Seniors and experts: please comment on this RIL chart: alert suspected

Hello everybody,

Merry X-mass and a happy new year to all of you!

i have attached RIL daily chart. Notice unique three price swing divergence.
This is not a usual divergence, you can say that a wedge is broken down with a MACD divergence.

The three price swings are very close to each other with great volatility.
along with divergence, this presents generally very good opportunity to counter trade on all time frames.

HOWEVER, IT IS NOT ADVISABLE TO ACT ON PURE DIVERGENCE ONLY.
HERE THE SET UP IS COMPLETE AND A SWING LOW OF 2652 WAS FORMED.

IF AND ONLY IF THIS LOW OF 2652 WOULD BE TAKEN OUT THEN, I WOULD GO SHORT WITH THE TARGETS OF 2300 AND WOULD FURTHER OBSERVE FOR 2000 WITH THE STOP OF MOST RECENT SWING HIGH.

Seniors and our experts, please do comment your views.

Take care,
Merry-Xmass
Winston

don't go short for any reason, whole market is under bullish nature , reliance is an front linke stock...obviously it should rally upwards in this market environment.

remember short spike towards down may be seen to let weak hands panic.

regards
suba

Hi suba,

you are very right! logic is perfect!

but i have traded these patterns on 5 min to 60min to daily charts with great accuracy! ( hey not 100% ) important is that 3 volatile swing points with divergence.

And i would not go short yet! but if RIL breaks 2652 on closing basis, i would go short because my set up tell me to do that, and with proper money management, i would be ready to absorp the shocks of Market!

Take care,
Winston

Dear winstonn sir & other seniors,

Thank you for bringing up RIL chart. Though i wanted to post and ask the seniors their opinion, i never had the guts to do it. I track only reliance pack and i am attaching my setup for RIL.

All seniors please do comment on my setup.

winstonn sir, i do not understand the concept of three price swing divergence. But from my setup, it did take the exact support at 2652 ( the low). It retraced exactly 38.2% (According to Fibo projection).

I agree with you that only when it breaks the low made i.e.2652, only then one should go for shorts. Being conservative, i think atleast it should close below this for 2 consecutive days. Once it breaks 2652, RIL will be totally bearish, i guess. It will break the trend, channel also.

Also for bullishness to resume, i feel it should close above 2900, again for 2 consecutive days. Previously though it did trade above 2900 for just a few days, it never closed above it for 2 consecutive days.

Morever, as it was in the upper channel, the volumes were decreasing ( as indicated in the chart). So i think it did give indication of divergence.

The first resistance is 2771(50 %). Last day it did close above that. I think it needs to close above that one more day. Then resistance is 2817 (30 dma). Close above this, the next resistance is 2895 (61.8%).

Please do let me know what you seniors think about my analysis.

Thank you for giving me an opportunity to discuss my views.

Thank you
Regards
Aparna

Hi Aparna,

welcome to traderji! here you will learn a lot from our great traders like Saint, C.V., Asishda ,Karthik , Oxy and many others! ( other left out please pardon me)

Your analysis is quite good, i think u r a fib fan! you have your system underway! it's great.
your fibonacci approach towards analysing the markets is a rational and fruitful one. Best of luck for ur analysis and hope you learn other methods from the fellow members.

Take care,
Winston

Dear Aparna,

What is FOBOnacci approach. Can u give more information on FIBO approach

puduags

Dear winstonn sir

Thank you for your encouragement.
Take care
Regards,
Aparna

Dear puduags

In technical analysis, there is a large group of analysts who use the FIBONACCI RATIOS for determining Support & Resistance for stock price movements. This can be used in any time frame (Minute charts, Daily Charts, Weekly Charts etc.). Before telling anything about this let me tell something about the Fibonacci Numbers and Ratios.

Fibonacci Numbers: This is a series of numbers starting from 1 and going to infinity. Each nuber in the series is obtained by adding the preceding two numbers. (1, 1, 2, 3, 5, 8, 13, etc.)

Fibonacci Ratio: If we divide two adjacent numbers in the above series, ie 1/1, 2/1, 3/2, 5/3, 8/5, 13/8 etc, we obtain 1, 2, 1.5, 1.667, 1.6, 1.625 etc. Finally these converges to 1.618. Likewise, 1/1, 1/2, 2/3, 3/5, 5/8, 8/13 etc converges to 0.618.

These ratios (1.618 and 0.618) are seen widely followed in so many things. (eg. Ancient architecture, Ratio of length of elbow to finger and length of shoulder to finger, tree branches, how rabbits multiply etc.)

As nature follows these ratios, technicians have found that stock price movements also follows these ratios.

In TA,Fibonacci is used in the following studies

1) Fibonacci Retracements
2) Fibonacci Projections
3) Fibonacci Arcs
4) Fibonacci Fans
5) Fibonacci Time Zones

I have used only Retracements and Projections in my setup. They use the Percentages 0%, 23.6%, 38.2%, 50%, 61.8%, 76.4%, 100%, 161.8% etc. (These are got by dividing the fibonacci series numbers in various combinations).

For Fibonacci Retracements we need TWO POINTS (a high price point and a low price Point). The distance is divided into the above fibonacci percentages by the Analysis software and gives you the levels to which the stock can retrace).

For Fibonacci Projections we need THREE POINTS (Beginning of upmove/ down move, highest point, lowest point).These points need to be selected carefully depending on the stock's price movments. By various trials we will be able to find a set of points that would give us proper support and resistance levels.

I would like to share a few of reliance pack charts so as to see the beauty of fibonacci levels.Let us take RPL chart.

I have taken the low point(start) on 17 aug 2007. Next the high on 17 oct 2007 and the immediate low on 22 oct 2007.
See the high. Almost near to 161.8%. When it fell, it took support exactly at 50%. And when it pulled back, it got resistance exactly at 100%.

In a nutshell we get a broad view on various supports and resistances of various stocks. For past 4 days RPL was facing resistance at its 61.8% projection line. Last day it has managed to close above it.

Take a look at RelCapital. It faced resistance exactly at 61.8% projection line.

In general, we can trade based on these fibonacci levels.

One cannot depend on only one type of indicator. We need to have a combination of different indicators to get confirmation of a particular trend in a scrip.

Hope i have been able to explain properly.
Incase i am wrong, please do let me know.

Thank you
Regards,
Aparna

Re: Clarification on FIBONACCI approach

Dear Aparna,

Thanks for your explanation. Since I am new to this line, it gets little difficult to understand. Hope I will understand slowly. If i have any doubts i will ask you again.

Thanks

puduags

A short below 2700 itself, IMHO, was permitted. Either, below the low of the breakout bar or if price would have gone below the retracement bar.

BTW, now as price is inside the channel one again, one can look forward to shorting at the upper channel line with an assumption that channel will not be broken. Ofcourse, divergence alongwith candle behaviour, at that point, would come as a handy tool. If, however, channel is broken on the upper side, the short trade should be reversed.

Regards,
--Ashish