

• Pre-result accumulation in index heavyweights

• Price expansion ahead of policy-sensitive sectors before RBI announcements

Key Takeaway Box: If price disagrees with narrative, price is usually right.

2. Prices Move in Trends

Markets move in directional phases rather than random distributions.

Trend Classifications:

• Uptrend: Higher highs, higher lows

• Downtrend: Lower highs, lower lows

• Range: Mean reversion

Indian Example:

• Post-2020 NIFTY bull phase respected rising moving averages for over 18 months.

Key Takeaway Box: Trend persistence matters more than entry precision.

3. History Repeats Itself

Human behaviour—fear, greed, regret—remains constant across market cycles.

Indian Observations:

• Repeated small-cap euphoric tops

• Panic selling during global risk-off events

Dow Theory: The Backbone of Technical Analysis

Core Tenets

Indian Application:

• NIFTY and Bank NIFTY trend confirmation

Key Takeaway Box: No confirmation = no conviction.

Candlestick Theory: Reading Market Psychology

Candlesticks visually compress emotion into price structure.

High-Probability Candlestick Patterns

Indian Example:

• Bullish engulfing near 200-DMA in index stocks often signals positional reversals.

Chart Patterns: Crowd Behaviour in Structure

Continuation Patterns

• Flags

• Pennants

• Symmetrical triangles

Reversal Patterns

• Head & Shoulders

• Double top / bottom

• Rounding bottom

Indian Example:

• Long-term rounding bottom in cyclicals post-2019.

Key Takeaway Box: Patterns fail only when risk is unmanaged.

Support, Resistance & Market Memory

Support and resistance are zones of collective anchoring.

Types

• Horizontal

• Dynamic (moving averages)

• Psychological (round numbers)

Indian Context:

• NIFTY respecting round-number zones repeatedly.

Moving Averages: Trend Definition Tools

Momentum Indicators: Measuring Strength

Common Oscillators

• RSI

• MACD

• Stochastic

Indian Example:

• RSI divergence preceding sector rotation.

Trap Zone Callout: RSI can stay overbought in strong trends.

Volume Spread Analysis (VSA): Institutional Footprints

Volume validates intent.

Indian Insight:

• Breakouts without volume often fail in mid/small caps.

Advanced Technical Concepts

Multi-Timeframe Analysis

• Weekly → Bias

• Daily → Setup

• Intraday → Execution

Relative Strength Analysis

Outperformance vs index reveals leadership.

False Signals & Trap Zones (Credibility Section)

Risk Management Framework (Non-Negotiable)

Key Takeaway Box: Survival precedes profitability.

Technical Analysis During Indian Market Events

• Budget Day volatility

• RBI policy reactions

• Results season gaps

Avoid overconfidence during event risk.

What Works Best in Indian Markets

Behavioral Finance Mapping

Executive Key Takeaways

Technical analysis is a framework for probability management, not certainty.

• Price is the final truth

• Trends persist longer than expected

• Volume reveals intent

• Risk management defines longevity

SEBI-Compliant Disclaimer

This article is for educational purposes only and does not constitute investment advice. Readers should consult registered financial advisors before making investment decisions.