Section 2 - Chapter 1 - An Overview of Charting

Section 2 - Chapter 1 - An Overview of Charting - Presented by Rohan Sharma - The CMT Coach - Chartered Market Technician CMT Level 1 Study Material - CMT Level 1 Chapter Wise Short Notes - CMT Level 1 Course Content - CMT Level 1 2025 Exam Syllabus Visit Site : www.learn.ptaindia.com and www.ptaindia.com

1. Chapter 1 - An Overview of Charting Section 2 - Charts - Market Price Data Presented By : This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

2. Agenda Learning Objective Statements: An Overview of Charting A Brief History of Charting Line Charts Bar Charts Candlestick Charts This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

3. Step-by-Step Process of Chart Analysis 1. Identify the Market Trend (Trend Analysis) • Uptrend: Higher highs & higher lows (bullish market). • Downtrend: Lower highs & lower lows (bearish market). • Sideways (Range-bound): Price moves within a horizontal range. 📌 Tool Used: Trendlines, Moving Averages (MA), Dow Theory 2. Use Support & Resistance Levels • Support: A price level where buying interest is strong enough to prevent further decline. • Resistance: A price level where selling interest prevents further rise. 📌 Tool Used: Horizontal support/resistance lines, Fibonacci retracements This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

4. Step-by-Step Process of Chart Analysis 3. Analyze Candlestick Patterns for Market Sentiment • Bullish signals: Hammer, Engulfing, Morning Star • Bearish signals: Shooting Star, Evening Star, Bearish Engulfing 📌 Tool Used: Candlestick charts 4. Apply Technical Indicators to Confirm Trends • Momentum indicators: RSI (Relative Strength Index) shows overbought/oversold conditions. • Trend indicators: Moving Averages (MA) confirm direction. • Volume indicators: On-Balance Volume (OBV) measures buying/selling pressure. 📌 Tool Used: RSI, MACD, Moving Averages, Bollinger Bands This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

5. Step-by-Step Process of Chart Analysis 5. Identify Chart Patterns for Trading Opportunities • Reversal patterns: Head & Shoulders, Double Top/Bottom • Continuation patterns: Flags, Pennants, Triangles 📌 Tool Used: Pattern recognition tools 📈 Example: How a Technical Analyst Reads a Chart Imagine a stock is in an uptrend, and the price pulls back to the 61.8% Fibonacci retracement level while forming a bullish engulfing candle at a strong support level. 👉 The analyst sees this as a buy signal, expecting the price to continue upward towards the 161.8% Fibonacci extension . Key Takeaways • Charts summarize price action by visualizing trends, patterns, and key levels. • Technical indicators confirm momentum, trend strength, and potential reversals. • Candlestick patterns reveal market sentiment and trader psychology

6. 📊 Line Charts in Technical Analysis 🔑 Key Facts About Line Charts • Definition: A line chart connects closing prices over a period to show overall price movement. • Simple & Clear: Used to visualize trends without market noise. • Focus on Closing Prices: Since closing prices are most important to traders, line charts emphasize them. • Best For: Identifying long-term trends and support/resistance levels. • Limitation: Lacks details on intraday price action (open, high, low ). Cheat Sheet: How to Read Line Charts Aspect Explanation Trend Identification Uptrend (rising line), Downtrend (falling line), Sideways (flat line) Support & Resistance Peaks (resistance), Troughs (support) Breakouts Price breaking above resistance or below support signals a trend shift Moving Averages Easily applied to identify trend direction Simplicity Best for quick, high-level market assessment

7. 📊 Line Charts in Technical Analysis

8. 📊 Comparison: Line Charts vs. Other Charts 🚀 Key Takeaways Line charts are the simplest form of technical analysis, best for trend identification. Great for long-term traders who focus on overall market direction. Lacks price detail (highs/lows), making it less useful for short-term trading. Better alternatives exist (candlestick & bar charts) for detailed price action analysis Feature Line Chart Bar Chart Candlestick Chart Data Displayed Closing prices only Open, high, low, close Open, high, low, close Detail Level Simplistic Moderate Highly detailed Best For Long-term trend analysis Short-term price action Market psychology & patterns Noise Level Low (clean view) Medium High (detailed movements) Ease of Use Very easy Moderate Requires learning This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

9. 📊 Bar Charts in Technical Analysis 🚀 Key Takeaways Definition : A bar chart represents price movements with vertical bars, displaying the open, high, low, and close (OHLC) for each period. More Detailed Than Line Charts: Shows price range within a period, unlike line charts that only show closing prices. Best For: Identifying price trends, volatility, and momentum shifts. Versatile : Can be used in all timeframes (intraday, daily, weekly, etc.). Limitation : Can appear cluttered in fast-moving markets compared to candlestick charts This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

10. 📊 Bar Charts in Technical Analysis This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

11. 📊 Bar Charts in Technical Analysis Component Meaning Vertical Bar Represents the price range for a given period (high to low) Left Tick Opening price for that period Right Tick Closing price for that period Longer Bar Higher volatility (big price movement) Shorter Bar Lower volatility (small price movement) Close Above Open Bullish (price increased) Close Below Open Bearish (price decreased) This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

12. 📊 Interpretation of Bar Charts 1. Identifying Trends • Uptrend: Bars have higher highs and higher lows. • Downtrend: Bars have lower highs and lower lows. • Sideways (Range-bound) Market: Bars fluctuate within horizontal support and resistance levels. 2. Spotting Reversal Patterns • Bullish Reversal: A long lower wick and a close near the high suggest buyers took control. • Bearish Reversal: A long upper wick and a close near the low indicate selling pressure. 3. Measuring Volatility • Long bars: High volatility (big price swings). • Short bars: Low volatility (stable market). 4. Breakouts & Continuation Signals • Bars breaking above resistance → bullish breakout. • Bars breaking below support → bearish breakdown.

13. 📊 Comparison: Bar Charts vs. Other Charts Feature Bar Chart Line Chart Candlestick Chart Data Displayed Open, High, Low, Close (OHLC) Closing Prices Only Open, High, Low, Close (OHLC) Detail Level Moderate Low (simplified) High (more visual cues) Best For Price trends & reversals Trend tracking Market psychology & patterns Noise Level Medium Low (clean view) High (detailed movements) Ease of Use Moderate Very easy Moderate (needs learning)

14. Candlestick Charts in Technical Analysis Key Facts About Candlestick Charts • Definition: A candlestick chart visualizes price movement by displaying open, high, low, and close (OHLC) in a structured format. • Origin: Developed by Munehisa Homma in 18th-century Japan for rice trading. • Best For: Identifying market sentiment, trends, and potential reversals. • Visual Advantage: Easier to interpret than bar charts due to color-coded bodies (bullish = green/white, bearish = red/black). • Limitation: Can be complex for beginners due to the variety of patterns.

15. Candlestick Charts in Technical Analysis

16. Candlestick Charts in Technical Analysis Component Meaning Candle Body Distance between open and close price Upper Wick (Shadow) Highest price reached in the period Lower Wick (Shadow) Lowest price reached in the period Green/White Candle Close is higher than open (bullish) Red/Black Candle Close is lower than open (bearish)

17. Interpretation of Candlestick Charts 1. Identifying Trends • Uptrend: Series of green (bullish) candles with higher highs and higher lows. • Downtrend: Series of red (bearish) candles with lower highs and lower lows. • Sideways Market: Alternating green/red candles with small bodies, indicating consolidation . 2. Breakouts & Continuation Signals • Strong green candles breaking resistance = bullish breakout. • Strong red candles breaking support = bearish breakdown. • Doji candles (where open ≈ close) indicate indecision in the market .

18. Interpretation of Candlestick Charts Bullish Patterns (Reversal Signals ) Bearish Patterns (Reversal Signals ) Pattern Meaning Hammer Small body, long lower wick → Buying pressure at support Bullish Engulfing Large green candle engulfs previous red candle → Strong buying signal Morning Star Three-candle pattern signaling bearish-to-bullish reversal Pattern Meaning Shooting Star Small body, long upper wick → Rejection at resistance Bearish Engulfing Large red candle engulfs previous green candle → Strong selling signal Evening Star Three-candle pattern signaling bullish-to-bearish reversal

19. Comparison: Candlestick Charts vs. Other Charts Feature Candlestick Chart Bar Chart Line Chart Data Displayed Open, High, Low, Close (OHLC) Open, High, Low, Close (OHLC) Closing Prices Only Visual Detail High Moderate Low Best For Market psychology & patterns Price trends & volatility Simple trend tracking Ease of Use Moderate (learning required) Moderate Very Easy Pattern Recognition Strong Weak None

20. Comparison: Candlestick Charts vs. Other Charts 🚀 Key Takeaways Candlestick charts are the most powerful tool for visualizing market sentiment. They provide detailed price action (OHLC) in an easy-to-read format. Best for identifying reversals, breakouts, and trend continuation. More informative than bar charts and better for patterns than line charts. Require practice to master candlestick patterns and signals.

21. Next Chapter 1 – The X Axis Section 2 - Charts - Market Price Data Presented By : This Content is Copyright Reserved Rights Copyright 2025@PTAIndia