VANDE MATRAM! Weekend Views On Nifty!!!

We have wrapped up our market for the week. We open on Monday now; hopefully the policymakers won’t have any surprises for us over the weekend. So Monday opening would be more a continuation of how daddy Dow closes on Friday and cousin Nikkei opens up on Monday, till then enjoy the weekend. I am off for vacation with family and will be back on Tuesday so writing the weekend views today itself (my friend Ilango has a complaint that I post late).

The first chart up for post mortem is the weekly chart of Nifty shown below. The latest weekly candle looks more like a reversal candle. This particular candle has done two things; one it has jabbed at the falling trend line (thick black line) and attempted to reclaim the highs made on July 2007. The flip side is that we have closed below the 50% retracement. Speaking of retracements (marked on the chart) the 38.2% and 23.6% are exactly at those levels which we have been talking about quiet often; 4370 (most likely to be probed, tested and hold) and 4150 respectively. Between these two we have 4250 a strong support.

Moving on to the daily chart we have a red candle which has just closed in the vicinity of the long term falling trend line(again thick back line) and the Cradle I had mentioned in my previous posts. Nifty is more likely to test 4350/4400 zone, as on the daily chart we have a trend line support their along with the rising 20 period Moving average. The MACD histogram has been tracing a bearish divergence; on the other hand the MACD lines still have to give a crossover sell signal. The most important aspect of this chart is that we still have our sequence of HH and HL intact. To logically assume a trend reversal, we have to make a new lower low or take out the previous HH (both pivots shaded on the chart). Anything in between is what we call congestion or a consolidation. This is more likely to be the scenario as suggested by the flat ADX!

This brings us to the micro chart; the hourly. Here we have broken out of the rising wedge and my wolfee of course. We have a Double Top (confirmed by breaking of the HL pivot between them) and with both the 20 and the 50 period MA’s overhead we should be following the path of least resistance and that happens to be the trend line support (another cradle there!) and the 200 period MA below.

I WONT BE UPDATING THE BLOG FOR NEXT FOUR DAYS. WISHING YOU ALL, A VERY HAPPY INDEPENDENCE DAY. VANDE MATRAM!!!

"To establish true self-esteem we must concentrate on our successes and forget about the failures and the negatives in our lives."

Dennis Waitley

Nifty Reacap For The Day!!!!

I couldn’t update the blog yesterday, as there were some concerns with my comp. Guess didn’t miss much though. Let’s see how lil Miss Nifty behaved today! Well with daddy Dow down yesterday and cousin Nikkei also not in best of health this morning, our Nifty was left alone to fend for herself. The 5 minute chart on the left says it all. A gap down which was filled convincingly, but then uncertainty and volatility took over and had their toll on Nifty. We had important SEBI meet, and all sort of rumors regarding the policy decision on P Notes. For the nimble players Nifty gave two very good trades; first at the gap open “Fade the Gap trade” and second, a good convincing short once it broke the trend line and rising 20 periods MA in tandem followed by a clear sell in MACD. The hourly chart on the right is another delight from the point of view of a Technical Analyst; it has something both for the Bulls and the Bears to hold on to their views. For the bulls we have the HH and HL sequence intact, and till this is not disturbed the assumption of uptrend holds. Whereas on the other hand we have broken out of the wedge and the Bears welcome this jolly good sight (last time when we did this we went downnnnnnnn!!!) The Hourly has a triple bearish divergence MACD, corresponding to each new high Nifty has made. Presently the Price is stuck between the 20 periods and 50 periods MA’s. We need to break 4460/70 (4490 still provides some solace) to get ourselves a LL and initiate a trend change. Breaking that should take us to test our primary support of 4370 (trend line support and now also the 200 periods MA is residing there!)

Moving on to the daily chart below we can see Nifty has trend line and cradle support at 4460/70! Below that? Yes 4370 and here in the daily chart we now have the rising 20 periods MA residing there along with the trend lines to catch the falling Nifty. I personally feel till the ADX shows some strength, trading Nifty will be very frustrating for both the Bulls and the Bears. Tomorrow we have the Inflation Figures coming in the evening plus we start a long weekend, I doubt if anyone would trade aggressive and take home their position overnight. It might be a very volatile and choppy day. There are times when one should move on to trading other stocks and leave Nifty alone (it will really frustrate if it vacillates between 4450 and 4650) !!!

"Infinite money is available to a mind that is ready, willing, able, qualified and gives itself permission to earn and accept it."

Mark Victor Hansen

A Chop Suey Day! Nifty Recap For The Day!!!

A Chop Suey Day! Nifty opened with yet another gap up inline with the Asian markets. This of course was due to falling crude and a strong close in Dow on Friday. Today’s 5 minute chart (Left) was a trader’s nightmare; testing your patience! If you are the one who has successfully traded the Nifty today, then you are a pro and if not and wondering what happened then you are welcome to the world of lesser mortals (myself included). The hourly on the right suggests overhead immediate resistance at 4630/4652/4680 while the immediate support lays at 4595/70. In fact this support should now be used for trailing your longs. The daily chart below, has nothing much to offer. Our man ADX is sulking and not making things easy for Nifty. Without strength in trend there are only two possibilities either we are topping out or maybe it’s just the right time to catch a breather and consolidate. Because any up move from here sans consolidation would result in very tired Bulls, who could fall easy prey to the lurking Bears!!!

A Lesson In Pattern Failure!

I am posting this chart just to illustrate, why conformation from Price is important and why we say that patterns are not infallible. The chart below is of TATAMOTORS (courtesy my friend Jigs!) and the pattern; Cup and Handle (CNH). This particular pattern is considered to be super strong bullish and always worth a trade; but to TRADE it, you must be patient and wait for a confirmed break of the horizontal resistance above. This delays the entry and probably eats into some of the gains but it ensures that you are on the right side of the trade! TATAMOTORS has yet again made a CNH pattern, a break above 450 and sustaining that would construe a valid breakout and get the pattern into play! If you are a chartist, then these are the charts you must keep and annotate, so you can use them in the future for reference. Once again this takes us back to the golden rule of trading use strict STOPS because the most bullish of patterns can also fail!

Weekend Views On Nifty!!!

We have a weekly chart above. Nifty managed to close just a bit below the 50% retracement (4542) of the last swing. Above that we have resistance at 4647 and then the 61.8% retracement at 4730, above that the bulls will use all their might to reach the pschycological barrier of 5000! The support like I said earlier was 4370 and now 4450/70 has been tried and tested so should hold.

Now a look at the daily chart below, after two shooting stars the bulls fought back with a hammer. The battle is on! A close above 4630 opens new doors for nifty. The immediate support for Nifty is at 4450/70. We might have the 20 and 50 period MA crossover at 4300 levels; this in future should be another important point of reckoning. The ADX is flat and sulking it needs to get up and start rising to sustain this positive bias in Nifty.

Finally we move on towards the hourly chart. We have HH and HL in place. We need to make another HH taking out 4615 and then make sure we hold the recent HL at 4464. This is important for the trend to continue. A LH and a HL now will only lead to choppiness, congestion a.k.a. a Triangle? We have a likely hood of making a cup and handle on the hourly; a break above 4650 should confirm it. This has a minimum target of 4850!

To sum up I think till our short term support at 4450/70 holds we are in the game. Any break and close below 4370 would change the whole scenario. Another point I would like to make is that now we will start seeing a lot of negative divergences in the making. Remember they are just a cautioning tool; the real confirmation would come from the Price, breaking an important trend line or a MA support. My last post where I whispered a wedge and a Wolfe stands firm. It’s just prolonged a wee bit. Anyway like my good friend Ilango commented SHOUT TILL PROVED OTHERWISE so that makes it INNOCENT TILL PROVEN GUILTY!!!

"Failure is a part of success. There is no such thing as a bed of roses all your life. But failure will never stand in the way of success if you learn from it."

Hank Aaron