Food for Thought........!

[S S]

Hi!

This week, we start with the daily EOD chart for CNX IT. I was curious about the likely impact of the US markets on Indian markets, mainly through the IT sector, and was shocked to see that the BEAR Flag developing on CNX IT chart, almost in line with the one getting developed on the Dow Jones.

Therefore, the fall in IT stocks appear to be almost certain. The BankNifty & CNX Midcap indices do NOT have similar indication for the Bear Flag and hence those charts are not shown here.

The daily EOD for the spot Nifty appears to be continuing it’s horizontal range bound movement between 5177 on the upper side and 4720 on the lower side.

This could be mistaken for a kind of consolidation. But it is NOT a consolidation of any kind. Rather, this is a phase, where common people expect the markets to turn upwards, but get fed up due to the sideways movements of the market. In the end, as the markets start falling, it’s a distress sell that occurres.

But like I mentioned in my earlier message, some people just do not gather the required courage to book losses as the scrip hits the stoploss. Helplessly, they watch the markets fall from one low to yet another low very much below the previous low. These are the people, who sell all their holdings with a promise to themselves that they shall never ever trade again.

And that is exactly when the markets turn up sharply and speed past the anticipated resistances, before anyone knows what is happening. Most people then miss the bus, and then wait for the markets to fall, to try and enter at a lower level. Markets do NOT oblige them.

Therefore, please avoid acting on tips of any kind and check the market positions regularly. When the market is near it’s bottom, keep an extra check, so that as soon as the markets turn upwards, buying could be re-started without waiting for lower levels.

But for all this to happen, Nifty has to first break below 4720 and head towards 4435 level. With the central government declaring it’s high debt and the expected impact from the hidden conditions in the US, 4435 appears to be a great possibility.

The US is in a bad shape alright. But because the conditions in the Europe is worst, it has given support to US $ to make it strong. This shall not get continued for long, and US $ shall suddenly loose it’s strength. That is the hidden fear one cannot ignore.

That is what my opinion is, and I could be wrong.

Cheers!
SS

 

[S S]

Hi!

The last week’s chart is, in a way, a unique chart. It makes you speculate the most. For example, one should consider the marking made on the chart, which show the sub-waves marked as 1, 2, 3, & 4.

As per the EW basics, the wave 3 is NEVER the shortest. But many times, one finds it the longest. So the lengths of the sub waves 1 & 3 appear to be fine. So are the lengths of the sub waves 2 & 4.

However….! The sub wave 5 could be tricky, and I find two possibilities.

First Possibility : With the sub wave 3 having it’s low around 4720, on could find the sub wave 5 truncated just before it reaches that value. In reality, the low on 4th Oct was around 4728, which could be considered as the truncated form of the sub wave 5.

If that is true, then the upward journey should commence immediately, and one did find some glimpses of it on Friday 7th Oct, when the market speeded upwards.

Second Possibility : The sub wave 5 could be of 5 segments below it, and the low of around 4728 on 4th Oct could only be the end of the 1st segment of the sub wave 5. This means the 2nd Segment shall be up, followed by another three segments, and yet the overall trend shall continue to be downwards.

Considering the both possibilities, one finds that from Friday 7th Oct, the market was anyway poised to move upwards as per either of the two possibilities.

And the fall from the high of around 5170 on 8th Sep [marked as ‘4’] to the low of around 4128 on 4th Oct shall be retraced for recovery to about 61.80% of the total fall. It means that the spot Nifty may recover to the level around 5000 to complete the 2nd segment of the sub wave 5, and there after the downward movement shall once again start for the 3rd segment of sub wave 5. The target for the sub wave 5 shall be around 4435 as explained in one of my earlier messages.

Practically, the upward movement may continue from Monday 10th Oct onwards, but shall get arrested to re-start the downward movement around Diwali time. Muhurat trading may not be goody goody this year, because the fall shall continue till the end of this calendar year. Most of the American & European companies have the calendar year as their Financial year. So the book closures for the financial year takes place with the ending of the calendar year, for which, many companies do not like to carry any open positions, long or short.
These companies are back again in Jan, and that is when the real recovery shall be seen. It could also coincide with the pre-budget rally.

Keeping that all in mind, currently one should only play to the tune of the market on each day, and avoid keeping open positions which may fetch large profits or larger losses. And by end of this calendar year 2011, one could time the actions to take long positions suitably because once the uptrend starts, it may be too fast and too steep.

That is what my opinion is, and I could be wrong.

Cheers!
SS

 

[MurAtt]

Both you AND Sriram as well as other Techno-Fundamentalists I know of are preparing for a SuperDuper Bull Run after this downtrend ends.

Where this downtrend will end ... no one is predicting BUT supposedly tgts are 4700, 4400 and some even to the extent of 4300 i.e. 4298 on NF to be precisely 50% of the total rise from 2252 to 6340.

Except of course Prashant who is still looking at filling the election gap - albeit in a longer time frame.

 

[S S]

Hi!

As anticipated, the markets did rise during the last week. On Friday 14th Oct, I had kept my eyes on Thursday’s high of around 5137 for the spot Nifty, and was expecting the spot Nifty to take a return hit from that level.

But instead, the spot Nifty crossed that mark and hit the day’s high of around 5140, only about 3 points up.

As a result, there are three possibilities for the next week to open with. First, the difference of these 3 points gets ignored and the two days act as a double top, and the market slides down. Second, the spot Nifty continues its climb till it faces a strong resistance at the upper level of the channel, that is around 5232 levels, and therefore turns around downwards.

The Third possibility may make the spot Nifty to gain speed, and with the help of this momentum, the spot Nifty may make a third attempt to crosses over the channel and may be successful. In such a case, the fresh probabilities shall have to be reworked again.

The weekly chart does not give anything extra, but indicates that the spot Nifty is moving sideways for about 10 weeks.

We could safely assume the next Fibonacci number of 13 to play the important roll, which means that for the next three weeks also, the spot Nifty is likely to remain sideways within the channel.

On Options data for Nifty, the 5100 PE & CE almost have the same OI, so nothing could be derived from this info. But 5200 CE has a lot more OI than the 5200 PE, which may try to strengthen the 5200 level. Same is the case with 5300, and for the same reason, it may provide a good resistance at 5300, if the Nifty manages to come above the channel.

That is my opinion, and I could be wrong.
Cheers!
SS

 

[S S]

Hi!

While remaining above the 10 DEMA Red line all along, the daily spot Nifty EOD candle managed to close below it on Friday 21st Oct 2011. The candle for Monday 17th Oct 2011 was at the highest level for the week and had managed to be very near to the top Bollinger and Keltner Bands.

Therefore, now it would be evident that the daily EOD candles for the spot Nifty shall tend towards the lower BB & KB, which is expected to happen during the next two weeks.

When the next two weeks are completed, it could be seen that the weekly candle has remained within the channel for 13 weeks. 13 being a Fibonacci number, it is very likely that an attempt could be made to come out of this channel.

Unfortunately, because the weekly candle is likely to be near the lower part of the channel, that a break out attempt is likely to be on the lower side.


The daily and the weekly charts are showing a likely target of around 4435 & 4400 respectively, and therefore, it is possible for the spot Nifty to head towards this region after two weeks from now.

For any running race like 100 mtrs sprint, 200 mtrs sprint, etc, the participant takes a guard and with the shouts of get-set-ready, sprints ahead, it is a time now for the investors to take a stance and wait for the signals. The get-set-ready part shall include the finalization of appropriate scrips to be bought, their likely quantities and costs and arrangement of money in ready position, so that with the signal ‘go’ one can buy the decided scrips, without trying to catch the bottom.

That is my opinion and I could be wrong.

Wishing all a very happy Diwali and prosperous New Year. Happy Investing.
SS

 

[mangup]

Hi!

Usually, I stick to spot Nifty and its behavior, but this time I would prefer to start with Dow Jones. DJs chart is showing something explicitly clear and almost in a copybook style. The daily EOD chart for Friday 9th Sep for DJ is

The current Bear Flag formation is absolutely clear. Those who do not have any idea about Bear Flag may please google search the net and read and confirm. It only means that the Dow Jones is all ready to fall over 2000 points to the levels in the region around 9600 or below. It also means that the last low for Dow Jones on 1st Jul 2010 around 9596 is likely to be re-tested.

Reason could be anything, but if one of the main reason is going to be the IT sector, that shall definitely have a strong impact on Nifty & Sensex.

The spot Nifty daily EOD chart is not showing the Bear Flag as much clear as for DJ. But the low on 25th May 2010 for spot Nifty, which was around 4786 has already been violated on 26th Aug 2011 to reach a level of 4720. So, in the event the DJ does fall by 2000 points or more some effect is likely to drag down the Nifty to a level well below the last low of 4720. Therefore, chances for the Nifty to move towards 4435 region would increase with such fall in DJ.

However, there is an alternate view point. If the fall in DJ does NOT seriously impact the Nifty, then one should consider the possibility seen in the spot Niftys daily EOD chart, but with different levels considered :

The chart shows that the spot Nifty had remained in a channel having its upper limit around 5950 region and the lower limit near its low of around 5177 on 11th Feb 2011. But after breaking the channel downwards, the Nifty had reached the 161.80% level around 4732 and had bounced from there.

It is less likely that with a FALL or around 2200 points in the Dow Jones, the Nifty can still manage to GAIN 200 points as mentioned by some charlies on business TV channels. But it is possible that in spite of a heavy fall in the US markets, the Nifty may once again attain its recent low of around 4732 and recover from there, without attempting the lower levels.

That is what my opinion is, and I could be wrong.

Cheers!
SS

Dear SS,

I have observed some green & red arrows on the bottom & top of the swings. Can u pl let us know how these got genereated on the chart?

Thanks!

 

[MurAtt]

@mangup

I think SS has already replied AND to top it has also attached the AFL for the users here.
Please check a few pages back.
AND please edit your post and remove the quoted post so that it would make it easier to read for yourselve (in future) as well as others.
Thanks

 

[mangup]

@MurAtt,

Thanks! I got the afl. But i don't use AB. Can any one has the afl in metastock langauge.

Also how can i edit my post now as i am not able to see the edit button?

 

[MurAtt]

S S

Its today (and that too bcoz of Mangup) that I decided to checkup on the AFL posted by you.

I used Bar Replay to checkup the 'RED' and the 'GREEN' ARROWS.

Guess what, at times the Arrow arrive below a candle after 5 sessions !!!!

So, for traders no use BUT just a trend confirming tool that the trend is now changed ... thats it .. no trading as the bus is missed for sure.

Just to inform you and others who may think that they have got their trading arrow ...

Murtaza

Sorry,

Not used to attach files. The file with .afl extention was not being accepted and I was required to change it to .txt

So, here is the Gorden Rose afl attached after renaming it as Gorden Rose.txt.


@ Murtaza,

One needs to keep making alterations in afls. That is the only way one can find more about Amibroker, which helps in knowing more about the TA. I keep on doing one or the other change, so it would only be proper to give the original version to everyone interested.

Cheers!
SS

 

[linkon7]

S S

Its today (and that too bcoz of Mangup) that I decided to checkup on the AFL posted by you.

I used Bar Replay to checkup the 'RED' and the 'GREEN' ARROWS.

Guess what, at times the Arrow arrive below a candle after 5 sessions !!!!

So, for traders no use BUT just a trend confirming tool that the trend is now changed ... thats it .. no trading as the bus is missed for sure.

Just to inform you and others who may think that they have got their trading arrow ...

Murtaza

Those arrows are not signals. they are pivots and price needs to move certain bars for a pivot to be confirmed.