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

debdeeps

Active Member
This setup is only valid till TL support not getting broken which is @ 4500
 
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S S

Well-Known Member
Sorry Debdeep, did not check the messages earlier.

But I do NOT think so. When one speaks of an uptrend.... uptrend it is, till the trend line is broken downwards.

The stock markets never move in a straight line way, so the profit booking shall bring the markets down, within limits. Profit booking is considered healthy for the markets. If markets keep going only up and up, then the bubble gets formed that bursts, which is NOT the case here.

The OI for Nifty 4600 & 4500 PE makes these levels as strong supports. Even if 4600 appears to be broken, it is usually a false alarm, because 4500 remains intact, and the markets soon recover to go above 4600. In fact, such dips show better opportunities for going long.

Therefore, in my opinion, there is nothing wrong with the current behaviour of the markets.... but as usual, no one is God to know the things in the future, so I could be wrong. It is just the working outs of the probabilities, that have higher probable reasons over the other weaker probabilities.

Cheers!
SS
 

S S

Well-Known Member
Hi!

One good thing about the market is that, it has a trendline which is trending upwards. Since the recent low of around 3920 on 13th July 2009, that the markets are up-trending.

The two highs there after are around 4730 on 4th Aug and 4740 on 28th Aug 09, both of which are in line with the previous high of around 4790 on 12th June 2009. This clearly shows a strong resistance in the region 4730-4790 values for Spot Nifty.




During this period, we also see that the lows have been trending upwards, thereby making the channel smaller. The fact that the up-trending trendline has not been broken, it offers a very good support.

Therefore, in the recent future, a strong attempt is expected for breakout to come out of this channel. Probability wise, it should be 50:50, but the trendline is bringing the support upwards whereas the resistance is stagnant at 4730-4790 level.

Info on Nifty option also reveals the strength. 4600PE increased from 4174950 to 4593250. 4700PE increased from 1841950 to 2916300, whereas 4700CE decreased from 4384800 to 3340650, but 4800CE marginally increased from 3581400 to 3616300. This indicates that possibly the Spot Nifty shall continue testing 4800 levels.


The other factor in favour of this possibility have already been specified by me, such as shortage of rain fall-draught condition-increase in price of essential commodities and food grains, including sugar, Even the YSR news did not make any adverse effect, except on stocks of Hyderabad based companies.

Therefore, in my opinion, it would be easy to break the weaker resistance upwards that breaking the trendline for the market to fall drastically. But I could be wrong.

Cheers!
SS
 

S S

Well-Known Member
Hi!

Once again many self styled experts and advisors appearing on various business TV channels have started talking about the turn around by the markets to head towards Spot Nifty levels below 4500.

I have no idea. But I wonder, what is their basis for this option.

It was inevitable that the fickle mindset of Americans shall keep the US markets down yesterday, only because it was 8th anniversary of 9/11. Sick.

But if we take one look at the weekly chart for Spot Nifty, we find that the Nifty was stronger than ever before in last 52 weeks. Then why follow the Americans with a fickle mind?





And although not as strong as the Nifty, Dow Jones is slowly approaching it’s 52 week high.

US$-INR rate is staying within the channel of 47.50 to 49.50 INR per US$. It is a high time that it falls below 47, and that is what one should keep an eye on. My guesstimate is a kind of better results from Infy & Co for the second quarter that the markets may be pushed up in Oct 09, to bring in more foreign exchange and make the INR stronger against US$.

Gold is near it’s high for 2009 levels, but has not even reached the high. There are speculations both ways, and I do NOT wish to go into them as of now.

For the time being, Nifty it is, that one should be confident of. And whether one takes a look at Daily or weekly or Monthly charts, it is the same up-trending Trend line that exists. Therefore, so long as this trend line is NOT violated, the markets should be considered positive.

My opinion based on my understanding of the charts, and I could be wrong.

Cheers!
SS
 
Hi!

Once again many self styled experts and advisors appearing on various business TV channels have started talking about the turn around by the markets to head towards Spot Nifty levels below 4500.

I have no idea. But I wonder, what is their basis for this option.

It was inevitable that the fickle mindset of Americans shall keep the US markets down yesterday, only because it was 8th anniversary of 9/11. Sick.

But if we take one look at the weekly chart for Spot Nifty, we find that the Nifty was stronger than ever before in last 52 weeks. Then why follow the Americans with a fickle mind?





And although not as strong as the Nifty, Dow Jones is slowly approaching its 52 week high.

US$-INR rate is staying within the channel of 47.50 to 49.50 INR per US$. It is a high time that it falls below 47, and that is what one should keep an eye on. My guesstimate is a kind of better results from Infy & Co for the second quarter that the markets may be pushed up in Oct 09, to bring in more foreign exchange and make the INR stronger against US$.

Gold is near its high for 2009 levels, but has not even reached the high. There are speculations both ways, and I do NOT wish to go into them as of now.

For the time being, Nifty it is, that one should be confident of. And whether one takes a look at Daily or weekly or Monthly charts, it is the same up-trending Trend line that exists. Therefore, so long as this trend line is NOT violated, the markets should be considered positive.

My opinion based on my understanding of the charts, and I could be wrong.

Cheers!
SS

Dear SS Sir,
I am a humble reader of your chart analysis for some time now. I did appreciate that you are one among the first to predict nifty 3200 level long before. Can you please clarify my following doubts.

1.With regards to your cup and handle analysis my doubt is that as I read, cup and handle is a continuation pattern of a previous uptrend. But here cant we say that the previous trend was a down trend from 6200 levels of nifty.

2. At the handle part the volume should increase substantially when the break down occurs. But here the volume is not increasing.

3. Normally the cup formation should be for 4 to 6 months. But here we have a time period of almost one year.

I would be highly thankful to you if you can spare your precious time to clarify my doubts.

Thanks and regards
tkrajnambiar
 

S S

Well-Known Member
Hi Nambiar,

Good that you are making use of God’s gift to mankind…. the thinking ability.

If you read the basics of Elliot Wave Analysis, you will find that it says that the stock market behaviour is in form of waves…. 5 waves up and 3 waves down.

But in reality, you find that not only each up wave may consist of sub-waves, but each sub-wave may consists of sub-sub-wave, and so on.

Likewise, when one talks about the Cup and Handle pattern, whether one is referring to a daily chart or weekly chart, is the point to consider.

Therefore, I would not consider the time period as limited to 6 months alone. However, larger the time period for the cup, larger should be the time period for the handle.

Possibly, that is what is happening. And the break-out that you are talking about with volumes is not ‘break down’ as you mentioned, but possibly an upward breakout, which is yet to happen.

No pattern has hundred percent success result. That is why we should take a guidance from the pattern, and that is why, I am cautiously depending upon the up trending trend line for giving the major support to the markets.

Cheers!
SS
 

MurAtt

Well-Known Member
And as maybe happening in the current past where all patterns are failing and going by the markets saying that "nothing that is expected happens" - I think when people start believing that this pattern too is going to fail like the previous so many HnS etc and when we start looking more to the downside, we WILL get that upside push :lol:

examples :
when we hit 4720, we never thought abt 4350 and we hit it thrice in a week.
when we hit 4480, we never thought 3900 and we hit it
when we touched 3900, who thought that in a weeks time we would be back at 4400. every1 was expecting gap fill of 3600 (incl me and that burnt my fingers badly :()

so .....
 

S S

Well-Known Member
Hi!

Usually, during the settlement week, we find two types of actions. Most of the times, the Nifty is down on Mondays and part of Tuesdays and then recovers in the next two days. Sometimes, the action is exactly reversed to have Nifty going up on the first two days and then falling. And as usual, it is difficult to guess, which of these two actions may result next week.

The Nifty chart has been displaying strength consistently. So, whether the Nifty is down or up in the next four days, we should be going strong in the next month.

The Weekly chart for Spot Nifty shows few important levels.




As per the chart, from the current levels there is no resistance upto the previous high of around 5300 [5298.85 on 2nd May 2008] which could become a hurdle, along with the Fib level of around 5380.

In short, the next major hurdle channel appears to be in the region of 5300-5380, only if the Spot Nifty manages to stay above the uptrending trendline, and does not break it downwards.

To assess this situation today, one should have a look at the Oct 2009 options OI in the descending order for Nifty for last few days. It is almost 4800 PE - 5200 CE - 5300 CE, with 4500 PE also featuring on Friday.

So, as of today, 4800 appears to be a very strong support, with no likely resistance till 5200. But how can this happen? What is the base for this rise to take place?

From the talks of various PSU & private sector bank directors, one learns that a genuine demand for expansion loans from the manufacturing sector has started rising. This means that now the banks need to earn more, and the interest rates need to start rising.

For this to happen, I am anticipating the RBI to raise all the three important figures of CRR [Cash Reserve Ratio] Rapo rate and the Reverse Rapos rate by atleast one percent or even more, in steps. The Bank Prime Lending Rate [PLR] shall automatically go up.

This should impact positively for the banking sectors, but unfortunately, the Bank Nifty is NOT showing any signs of this likely move. But then, the Bank Nifty is currently having only the OI for the current month and options for the next month are NOT as much operational as for Nifty.

The US$-INR conversion rate appears to be making the Rupee stronger, thereby indicating an inflow of the foreign exchange into the country, which could be for the stock markets.

Therefore, I am personally considering 5300 as the next target for the Spot Nifty, based on my readings of the charts, but I could be wrong.

Cheers!
SS
 

S S

Well-Known Member
Hi!

While there was a good sunshine all along that suddenly the dark clouds have started approaching. But first, how the last week was different :

During the last week, after a long time that the US$-INR rate dipped below 48 Rupees a dollar, but recovered thereafter.

On the weekly charts for Spot Nifty, last week’s candle was a near Doji with open at around 4977 and close at around 4959. On both the sides were the long wicks, thereby indicating the volatility. It also indicated that efforts to move either up or down were done half-heartedly and did not sustain.



The scene on last two days for the Nifty Options OI also gave indications. While on 24th Sep, the settlement day, the OI outstanding in the diminishing order were :

4900 PE-4800 PE-5300 CE-4700 PE- 5000 CE

which gave a good support at 4900 level and also a good resistance at 5300 level, but indicated a hurdle at 5000 to cross and go up.

On Friday 25th Sep, the picture changed to –

4900 PE-4800 PE-5000 CE -5300 CE-4700 PE

making the resistance at 5000 more stronger than 5300.

Therefore, the next week may see a sideways movement of the market confining itself to the smaller range of 4900-5000 and the larger channel of 4700-5300 levels.

But this need not upset anyone. While the US and Asian markets were down, Indian markets stayed in the green on some days last week. This, in a way, is an indication that the negative influence of external markets on Indian markets has started diminishing.

The BBs are inside the KBs and are about to meet. The high of the weekly candle is somewhere nearby. The 10 Weeks EMA Red line is coinciding with the up trending trend line. So, if the markets continue to move sideways, within a week or two that the pressure shall get developed for the markets to decide…. Whether to stay above the trend line and move up, or to give up and fall below the trend line to make the things difficult.

That is because, once the trend line is broken and the Nifty is below it, that the trend line shall offer a very strong resistance, difficult to break.

As of now, there is no clear indication from the charts, but by a week or to, we shall see the effect, that shall tell us well in advance, whether there is going to be a stable govt in Maharashtra or not.

One must not forget that both BSE-NSE being in Mumbai, the capital of Maharashtra, that there is going to be some effect of the assembly elections due in this month, and the results of the elections.

But as usual, I am expecting the markets to indicate the results even before the polling takes place…. But we need to wait for sometime to see that on charts. One clear indication would be if and when the Spot Nifty goes above the recent high of around 5037 on 22nd Sep…. one could expect a stable govt in Maharashtra…. could be Congress-NCP or Shivsena-BJP. If not, there is likely to be a horse trading of Aayarams-Gayarams.

One comment on Murtaza’s posting of 13th Sep. Let’s take the first example he has mentioned, which is –

“when we hit 4720, we never thought abt 4350 and we hit it thrice in a week”

These are trading advantages. If we are in a region…. say 4500 for Spot Nifty and I go long on 4500 Nifty Calls, and the markets start falling, I just short the futures to cover my calls. When the markets go to the lower level, say of 4350 that I do nothing. But as they start recovering and come above 4400 that I square off my futures and go extra long in 4500 Calls.

For that one must be sure that the markets are temporarily down and are going to recover and therefore, one must manage to stay away from Fear…. which comes only from Greed. And this would depend on everyone’s mindset and experience in the markets.

All my opinions, and I could be wrong.

Cheers!
SS
 

S S

Well-Known Member
Hi!

After the buy signal on Spot Nifty on 19th Aug 09, there is no sell signal that has appeared so far. But for the Dow Jones, Nikkei and Straits Times of US, Japan and Singapore markets respectively, a sell signal followed by a buy signal again followed by a sell signal have already appeared till last week.

Therefore, only comparing the falls and rises with those market does not make sense. But first the scene on the US front.

On 2nd Oct 09, the DJ had a further fall that was, in a way, arrested by the 31.8% level around 9435 level. There seems to be a possibility of the current formation following the Asian style to lead to a Cup & Handle, of which, the cup formation itself is not complete and the DJ needs to rise to the levels around 11300, which is the 61.2% level.





The recession in the US, job problems, home loan problems, etc have already been built in the current scene and therefore shall have virtually no further negative effect on the movement of that market here after.

The Indian markets in today’s condition stand no comparison with their counterparts in the leading world markets and appear to continue their upward movement. However, one cannot ignore the world situation in totality. The worst case likely is for the Nifty to fall to 4750 levels and recover. The candle may also turnout to be a Doji for the next week.





The OI for Nifty options as on the closing of 1st Oct is also encouraging. In the diminishing order, the OI stands at –

4900PE-5000PE-4700PE-4800PE-5300CE-5200CE-5000CE-5100CE.

This speaks for itself, that a very strong support exists from 4700 to 5000 levels for Nifty and the resistance would be from 5000 to 5300, especially if the markets fall below 5000 on Monday 5th Oct 09 and also close below 5000.

If the markets do NOT close below 5000, then their upward surge shall continue till 5300 for Spot Nifty.

One look at the US$-INR rate is also encouraging. The sudden fall in that rate on 1st Oct suggests a sizable inflow of the foreign exchange.





Without any revision of rates from RBI, that the PSU banks have already surged upwards. Now the market is anticipating better results from the industries and is expected to move up further.


But if the results are NOT extraordinary, markets may go for a short correction. In addition, the Maharashtra state election is due on 11th Oct, with it’s results getting out on 22nd or thereafter.

So, for the next week, only the results expectations shall be the main key and NOT the elections. Therefore, even if the markets dip on Monday, it could be considered as an opportunity for going long.

But that is what my opinion is, and I could be wrong.

Cheers! Happy Trading-Investing.
SS
 

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