Trading NR7 setup

[vicky_ag]

AW10,

This year on an average we have 3 NR7 per month and on a median we had 2 per month. Out of those, breaking of both on the upper and the lower side happens on an average of every 2 months.

Statistically,

We had a total of 21 NR7.

Most - 5 (March)

Least - 2 (in April , June , July)

Breakout on both sides - 4 ie 20% (4/21)

I have not checked the viablity of a winner/loser. But, the July's breaks were worth atleast 150 points each.

 

[Satyen]

Here are my random thoughts on the NR7 setup:

In NR7 setup, I have quite often seen that the price breaks below the low on next day, and then again on the next day(2nd day after NR7) it starts its upward move.

What could be the reason for this? It is a trick by the professionals to shake-out the shares held by technical traders who are not as foolish as novices but also not as clever as professionals?

If its such a shake-out attempt how could be identify?
Typically such situation would occur when there are not sellers at that price. No sellers mean professionals do not get to buy. This means lowered professional transactions which would reflect on charts as low volumes.

How can be predict which direction the NT7 will breakout? Up or down?
In the 6th post of this thread, there is written "one of the market groups is trapped"(within losing position). Now the question who is trapped? Is it the bull or the bear who is trapped. This trapped group will soon giveup. If bulls giveup, prices will tank, if bears giveup, prices will sky-rocket.

Next question, how to identify who is trapped? or any hints?
Lets take help from the professional trader who controls the closing price. The professional trader has access to certain privileged information which we cannot see. The professional knows who the big players are and what their positions are. The professional will be in favour of the winning group.

So now next question: Since the professional is sided on the winning group, can closing price be used to predict the direction of breakout?
No thoughts on this one because I am yet to go through the historical data.





Till then, keep your comments coming. And let me know if I am thinking on the right path, or have I become psycho and over-indulgent?

Thanks,
-Bunny.

Dear AW10, and Bunny i was visualy going thru NR7 days from jan 08 to june 19 th 09 and NR7 days according to sunils data .......

As bunny said we may be traped etc even i have marked after nr7 break out in direction of trend and imidiately after 1/2 days trend reverses so what i want to do is trade 3/4 trade after NR7 day in 60 min time frame using 60 minute visual pivots found all most all NR7 days gives profit after we have range expansion .........

So i think we got the messege that market undecided and will eventualy come out from this phase so we keep on trading in lower time frame ( i prefer 60 minute) untill we have range expansion and we will be in profit so we should not worry about single trade etc

Will post chart after market waht i wanted to say

 

[lazytrader]

1. Lets take help from the professional trader who controls the closing price.

2.The professional trader has access to certain privileged information which we cannot see.

3.The professional knows who the big players are and what their positions are.

Till then, keep your comments coming. And let me know if I am thinking on the right path, or have I become psycho and over-indulgent?

If you can't substantiate the above 3 points with supporting data then you can call yourself "psycho and over-indulgent" I would suggest a couple of weeks of rest.

Works for me!

 

[AW10]

Dear AW10, and Bunny i was visualy going thru NR7 days from jan 08 to june 19 th 09 and NR7 days according to sunils data .......

As bunny said we may be traped etc even i have marked after nr7 break out in direction of trend and imidiately after 1/2 days trend reverses so what i want to do is trade 3/4 trade after NR7 day in 60 min time frame using 60 minute visual pivots found all most all NR7 days gives profit after we have range expansion .........

So i think we got the messege that market undecided and will eventualy come out from this phase so we keep on trading in lower time frame ( i prefer 60 minute) untill we have range expansion and we will be in profit so we should not worry about single trade etc

Will post chart after market waht i wanted to say

Thanks Bunny for raising few points to discuss and Satya for sharing your observation.
My view as per price action, breakouts are often followed by retracement and test of the breakout level. Depending on demand/supply equation before and a- the-time of breakout, the retracement might test the breakout level or might reverse before this level. The way we trade the breakout is very different from the way we will trade retracement. In my view - breakout trading is a quickie. Get in at right time and exit after instant gratification (or punishment) in next 1 or 2 bars. Retracement trades are more of extended pleasure of riding the trend.
So it depends on our requirement and how we want to trade this setup. Based on that the trading rules will change. If we confuse and try to trade a breakout entry as trend following entry then chances are high that we will be stopped out or will end up carrying the pain when retracement is in progress.
A daytrader, may try to encash on breakout move that is coming from widebars in next days, whereas a swing trader might wait for retracement.
An option trader might like to sell jump in premium that results from euphoria of breakout (which quickly dies down) and create the long position when it retraces and starts going up.
Another option trade that I had mentioned in which trader is already long using straddle/strangle before the breakout in last 15 mins of NR7 day, may decide to book quick profit on winning leg or adjust it by selling higher strike option and lock-in the gain.

And wait for retracement to exit the loosing leg of straddle/strangle.

( I can think of many such scenarios to trade this setup depending on various trading requirements).

Happy Trading

 

[rohangawale]

Todays NR7 stocks are:-

STOCK		HIGH		LOW
CAIRN		241		236
CIPLA		277		270
DLF		401		385
GAIL		323		313
HERO HONDA	1625		1598
ICICI BANK	778		758
IDEA		79		76.5
NTPC		217		214
RCOM		285		276
REL  		1225		1195
REL CAP		922		898

 

[AW10]

Thanks Rohan for sharing the NR7 stocks for today.
I see that DLF and RELCAP were flagged yesterday as well.

that means, 2 days of NR7.. (maybe NR8 setup).. Looks juicy for breakout trade setup.
More so if it breaks on downside. As upmove has been facing resistence and seems stretched to me at this stage hence Reward Risk ratio favours short trade better.

Happy Trading

 

[vicky_ag]

There is a way out of all the mess created by a single sided break and reverse on the next day of NR7.

That is:
If we look at the break of the day before NR7. What I mean is:

Day Number Range

1 130
2 145
3 125
4 160
5 110
6 100 -----> Consider the breakout of this day instead.
7 95 (NR7)

Also, a exit strategy is very necessary. As, we cant just sit back and enjoy the ride.

 

[rohangawale]

Thanks Rohan for sharing the NR7 stocks for today.
I see that DLF and RELCAP were flagged yesterday as well.

that means, 2 days of NR7.. (maybe NR8 setup).. Looks juicy for breakout trade setup.
More so if it breaks on downside. As upmove has been facing resistence and seems stretched to me at this stage hence Reward Risk ratio favours short trade better.

Happy Trading

yes Sir,
as suggested by you k

"Rohan, higher the number stronger is the signal that market will breakout.. but
that doesn't tell us that it will give us next wave of 300 pts / 500pts. How long that expansion will last depends on many other factors so we should not anticipate bigger expansion.

eg - if mkt breaks upward on Monday, It may not be able to go too far cause, it has already travelled 700 pts in current wave. Still 100 to 200 pts is possible. If it breaks down on Monday then support zone are quite far away (4000/3900 level).. It might be able to go down to those level or it might find new buyers before that..
Lets not anticipate that and listen to the market and adjust our trades.

Happy Trading

"
so we will wait for expansion of the mentioned stks of 2NR7/NR8

 

[Satyen]

Date ........................Days Range ..................................NR7??
20-Jul-09 ................. 111.45 . .
21-Jul-09 ................ 69.9...........................................Yes
22-Jul-09 ................ 181.2 . .
23-Jul-09 ................ 91.9 . .
24-Jul-09 ................ 83.5 . .
27-Jul-09 ................ 85 . .
28-Jul-09 ................ 73.6 .
29-Jul-09 ................ 157.9 . .
30-Jul-09................ 99.6 . .
31-Jul-09 ................ 93.9 . .
3-Aug-09................ 117.9 . .
4-Aug-09 ................ 79.8 .
5-Aug-09 ................ 99.6 . .



Dear AW10 i have a confusion about range contraction looking at above we have
a NR7 day 21st July but on on 28th july we have days range 73.6 which is 3/4 point
more than prev NR7 and we can consider it as range contraction but on 4th August
we have a range of 79.8 so can we consider 4th august still a NR day if there was not
28th july then it must be so bit confused

Again looking at days range from 21 july except 22,29 july and 3rd August all the days
range comes near to same range so can we still consider 4th august as NR day Even
10 day average on 4th Aug come near to 105.44 and 20 day 107

please guide how you read this situation in terms of range contraction /expansion

Waiting your reply

 

[AW10]

Date ........................Days Range ..................................NR7??
20-Jul-09 ................. 111.45 . .
21-Jul-09 ................ 69.9...........................................Yes
22-Jul-09 ................ 181.2 . .
23-Jul-09 ................ 91.9 . .
24-Jul-09 ................ 83.5 . .
27-Jul-09 ................ 85 . .
28-Jul-09 ................ 73.6 .
29-Jul-09 ................ 157.9 . .
30-Jul-09................ 99.6 . .
31-Jul-09 ................ 93.9 . .
3-Aug-09................ 117.9 . .
4-Aug-09 ................ 79.8 .
5-Aug-09 ................ 99.6 . .



Dear AW10 i have a confusion about range contraction looking at above we have
a NR7 day 21st July but on on 28th july we have days range 73.6 which is 3/4 point
more than prev NR7 and we can consider it as range contraction but on 4th August
we have a range of 79.8 so can we consider 4th august still a NR day if there was not
28th july then it must be so bit confused

Again looking at days range from 21 july except 22,29 july and 3rd August all the days
range comes near to same range so can we still consider 4th august as NR day Even
10 day average on 4th Aug come near to 105.44 and 20 day 107

please guide how you read this situation in terms of range contraction /expansion

Waiting your reply

Satya, This is where reality of market comes in place and we have to use our judgement. In above range sequence, 4th August is still NR6 day. If you use the judgement and try to look beyond exact range of 28th July, this gives a NR-10 signal. So without getting lost in the numbers x of NRx setup, I would still call it contraction day and get ready to face expansion. (if you noticed 26/July, 29th July range, it is almost double of previous NR7 day range. Too me, this stock/index looks real juicy fruit to day trade after NR7. It gives real nice move on next day)

If you look at average range of last 10 days then on 4th Aug, it was 105 points. So 80 points range of the day is almost75% of the average daily range. Which is good enough for classification as contraction range. I use the range of 80% of average as signal for contraction. That helps in smoothening the effect one-off data point. So if you are programming any indicator then instead of going by exact day range, I would suggest to take 10 days (or any other number) average range.. and If today’s range is <80% of this average range, then trigger the signal.

Hope this helps.

By the way, we had NR6 on Nifty yesterday, Prev day was NR5 and we have seen the nice range of 150+ points today..

Happy Trading