Friday, March 28, 2008

Trade What You See And Not What You Think....!!!

Phew what a day!!! We opened firm and then started to loose ground. The first trade, Nifty Futures gave was “Fade The Gap”(I did it, got myself some loose change!!!).Well after filling the gap we made a futile attempt to claim the days high..Failed!!! , started drifting downwards and slowly bidding our time for Inflation figures(Every Friday we do that anyways!!!). The figures were bad and guess what??? We took off on bad news!!! Surprised.. well don’t be, it was just Dow Theory at play. Confused???….read on.

Today not only tested, the grit of many a professional traders, it was also a nice revision for me of what I am learning in Technical Analysis.

  • Markets Discount Everything: This is the basic tenet of Dow Theory . Bad Inflation figures, spur a rally in Nifty, meant that the news was already discounted by the market (see told you na don’t be surprised).
  • Moving Average Limitation: In my previous two posts, in Nifty intraday charts, I had illustrated how the Moving Average (MA) acts as a trend line and as well as a logical support and resistance, when moving in trends. If you had observed the MA today in the market, from the opening till about 2 p.m. you would have noticed that the choppy market conditions render them useless and reduce their efficacy.
  • See The Broader Picture: That is why today I am posting a three day chart (might help my day trader friends to unravel why we went up crazy). We not only traced a big Inverse Head and Shoulder Pattern (IHS) spanning last three days, we also made one today (a bull within a bull!!!!).Take a look at the chart and you will get my point. The targets for both the IHS Patterns were achieved today itself. Now the big question is are we making the IHS Pattern on the daily?????? I will be tryin2figure it out this weekend……

5 comments:

Anonymous said...

Superb Analysis. I could cover my short in right time but didnot go long.
Overall escaped today with small profit.

Unknown said...

God gives u great eyes ;..i can see only one IHS ( today's ) even though i have 4 eyes (spects ) ..good

thank you

Tryin2Trade said...

Thanks Satya and Ankit...like i always say tryin2trade here!!!!cheers

Shiree said...

Dear Manoj
Its getting better and better day by day . The explanation superb . I think best conditions for direction met when we have two concurrent conditions for example a Bullish HSP inside a Bull flag just as it was in BHEL set up .
Or the one highlighted by you here.
Good luck
Shiree

Saikat said...

Manoj - great work - me a big fan of Chart patterns - will like to share some of my fav also