Wednesday, January 28, 2009

Nifty Recap For The Day!!!

Two days and almost a 200 point rally in Nifty! A bullback…oops I meant a pullback or is somebody’s goose is being cooked? We had an important announcement about the schedule of our general elections and the moral code of conduct comes into force on February 8th, this means that the incumbent government has just few days left to play SANTA (I know Christmas over but if the government wants to play SANTA, it can play anytime!). All the investor friendly (and some not so friendly) and populist schemes and bills have to passed pronto. Elections are big time money spinners a lot of money needed will be pulled out form safe havens (the stock market is one good parking place!). This might just end being a RELIEF rally…..RELIEF!!! Yeah RELIEF for the politicians!!!

Anyways we mustn’t bother with all these as traders and just trade what we see on the charts. Deepak Singh of State of the Market once commented to me that while trading it’s more that enough if you use your EyeQ rather than THE IQ! Amen! So lets se what we have on the daily charts today, well for starters we are back to the all important pivot we have often discussed 2870! Secondly the price has just stalled at the confluence of the 20 and 50 periods MA’s. As of now from the daily chart it looks like the next trouble spots are 2915/20, 2950 and 3030! Speaking of supports we have something strong (hopefully) for a change at 2780 and 2680.

The hourly chart below shows once again how the confluence works, the price stalled right at the 200 periods MA and the 38.2% retracement. Funnily the entire weeks OS position now seems to be OB in just two days! I just spoke about support at 2780(it becomes the logical stop for all things recently BULLISH!) earlier; well you can see that is exactly the area where the 20 and 50 periods MA’s are in tête`-à-tête with the 23.6% fib! 2906 and 2968 looks like show stoppers on the daily chart. Things can be a tad bit volatile tomorrow, needless to say that tomorrow being the derivatives expiry day.

"Procrastination is the thief of time." Edward Young

Monday, January 26, 2009

Gold Views!!!

All that Glitters is GOLD!!! Well so it seems if you see the last week’s run in the GOLD. People have starting shouting go BULL in gold now. After all with the world is scared that the equity market is going to be a bit more painful, so no harm in taking solace into the security of the yellow metal. In my last post on gold I had written that a convincing close above $ 870 will lead to what we would assume to be a triangle breakout! Now once again this becomes important because gold on retracement should take support here and try and move up. Failing to hold on this we have now a support zone established at $830approximately, where the 200 and 50 periods (on the daily chart) are lined up almost horizontally! The upper leg should test $930/40 before assuming any significance. There is a bit of negative divergence developing on the daily chart and hinting at OB situation. Gold is interestingly poised on the weekly charts too! Now let’s wait and see how this breakout pans out next week.

"Imagination is more important than knowledge" Albert Einstein

Sunday, January 18, 2009

Weekend Views On Nifty!!!

Nifty has had an eventful weak (pun intended), with Nortel scare and Satyam news still in focus (bailout no bailout? etc etc), it’s managed to close above the half way mark of the weekly bar. With the US markets closed on Monday and OBAMA stepping into the hot seat maybe the DOW will give a short rally next week. Monday should be a flat opening and a very zzzz type day! Apparently the only support on weekly is the one we just held up all along this week, now below that 2580 is the only hope or rather the line of Life!

The daily chart below has had a weak reversal of sorts (weak because there was lackluster volume on the up tick), the 50 periods MA is right on top at 2880 to stare Nifty down. Above that we have the 20 periods MA and the trend line resistances sitting pretty tight at 2930/40 odd levels. In fact right from 2880 to 2950 is ONE strong resistance band!

The hourly chart below is a very good example in showing these resistances along with the fib ratios as well as the MA’s. As regards to supports, we’ve have had some nice respite at 2750/80 during the intraday gyrations, so logically the bulls and the bears should be actively watching this to either hold or crack! Nothing more than a few intraday plays in Nifty as of now, and like they say THE SHOW MUST GO ON!

"Effort only fully releases its reward after a person refuses to quit." Napolean Hill

DLF Views!!!

I haven’t seen or traded DLF for a long time, so while analyzing the chart for a friend I was kinda interested in it. The chart below is the daily chart of DLF. First to cry over the spilled milk, O boy what a great short it had given on break of 280. A bearish H&S on both the price and the RSI, negative Divergence on MACD and Bingo as soon as the price broke down from 280(the two ema’s the 20 and the 50 were there!)It was a screaming short! Before someone points out that hindsight is always 20/20 lets move on and see what the status quo as of now is;

The chart above is sufficiently annotated; we have what we call two bottoms in place marked as B1 and B2 with a lengthy divergence on the indicators. The weekly bar (not shown here) is a NR/IB. Anyway no marks for guessing that coz the last 5 days are what seem to be NR/ID’s implying contraction. Speaking of contraction, then expansion by no means is far enough. The price is far below the MA’s so a possible pullback is not ruled out. A break above 199/200 should head for 208 and then eventually 216/18. Till the time we don’t break 232 convincingly with volumes, no point in being bullish on this stock. 180 looks like a good support for DLF as of now.

"If A equals success, then the formula is: A = X+Y+Z. X is work. Y is play. Z is keep your mouth shut." Albert Einstein

Ril Views!!!

Last week RIL has really lead the NIFTY, the relative strength chart below is a clear proof of that.

However the weekly chart of RIL below has some surprises. Interesting resistance is developing at the fib confluence (marked on the chart), there is a bearish crossover of the 20 and the 200 periods MA’s, in short, 1450 and 1500 looks a terrible place! There is a kind of hidden negative divergence in the making here with the indicators moving higher but the price is failing to move with the momentum. RIL needs to protect 1135 at all costs on closing basis infact monthly close better be or has to be above 1135 if one has any bullish fantasies on RIL! I would rather like to see a clear bullish divergence on the weekly MACD before getting gung ho about RIL.

The daily chart below has RIL closing at the 20 periods MA with a strong historical resistance at 1280 staring down at it; this is where incidentally the 50 periods MA is also residing. Any foray to go long in RIL above 1220 should be done with a strict stop at 1180 region, or better still if there is some intraday pullback to 1190/1200 then that would be ideal to play a small swing.

Why I spoke about intraday pullback, because on the hourly chart below we can see the Price stalling at the 200 periods MA along with the 50% fib retracement. Immediate support below is in the form of the 38.2% fib and the 50 periods MA! There is a slight negative divergence in MACD histogram and stoch is already at 90! Personally I would be following RIL next week to see how it plays and where I need to improve upon my analytical skills!

"Continuous effort, not strength or intelligence, is the key to unlocking our potential."

Liane Cordes

Gold Views!

The weekly chart of Gold below shows that though we are still in a structural downtrend, with lower highs and lower lows. The recent lower high has to either break the recent low at $680 to confirm further bearishness or taking out $870 convincingly (looking for a triangle breakout here although the last two attempts have failed) will result in interrupting this structural downtrend. $870 is also the 61.8% fib value drawn from the highs of 987 to the lows at $680. No wonder it’s posing as a sissy! There is a confluence of 20 and 50 periods MA’s at $825 and $830 respectively and the 20(green) is trying to cross above the 50(blue) attempting a bullish crossover! Whereas breaking $760 can result in a downside break, and going in for testing of the 200 periods MA and $650 (the red long term trend line drawn from Jan 2002).

The daily chart below paints an interesting picture! The earlier DT formation met with its logical target and bounced back from the 50% retracement. Look at the last bar on the chart its encompassing all the three 20, 50 and 200 periods MA’s! The stoch above is turning up, the RSI has already broken its downtrend line and MACD has also ticked up. The ADX right at the bottom is still listless below 20; maybe it will wake up with the Price breaking $850 and head for that elusive $870! All in all GOLD is interestingly poised… let us see how this plays next week!

"I have not failed. I've just found 10,000 ways that don't work." Thomas Edison

Humor In Adversity!!!

I am not tryin2b insensitive here with this post. I know things are bad for people who are in middle of this mess. But then there are ways people vent out their anger, some grieve for a long time, some shout obscenities, some get physical, some despair and yet some are who vent it out with wry humor. Life goes on, the pain subsides the scars remain only to remind you of what was once. This was one fellow’s way of venting it out!

Saturday, January 17, 2009

Trading Coach A Myth Or A Reality!

I was wondering weather it is necessary to have a trading coach to be a successful and a professional full time trader. If the answer is yes, then what do we look for in a successful coach? Why is it so hard to find a coach in this profession?

I was hoping through this post to initiate a discussion on this topic so everybody’s views and thoughts are welcome. I would appreciate all your comments on this topic and look forward to the readers of this blog to contribute (hey don’t worry I am not asking for money here!) in anyway they can on this thought provoking point. Hoping to hear from you all!

"If we all did things we are capable of doing, we would literally astound ourselves."

Thomas Edison

Lessons On Trading From The Movie KUNG FU PANDA!

Last three evenings I am watching the same movie in the night, Kung Fu Panda, can’t help it the kids want to watch it before they go to bed. Nice movie with lot of philosophy thrown with animation. What struck me was that the message of the movie is very apt to our trading psychology!

In one of the scenes under a peach tree the wise old man Oogway tells his student master Chifu to let go the ILLUSION of control and start BELEIVING(Chifu has serious doubts that the big fat panda can make a dragon warrior). He says that things don’t happen as we wish but they happen on their own and take their own time. Same with good trade setups we should WAIT to let them happen and don’t try to preempt them! All we can do is nurture our trade and believe in it!

In the second instance in the movie when the Panda becomes the dragon warrior, and open the centuries old scroll to read the secret, he finds it blank with only his reflection on the scroll. Dejected by not seeing anything on the scroll he assumes that after all he wasn’t the true dragon warrior. Realization dawns on him later when his father the noodle soup seller tells him the secret ingredient in his secret ingredient noodle soup is NOTHING! Yeah he say there isn’t any secret ingredient and to create something special one needs to believe in that you are special. Bingo! There is no secret indicator or method to play the markets….Its only about you and your beliefs in your system. A nice lesson in trading I must say. I would suggest that you should watch this movie with your kids and enjoy it. I guarantee it will be money and time well spent. Enjoy!!!


LIC's Jeevan Aastha: Look before you leap!!!

A friend of mine Mansukh recently bought to my notice an article on Jeewan Asthaa, a new policy by LIC which is creating a buzz in the market. He says that I should put it in my blog, so many a friends who would have missed the story can benefit from it.

Sandeep Shanbhag writes: It is in school that we are taught the basic difference between simple and compound interest. We are taught the fundamental principle that compound interest and not simple interest is the effective rate of return on any investment.

However, it increasingly seems to me that this is a lesson that is either not learnt well or is forgotten way too early. How else does one explain people falling over each other to invest in what essentially is a fixed deposit that, depending upon the age of the investor, offers at best 7.32% per annum (p.a.) and at worst a 4.32% p.a. return?

Interested? Well continue to read the entire story here!

Wednesday, January 14, 2009

Nifty Recap For The Day!!!

On Monday I had spoken about a technical bounce not ruled out, and that is what we have achieved so far (just about managed 23.6% retracement from the lows). Much of it was attributed to the rumors about the out of court settlement between the feuding Ambani brothers which led to the entire Reliance pack leading the rally! Now talking technicals the daily chart below shows that Nifty is trying to lunge at the falling 50 periods MA(at approx 2880) and also going to test the broken trend line (the blue line). The earlier spoken level of 2700/2750 held fort till now. Another important 2780 now joins the battle for the beleaguered bulls. The resistances remain the same 2880/2920 and a real mean one at 2950/60. Therefore the new range we have of about 150 odd points. A break on either side would result in a min 150 point move. If broken on the upside it would work as Viagra for the bulls and immediately signal the reversal of this trend. On the other hand if we break on the downside then things become very very nasty because then testing the closing low of 2500 is THE TARGET!

The hourly chart below illustrates a few important points we have already discussed earlier. The price had overstretched form its MA’s so a pullback was in order. The 38.2% and the 50 periods MA are both at 2880 near about (remember our resistance 2880). What’s interesting is that there is a Hidden Bearish Divergence on the cards (yeah yeah here I go again about Divergence!)! Any one who doesn’t understand what I am talking about can got to my Divergence post to get an idea of what I am talking about. And before someone kills me for spreading panic lemme just put it in writing that Divergences are JUST WARNINGS! The real trade comes into practice ONLY and ONLY with the confirmation from PRICE. In this case break below 2780 con confirm this one!

At the time of writing this post DOW was in dumps (down about 180 points), so a gap down is a certainty, if Dow doesn’t do any magic overnight. These are trying times for the traders, and gap down if sustains 2750 is good buy for swift intraday trades (it will be very volatile, if you aint the one with nimble fingers…stay out)!

"The only thing that ever sat its way to success was a hen." Sarah Brown

Monday, January 12, 2009

Nifty Recap For The Day!!!

Nope I wasn’t stuck in Satyam! Neither was I delving deeper into the causes and effects of this sordid affair, which has left many a souls poor and more importantly cheated and violated. I was busy with my primary business, as these winter months are important for me, it’s my season time! Secondly my full time maid has left us after almost 5 years, so I am a lil busy with kid and helping my wife around (both of us are working parents). Third if any one is from DELHI, he will realize what a nightmare it is to get your child admitted into nursery. Yeah it sucks…so far I have filled in 25 applications and done 8 interviews, still waiting for that elusive admission letter Anyways won’t bore you guys with my problems, its back to analysis again, I might be lil rusty. You know, it will take a day or two to get back into the groove again.

Last week when everybody thought we were getting a reversal of sorts, the SATYAM fiasco gave the much needed opportunity to the Bears to strike back with full force. Life above 50 EMA (not drawn in my chart below) doesn’t suit Nifty I suppose. The Nifty chart below shows the 20 periods SMA (green) is above the 50 periods SMA (blue), 20 needs to have a bearish crossover with 50 to signal real weakness. Supports? I believe none exist…its just that they are points where Nifty takes a breather before continuing the journey! Still one mustn’t be so pessimist, therefore we shall presume 2750 and 2700 to hold fort. Remember the famous line “Innocent till proven Guilty”! Resistances? Hmmm here there is no confusion, for starters how about 2815/2880 and 2920?

The Hourly below shows that we are a bit oversold so a technical bounce is not ruled out, the DT shown on the hourly looks more sinister(yeah its there on the daily but on the hourly the effect is more scary)! The price is too far stretched from the MA’s overhead, so an alignment of sorts is in the offing. Its not that the Price will snap back towards the MA, sometimes it just meanders sideways to enable the MA to come down to a strikeable distance!

"Get busy living or get busy dying." Stephen King

Sunday, January 4, 2009

Weekend Views On Nifty!!!

AH! The year comes to the end, and time starts to make new trading resolutions. Resolutions which we might eventually break! Anyway time to start again with a clean slate, time to look forward and learn from the mistakes from the past. Well I for starters have RESOLVED to TRADE LESS TRADE SMART (may the Market give me strength to keep my sanity). Wishful thinking? Yups.

And now let’s see how Miss Nifty began the New Year, no nasty surprises on the first two days, is it cautious optimism? Maybe! We have had a stimulus package(Viagra?) announced by our government plus the all important Uncle DOW also gave a nice start to the year, and cousin Nikkei aint doing bad either! This is bound to bring in some exuberance on Monday. Then we have quarterly results coming in from next week which will influence to some extent. Yes they will be bad, the world knows, no secrets there. But what’s important is How BAD?

The first chart below is the monthly chart, just to give you the feel of the broader picture. There has been Price contraction happening for the last two months as can be envisaged by the two consecutive IB’s (Inside Bars). For all practical purposes we need to see how the break of 3110 pans out and how 2950/2885 holds out!

The weekly chart has shown once again a reversal bar, the MACD histogram is showing strength, the RSI is broken above its falling trend line. A break above 3110 can lead to fishing of short stops and resulting momentum can lead Price to 3150/60. Talking about 3250, I would wait first to see how this week unfolds itself.

The daily chart has 20 and 50 periods simple MA’s crossing at approximately 2885/90 so this becomes a support of sorts. If you use the EMA’s then you will notice that the latest NR bar (this also qualifies as NR4) we made on Friday sits right at the 50 EMA from where it had earlier reacted downwards. We have the indicators moving to the OB areas (especially the hourly), warranting some caution. Any intra day dip to 3010 is a welcome buy if it shows support there. The daily structure has been of lower highs and higher lows (contraction? you bet it is). Nifty needs to break 3250 convincingly, and trade above it, to create a higher high. This move will then confirm the December price action as the Higher Low and would act as sorts of intermediate trend reversal.

"The secret of success is constancy to purpose." Benjamin Disraeli