So Should I start booking profits in IFCI? Chart attached

[bunny]

Hi guys,
I am attaching a chart of IFCI upto closing of June 1, since 3 months.
Is this time to start taking profits part-by-part?

I feel so because:

1. The MACD histogram shows increasing influence of bears
2. MACD: Fast line has already crossed below the slow line
3. Volume are decreasing fast
4. ADX has already achieved a top and has started to flatten out

However, looking at today's(June 2, 2009) price action, do you think a head-and-shoulders pattern is likely? One thing that prevents me from thinking in head-and-shoulder pattern is the volume. If we assume that the left shoulder is being formed now, then volume must be increasing in the last 7-10 sessions, which actually is not. Also, the EMA (Close, 20) and EMA (Close, 50) are still apart which means trend won't reverse.

Any comments? Should one take short positions on this scrip.

Thank you.

 

[sudoku1]

Hi guys,
I am attaching a chart of IFCI upto closing of June 1, since 3 months.
Is this time to start taking profits part-by-part?

I feel so because:

1. The MACD histogram shows increasing influence of bears
2. MACD: Fast line has already crossed below the slow line
3. Volume are decreasing fast
4. ADX has already achieved a top and has started to flatten out

However, looking at today's(June 2, 2009) price action, do you think a head-and-shoulders pattern is likely? One thing that prevents me from thinking in head-and-shoulder pattern is the volume. If we assume that the left shoulder is being formed now, then volume must be increasing in the last 7-10 sessions, which actually is not. Also, the EMA (Close, 20) and EMA (Close, 50) are still apart which means trend won't reverse.

Any comments? Should one take short positions on this scrip.

Thank you.

one can certainly consider booking 50 % profits....but i will b wary 2 go short even if this is a top in the making as trading in ANTICIPATION is the most dangerous act........i will look for some weakness before thinking of going short....

as for the MACD.....look for the whole rally from march.....there r quite a no of whipsaws spotted

 

[bunny]

Thanks Sir,
As about the MACD, since its giving many whipsaws, we could look for +DI crossing over -DI, and short term moving average crossing over comparatively longer term moving average.

I remember reading that MACD can give many whipsaws and frustrate when the markets are choppy

 

[lazytrader]

Let me give you a piece of advice which has served me well:
- buy when stocks are moving up
- sell when they are moving down
- in an uptrend buy on dips

Why do you want to sell now when everything is moving up? If you are a novice then you shouldn't be looking at indicators. First get your basics, then the stratergy, money management and then you can go to charts and indicators. There is a lot of info here and also read the thread "Teach a man to fish..."

As sudoku1 said don't anticipate. You are not getting paid to predict the future. In a rally everything goes up so you only need to make sure that you stock is participating in it. If it is not then you can sell. If the market is consolidating then you look at the indicators.

For now sit tight...
book part profit when the stock starts moving down, not when it is moving up.
And keep a "calculated SL"

 

[gunavadhi]

Let me give you a piece of advice which has served me well:
- buy when stocks are moving up
- sell when they are moving down
- in an uptrend buy on dips

Why do you want to sell now when everything is moving up? If you are a novice then you shouldn't be looking at indicators. First get your basics, then the stratergy, money management and then you can go to charts and indicators. There is a lot of info here and also read the thread "Teach a man to fist..."

As sudoku1 said don't anticipate. You are not getting paid to predict the future. In a rally everything goes up so you only need to make sure that you stock is participating in it. If it is not then you can sell. If the market is consolidating then you look at the indicators.

For now sit tight...
book part profit when the stock starts moving down, not when it is moving up.
And keep a "calculated SL"

"Teach a man to fist..."??????? will not it give a wrong meaning here?lol.

 

[AW10]

Bunny,
Great to see you enthu in the forum and zeal to learn trading. Keep it up buddy.

My suggestion/ comment on your original post
1) Start using Candle charts instead of line chart. I found that Candle chart can give u lot more hidden message regarding the pattern of price fluctuation during the day, who dominated the move i.e. buyers or sellers etc.. A dot of closing price does not give any info. Line charts are good for long term charts going into many years. Haven't seen any trader using them but I have seen almost everybody using Candle Charts.

2) For this type of question, u will get diverse view from people.. There is no consensus on it and that's why market exists. When some one is selling it, there has to be people with opposite view to buy it.
Important is to develop your exit strategy. Backtest it, paper trade it.. and improve till the time u are comfortable in risking your money (be it paper money of real money).

3) While designing - you have to consider initial stop, partial profit taking exit, target exit and trailing stop. Not many people pay enough attention to exits and get fascinated by entry rules.
In professional trading, EXITs are lot more important then entry. You can have coin flip based entry strategy (50:50 chance) but right Exit strategy to make money over a series of trades.

4) In this case, my approach will be to book partial profit, and tighten stops on remaining position. Market goes in cycle. It is never a one-way journey that most of the people think. If it has gone up, then
there will be retracement before next up move starts. It depends on individual traders time period of trade..whether to exit during the retracement and re-enter (short term traders will book profit).. or continue to hold for longer time (buy and hold people ) so that bigger retracement don't have any effect on their position. In my view, if u ask majority of buy and hold followers, they have no idea when to take profit and when to exit.

5) Regarding your entry. ADX and MACD are both trend indicators and both lagging indicators. In my view, it is like a blind man asking direction to another blind man. Some time they will be right but you never know when they are not. There are standard, bookish definition of using indicators.. but if you use you creativity, u can use the indicators more intelligently.
Lets say - current ADX is 40+.. Look back into the chart, mark the time when adx was >40, and observe what happened to price after this event.. For how many day it went further up, how was the crash later on.
In my observation, High ADX rating as sign of the end of trend and that's when I start booking profit or tighten my stops.

Hope this helps.
Happy Trading.

 

[bunny]

Thanks Sir for your review.

Start using Candle charts instead of line chart.

Yes, I am already using candle stick charts, but for drawing the trendlines, I face slight difficulty when the candles are cluttered, hence I chose a line chart here.
[/quote]

Lets say - current ADX is 40+.. Look back into the chart, mark the time when adx was >40, and observe what happened to price after this event.. For how many day it went further up, how was the crash later on.
In my observation, High ADX rating as sign of the end of trend and that's when I start booking profit or tighten my stops.

Yep, thats how I was told about this. When ADX>40, it indicates the trend is losing its strength and a reversal may occur.

Thanks Sir