Day trading analysis relies mainly on the data of the previous day's trading summary. The previous day's market movements both in the cash as well as the derivatives market serve as an indicator of how the markets are likely to open on the following day.
Most of this data is easily available on various financial/stock marketrelated websites under the heading daily statistics, end-of-day statistics or analytical tools.
1. Advance/Decline Ratio
This number helps one understand the ratio of the number of stocks moving up to the number of stocks going down in the entire market. It helps to understand the overall breadth of the markets, that is, if the number of advancing stocks far outweigh the number of declining stocks, then the underlying trend is bullish and vice versa.
This shows the total volume on important exchanges in all segments, that is, cash and derivatives. Turnover is very important because it tells you whether the markets are falling or rising on high or low volume. Also, it tells you how much percentage of the day's trade is cash (delivery) and how much is the derivatives segment.
3. Top Gainer/Top Losers
The first and foremost thing to check out is the list of top gainers (stocks that have gone up the most) and the top losers (stocks that have gone down the most on the trading day). Although it may not remain the same the next day, it indicates which stocks have maximum buying or selling interest and can then be analysed on other parameters.
4. Upper/Lower circuit
Upper circuit means that there are no sellers in the stock, only buyers. Lower circuit means that there are no buyers in the stock, only sellers.
5. Stocks closing at/near the day's high/low
A stock closing at its highest point or lowest point of the day usually means the bulls or the bears were strong enough to take the stock to the high/low point and keep it there till the end of the day.
6. Most Active Stocks
This shows the stocks that have made significant moves both in terms of value as well as volume. Any move of the stock either upwards or downwards with high volumes usually implies that there is greater interest of market participants and the move of the stock and the trend is expected to continue in the direction of the move for the next session.
7. 52-week High/Low
This shows the stocks that are trading at the highest or the lowest point of the year.
8. Bulk And Block Deals
Such deals are usually undertaken by large hands such as institutions, insurance companies, mutual funds, high net worth investors, etc, and, hence, from that point of view helps one understand where institutional interest lies.
9. Sector Buzz
This gives an idea of the sectors which are leading the market up and which are dragging them down.
10. FII and DII figures
These are the most important numbers in the market since these are institutions which decide the direction of the market. These figures show whether FIIs or DIIs have been net buyers or net sellers in the market.
11. Open Interest (OI)
Open interest simply means the number of future or options positions that are not closed or remain unsettled at the end of the day.
If the OI is up and stock price is also up, then it is a bullish sign. If OI is down and stock price is up, it is a bearish view. If OI is up but stock price is down, then too it is a bearish view. And finally if OI is down, and the stock price is down, then it is a bullish sign.
12. Put-Call Ratio
It is the ratio obtained by dividing the total number of put options traded by the total number of call options traded. If the ratio is increasing, it means that investors are buying more puts than calls and, hence, the outlook is bearish or they are not sure about the markets and are buying put options as a hedging tool in case of a sell off.
13. Moving Averages
Stocks that have moved above their 30-day, 50-day, 200-day moving averages mean that they have managed to trade and close above these historic levels and are expected to move upwards and vice versa.
Volume is the most important entity to consider while entering or exiting any stock. A stock that is going up with huge volumes can be expected to continue in that direction. Whereas a stock that is going up on thin volumes, does not show strength and the move is not expected to last and it can be a reversal.
15. Positive/Negative Breakout
When stocks move out of a confirmed resistance or support level, it is known as a breakout.
If the breakout is on the upside (above the resistance), it is known as a positive breakout and the stock can be expected to go up. If the breakout is on the downside (below the support), it is known as a negative breakout and the stock can be expected to go down.
16. Higher tops-higher bottoms/ lower tops and lower bottoms
When the chart pattern shows the formation of higher tops and higher bottoms, it means that the stock opened higher than the previous day's high and closed higher than the previous day's low, and thus it signifies an uptrend.
Similarly, if it shows lower tops and lower bottoms, then it means that the stock is in a downtrend.
17. Corporate Action
Company-specific actions such as bonus, splits, rights issues, dividends, quarterly results, etc all have an impact on the stock price. Keep tab of important dates such as record dates, result dates, ex-dates, AGMs, etc, so as not to get caught on the wrong foot.
18. Exchange & Regulator actions
Actions taken by exchanges and regulators can impact stock prices greatly. Stocks taken in and out of key indices, stocks put in F&O ban, stocks shifted to T-to-T segment, penal actions, fines, etc.
19. Global Markets
Whatever anybody says, the decoupling theory just does not pan out. In this world of globalization, happenings from around the world affect our markets to some extent.
Have a look at how the different world markets have done since the close of our markets to the next opening of our markets. These include the European markets (afternoon and evening), the US markets (night), the Asian markets (next morning).
Finally news, whether it is good or bad, is the most powerful force and has the power to change a trend overnight. Especially those announced after the present day's market hours! Therefore, always keep your eyes and ears open.
Source: Nirmal Bang's Beyond Market
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