chachi said:
Hi Amit,
I am going through your threads and learning. Always eagerly wait for your comments (rightly it should be lessons), as well as Saint's, Supra's, Karthik's and so many. I have always found something to learn. You look to be a born teacher.
In the process of my learning I have positioned myself on SonaSteer @ 96.05 CMP 97.50. I have attached the chart. From the chart it looks MACD histogram is trying to breach the zero from down and may start a new upward trend. Is it incorrect to take the position now as the MACD is still below zero line? The support has formed at 90 and resistance is at 107. If I am correct and if the MACD histogram comes above zero line, the target should be 107 + (107-90) = 124. Please bear with me as I am still learning. As usual I will be eagerly waiting for your comments.
As I am trying to post this CMP is 100.25...
Regards
Chachi
Hi Chachi...thanks very much for the kind words. I guess we share what we know.
Really good to see more members starting to take responsibility for what they do in the market, and towards that end, taking their study seriously.
Good going indeed.
I'm quite confortable with SonaSteer at this point, but my concern is with volume.
The latest bar has better volume than the past two bars, but even so it has to do better.
Why is volume important here.
Well, volume is important to hold up a trend in either direction and without it a trend would eventually dwindle.
But at this point it has to push the price line through a couple of important levels, in fact trendlines, to seek a clear breakout.
In the chart, note the two trendlines (white).
You can see the upwards sloping trendline as an important support line.
In conjunction with the horizontal top line, the sloping line forms a neat ascending triangle.
However, instead of a breakout, we see a breakdown (red ellipse).
Note the sharp spike in volume at this break down.
Now there are two levels of contention that the price has to pierce through.
One is of course the top horizontal line of the ascending triangle that had broken down. The level is 100.80.
Today's high was 100.70.
The other level that the price has to pass through is going to be formed at the point where price will meet the sloping white trendline in the future.
It's an important and a sturdy line, as can be seen by the price action along it.
I've been studying trendlines lately, especially on intraday Nifty, and often come across certain trendlins that will cause quite some difficulty for the price line on either side of it. Meaning, when the price is above such a line, it forms a firm support, but slipping under it makes it a strong resistance.
This trendline may or may not pan out quite that way, but will be worth watching. I'll chart it and if anything interesting happens, will post it.
The price may attempt to test these lines in the near term, and as they may likely give stiff resistance, I'd like to see more volume on SonaSteer.
It's the weight of strong volume, and also momentum, that can help price break past difficult levels.
This is one aspect.
Your other issue is MACD/histogram!!
Oh well...can't escape it can I.
Yes, the histogram as of tonight is still sloping upwards. Yes, this can be an early signal that MACD may see a bullish divergence.
As explained earlier, when the histogram crosses from below to above zero line, there is a simultanious divergence in MACD.
This divergence in MACD may happen below or above the zero line.
Divergences in MACD that happen above the zero line are much more bullish.
Ok.
My interest in MACD at this point is its use as indicative of the rate of change in momentum.
When MACD is positive and climbing, the gap between 12 EMA and 26 EMA is widening. This indicates that the rate of change of the faster EMA is higher than the rate of change for the slower EMA: Positive momentum is gaining.
It is exactly this kind of momentum, along with volume, that would help SonaSteer clear the difficult marks and move onto a breakout.
That's pretty much it, Chachi.
Bring it by again when you like.
