Diary of a 315 Trader

[timepass]

Dear Putuval,
I am observing a Head and shoulders pattern in RIL's daily chart !!
I am posting the image with demarcations and target price !! awaiting for your valuable comments !!

Let me explain what i have done !!

1) 3 red arrows converging on top are pointing towards head and the shoulders !!
2) A blue colored trendline is drawn from top of the head and passing alon the left shoulder !!
3) Fibo levels are applied !!
4) A blue coloured horizontal neckline has been drawn at 762 price !!
5) A black colored arrow is made starting from top of the head(i.e. 955) to neck line (762) !!

Now according to the head and shoulder theory , if the price breaks the neckline then it has to come to the price of 570 (Neckline-(head-neckline)=762-(955-762)=569=target price) !!

And the zig-zag descending blue lines that are made considering the resistances , supports, intersections of the trendline, fibo levels and the ichimoku cloud !!

Your comments plz !!

-Vivek

I expect Reliance to travel once to 872 before taking further direction. Why ? That buyback is still on, isn't it ? Till the end of the year they had purchased only about 3% odd of the float.

 

[bapu4]

Dear TP,
Thanks for ur lightning speed of the response !! It was sent without any 'timepass' !! Haha !!

Actually, i didnt mean that it would start falling right from the next trading session , but can it gradually come within a fortnight or a month to the neck line level ??

Also ,from where do we get the buyback and all such key precious data about the stock ??

How long does this buy back goes on ??

-Vivek

 

[a1b1trader]

I expect Reliance to travel once to 872 before taking further direction. Why ?

Why?
(Yes you are right TP Bro)
Because there is +ww formation in weekly chart to a target of around 870.

Edited on 16.6.13
Sorry friends, I perhaps made a mistake, there is no +ww

 

[bapu4]

Dear TP,
Thanks,the chart is not daily it was a mistake it is weekly chart.I can't figure out +ww formation on weekly.However the HS pattern will become active once the price closes below 760,if RIL reaches 870 the nifty will go to 6000+
which does'nt seem to be the senerio at present things should be clear by Wed/Thu after FOMC in US next week,Reserve bank is unlikely to cut rates,
in the given situation,the inflation figure looks manipulated for vested interests.
Vivek

 

[timepass]

what is a +ww formation? what are other ww pattern formations? Pls help in understanding.

Please search for and read the thread named "Wolfe Waves".

 

[trade4putuval]

Dear Putuval,
1) I was jus going through the posts of this trade, in the beginning i saw the GFZ ,envelope and u have also given the chart , but i didnt understand the application ? What u wanted to say ?

Regards,
Vivek

These were the findings of some great traders before I came to traderji. There is a user "TradeWithHunter" who had done some research, and one of his research was "Trading the 'greater fool zone'. Any trader found trading in the wrong side outside this zone is considered a Fool. We have to plot the graph around 17SMA. Please check this thread for more details, http://www.traderji.com/technical-analysis/63589-shs-trading-greater-fool-zone.html. I have not been following this now because I find other indicators helpful for my trading zone. But yes, if there is a trend and you need to know when it will end, this strategy will surely help.

Dear Putuval,
2) Also, is there any rule or concept that where should we use ema,wma or sma and which one ?? Also why to use the particular MA there itself ??
'coz in the post i mentioned above u have used 50 sma .

Plz put some light !!

Regards,
Vivek

As mentioned above, these were the research done by some great traders. I borrowed the 50SMA from the user, "Kavima", who has her post based on the Andrew Pitchfork strategy, which can be found here, http://www.traderji.com/futures/53485-nifty-entry-exit-target-levels-median-line-charts.html. 50SMA cross over decides the trend of a scrip/entity. Price moving above 50SMA is considered bullish, and vice versa.

 

[trade4putuval]

Dear Putuval,
I am observing a Head and shoulders pattern in RIL's weekly chart !!
I am posting the image with demarcations and target price !! awaiting for your valuable comments !!

Let me explain what i have done !!

1) 3 red arrows converging on top are pointing towards head and the shoulders !!
2) A blue colored trendline is drawn from top of the head and passing alon the left shoulder !!
3) Fibo levels are applied !!
4) A blue coloured horizontal neckline has been drawn at 762 price !!
5) A black colored arrow is made starting from top of the head(i.e. 955) to neck line (762) !!

Now according to the head and shoulder theory , if the price breaks the neckline then it has to come to the price of 570 (Neckline-(head-neckline)=762-(955-762)=569=target price) !!

And the zig-zag descending blue lines that are made considering the resistances , supports, intersections of the trendline, fibo levels and the ichimoku cloud !!

Your comments plz !!

-Vivek

That was a very detailed post.

I agree with you on the head and shoulder pattern. With regards to TP's comment, the buy back is spanned for the next 6 months, I guess. And looking at the Ambanis way of dealing with things, I guess they will wait for a suitable time to make an entry, maybe when RIL comes a little too low, but then it depends on whether they have set a price for buyback, have they? And I am confused with this news, http://profit.ndtv.com/news/corpora...are-buyback-gets-38-per-cent-of-target-316529. Is this news still right?

Another point that takes precedence in this thread is that technical traders should not follow news. The traders should listen to what the price is saying.

• And in that regard, I see this head and shoulder formation in weekly dully helpful.
• And if you notice, the Fibo levels of 50% has been hit and the price stopped at that level. We should not forget that this is weekly chart. If the price was intending to shoot up next week, it should have closed some points above the 50% level.
• Ichimoku wise, in daily chart, the chikou span stopped at the price action and did not cross to the bullish side, i.e. above the price action.
• Ichimoku wise, in daily chart, the price is inside the cloud, and the price stopped short of the cloud top (821.5) and retraced. The cloud top looks like a step which means it has a meaningful resistance. Now what happens if this resistance is broken!!! We have another step at 826.1.
• The Fibo level of 38.2% stands at 836.

These are important levels that will stop the price from going to 870.

So strategy should be something like this:

• Go short at current levels, 816 to 822 with a stop of 836 and accumulate further at 826.1. (Considering the 50% Fibo in weekly, cloud top in daily). We can hedge this short with a long 820 call option, which has to be exited (SL) when the price touches 810. We should not forget that the options decay after 15th of every month. In other words, do not hold this hedge for long.
• If the price manages to close above 830-836, go long in future for target of 859, 50% fibo levels in daily. (I am doubtful on the long part)

Moreover, 30 minutes charts shows highly overbought, with 15ema standing at 806.

 

[trade4putuval]

Why?
(Yes you are right TP Bro)
Because there is +ww formation in weekly chart to a target of around 870.

I slightly disagree with this view. When I look at the formation from wolve wave theory perspective, then

• First wave formation was 673 to 881.6 to 761.1.
• Second wave formation was 761.1 to 955 to 764.4.

The low of first wave and second wave are almost equal percentage wise. And it looks like a double bottom formation, rather than a second wave bottom. And with regards to head and shoulder pattern, these prices 761.1 and 764.4 almost looks like the neck of the pattern.

For me, this looks like more of a head and should pattern, than the wolve wave pattern.

 

[a1b1trader]

Yes, you are right T4P and Bapu4 (Vivek)

There seems no +ww on weekly chart of Reliance.
I perhaps made a mistake in drawing lines.

 

[trade4putuval]

That was a very detailed post.

I agree with you on the head and shoulder pattern. With regards to TP's comment, the buy back is spanned for the next 6 months, I guess. And looking at the Ambanis way of dealing with things, I guess they will wait for a suitable time to make an entry, maybe when RIL comes a little too low, but then it depends on whether they have set a price for buyback, have they? And I am confused with this news, http://profit.ndtv.com/news/corpora...are-buyback-gets-38-per-cent-of-target-316529. Is this news still right?

Another point that takes precedence in this thread is that technical traders should not follow news. The traders should listen to what the price is saying.

• And in that regard, I see this head and shoulder formation in weekly dully helpful.
• And if you notice, the Fibo levels of 50% has been hit and the price stopped at that level. We should not forget that this is weekly chart. If the price was intending to shoot up next week, it should have closed some points above the 50% level.
• Ichimoku wise, in daily chart, the chikou span stopped at the price action and did not cross to the bullish side, i.e. above the price action.
• Ichimoku wise, in daily chart, the price is inside the cloud, and the price stopped short of the cloud top (821.5) and retraced. The cloud top looks like a step which means it has a meaningful resistance. Now what happens if this resistance is broken!!! We have another step at 826.1.
• The Fibo level of 38.2% stands at 836.

These are important levels that will stop the price from going to 870.

So strategy should be something like this:

• Go short at current levels, 816 to 822 with a stop of 836 and accumulate further at 826.1. (Considering the 50% Fibo in weekly, cloud top in daily). We can hedge this short with a long 820 call option, which has to be exited (SL) when the price touches 810. We should not forget that the options decay after 15th of every month. In other words, do not hold this hedge for long.
• If the price manages to close above 830-836, go long in future for target of 859, 50% fibo levels in daily. (I am doubtful on the long part)

Moreover, 30 minutes charts shows highly overbought, with 15ema standing at 806.

I am short 2 lots @ 825 in futures!!!