Your honest opinion please

Now a word or two for those who might not have read this thread at all. We need not bother about them. They will not read this thread in future also.

But a few things must be stated for those who have read this thread and have not expressed their honest opinion thinking that if they go wrong, they will be exposed in a public forum like this. Those friends may please note, you are expressing only your opinion, it may be correct or it may not be. But it is only an opinion. No one is going to sue you or ridicule you for that. The members of this forum are very mature. Infact, this is a great forum. All are helping one another. To my limited knowledge, no one in this forum has ever ridiculed the opinion of another member.

Why are you hesitating to admit that your opinion was wrong? Is it your ego which prevents you from acknowledging this truth? Which truth? The truth is that you have formed a wrong opinion either because you were lazy to assimilate and analyse the facts or because you did not have any knowledge to make such an analysis. If it is ego, then please get rid off that ego. The earlier you get rid of it, the better for you. Why? Only when you acknowledge that your opinion was wrong, you will realize the need to get out of a loosing position in the market. To put it in another way, you will not try to impose your views or your opinion upon the market. Remember, market listens to nobodys views. But you MUST listen to what the market says. If you dont, then you are digging a deeper hole under your own feet. First thing you have to do to come out of the hole is to stop digging under your own feet. Let the process of humbling begin. Remember in order to become a successful trader, this process must begin. The earlier the better.

Are you still hesitating? Let me point out one more aspect. Ask yourself this question. Who is that you in this forum? Is not your name an assumed name (to put in harsh words fake name) in this forum? Why are you so attached to this fake identity? (My sincere apologies to all those members who have posted their real name and identity in this forum. By no means I am condemning/ridiculing them. If you have done so, I must appreciate your courage). Can any one identify you, I mean you the real person from the fake identity given in this forum? For that matter is anybody interested in doing that? That too because you posted your opinion in this thread? For that matter will you be able to identify me if I come and stand in front of you? Will you ever be interested to undertake such an exercise? I bet you will not. So why did you hesitate to post your views here? Do not commit such a mistake next time. You missed a golden opportunity to see how your analysis can be improved and how many points you have missed. You missed an opportunity to acknowledge that some one is still smarter than you. You missed an opportunity of killing that personal ego.

Now for those who have posted their opinion here, I have one request. See the chart now posted here (in my disclosure post) with all details. Do you have a different opinion now than the one posted here earlier? Well if you have any, you need not post them here, but you must introspect yourself as to why you have a different opinion and what is that point which makes you to take a different opinion. If you do that you will notice as to where that bias came and once you identify that source of bias, you will be constrained to remove it from within you. That is very important. Please note one of the very important purpose of posting the chart without any details was to show the bias (if any) within you.

Why it is important to remove this bias? Technical trading does not care for the legacy of the company. You take the trade on the basis of price, volume and time data. If you want the assistance of any of your favourite indicator(s), it is altogether another addition(s).

I was also curious to know how many of you are looking such a long term chart as yearly chart.

Another purpose of inviting your views is to see how you are going to approach the market without any bias of whatsoever nature. Are you able to grasp all available information from the chart? Are you able to form a trading plan on the basis of available information? It is debatable whether the data available on the chart was sufficient point to form a trading plan. For some it was sufficient and some others required more data. Let us not get in to those aspects. The point is, are you able to grasp all available information from the chart? To highlight this aspect, I asked for your honest opinion and honest analysis which is not influenced by others opinion or analysis. Had you done that then please review all other posts here and see whether you have missed any of the points in analyzing that chart and which others have pointed out. But please do not comment upon others analysis.

Your trading tactics should comprise (I am not going to the whole detail here, but I am highlighting only those points that are relevant in this thread)

1. Assimilating all available information in the given chart. Take care you do not miss many. We can term this process as collecting evidence. This is collecting facts.

2. Thereafter, forming an opinion on the basis of available evidence/facts as to what will be the next likely move (which some call as trend) in the chart analysed.

3. Thereafter forming a trading plan as to how to get maximum benefit out of this ensuing trend.

You see now you are closer by many steps in analyzing the chart without any bias as to the legacy of the company. If you proceed in this manner, you will not think like this Reliance/L&T is a great company. So at Rs. 500/- it will be a bargain and I will buy it. On the contrary, you will think in this fashion, Whether the downtrend in this stock has ended? If yes, will it move upward next or sideways next? If the downtrend has not ended, should I short it now or leave it alone? If it is going upward/sideways next what should be my course of action? Have you noticed the difference between the above two thoughts? Now if you see an opportunity, you will not hesitate to short the stock whatever may its legacy be.

Of course, it need not be that your opinion should always be correct. That is a bad habit that our education system has inculcated in us. Please remember that there is no such thing as 100% correct forecast or 100% guaranteed trade. None in this world could achieve such a standard. If that be the case, then there is no point in concepts like money management and stop loss, risk reward ratio etc. When a transaction takes place both the buyer and the seller thinks that he is 100% correct. But infact, only one of them can be correct. That is the fact. Always keep it in mind.

All that is essential is to form an opinion on the basis of facts/evidence. As someone said every ass has got an opinion. So do I. But what is dangerous is forming an opinion without any fact/evidence. That is what most newbies do and that is what ruining them. As it is only an opinion, it can be wrong. Market never bothers about any ones opinion, you and me included. But what happens when these opinions go wrong and what should happen when they wrong is to reanalyze the very same chart to see what are those evidences/facts that you have missed/ignored while forming that opinion. Take care you do not miss them in future.

When your opinion does go wrong, you will realize the importance of stop losses and position sizing etc. Next time you will not trade without them. These are absolute insurance schemes to protect you from your misadventures. Do not fret them.

Now a word or two about the chart I posted in my first post in this thread. Look carefully at that chart. What do you notice? For the sake of convenience, I am quoting with reference to dates.

Firstly, you will notice that there was a peak in the year 2000 and there was low in the year 2001, which was tested in the year 2002. The test was held successful, i.e. the price did not go below the low of 2001. That established the path of least resistance. That is to the north. A rally ensued. Notice how the volume and range of the each of the candle increased subsequent to the testing candle of 2001. Only exception is 2004 candle. But you will notice that 2004 candle closed on the top. So from 2001 bottom there was rally upto 2007 close candle. Each candle from 2002 to 2007 made higher lows and higher highs.

Now look at the last candle. It is a massive outside reversal bar. You may have some colourful name in candlestick terminology for such type of candles. If you want you can use them as well. The high of the last candle was higher than all other earlier candles. Its low is lower than the low of two immediately earlier candles. Look at the close. It closed on the lower 1/3. Look at the volume. It was highest and massive. It is both wide range candle and wide range body candle. Now consider where did this candle appear? Did it appear at the bottom of a downtrend or did it appear in the middle of an upswing where you can notice some resistance to the left or did it appear in the trading range? The last candle appeared at the top of an upswing without any resistance on the left side. Look from any angle, last candle will convey only one message. Bears have taken strong control. Prior uptrend from 2001 lows has reversed. If you are still unsure, you can draw a supply line connecting the lows of all candles from 2003 candle onwards and you will notice that that supply line is also broken to the downside on the last candle. You can now give a colourful name to the bear which is apparent on the chart. You can call it as cuddly bear or grizzly bear or by any other name. What is important is that you must recognise it as a bear and not as a bull and you should not be having an opinion that earlier upswing is still in progress. The range, volume and open, high, low and close of last candle have clearly conveyed the message that bears have taken control of the proceedings from the bulls.

So the available facts/evidences have been summarized as above. If I have missed any, and if some one else has got them, I must appreciate him because he is a better observer than me and he is more knowledgeable than me.

Now on the basis of the facts/evidence (assimilated by me as stated above) what are the deductions/opinions that I can make? I can reasonably expect that

1. It will never be easy to takeout the high of the last candle. Infact, when such a wide range candle with such a wide range body occurs, that range itself will offer stiff resistance to any attempt to take out that range first and then it’s high.

2. There is no indication of weakening of strength of bears in that chart. So I can reasonably expect that next candle will make a lower high and most probably a lower low as well. The least I must expect is a test of the low of last candle.

3. If in the subsequent candles there are any lower lows, then I will have to watch out how far low it goes. Because, lower the low of subsequent candles, higher the difficulty will be to takeout the range and high of the last massive red candle appearing in the chart.

4. If there is any rally, I will have to asses the strength and enthusiasm of bulls in that rally. Shorter the rally, more negative will be points awarded to the bulls.

5. I have to be prepared for a 1-2-3 pattern as well. This will confirm the downtrend. Being a yearly candle, I doubt whether I will be able to see this (of course, you did not have the benefit of time axis to form this opinion). But I must not be shocked to see one such pattern.

6. If by chance (this is extremely remote chance), the high of last candle is taken out in the immediate future say next two or three candles, that will be more in the nature of an upthrust. A new uptrend is very unlikely.

7. There is another possibility also. Next few candles may establish a trading range rather than making new lower lows. If that happens, I will have to conclude that bears are loosing the advantage that they have established in the last candle. Does it mean that there will be an uptrend? I am not sure. To move the prices higher, there must be sufficient demand. In the absence of sufficient demand, price will not move up.

Now what are the trading plans? Well some of you have indeed posted your plans. I do not want to comment upon them. Neither should you. But what is important is to have reasonable expectation or opinion on the basis of available evidence and basing a trading plan on that. In my opinion, now it is better to take trades on the short side as that is the dominant trend appearing in the chart. Should I short immediately or should I short on the pullback depends upon my risk appetite and my trading style. Should I short in the timeframe shown in the chart or should I consult any higher/lower timeframe chart for better opportunity also depends upon my risk appetite and trading style. But I must note, I have posted only one timeframe chart and asked your opinion so I to be fair, I must restrict my comments on one timeframe chart only.

Definitely I will not go long on this chart. I am neither a bull nor a bear. I am a simple ass who follows the leader of the trend apparent in the given chart. Right now bears are showing their teeth. I am following them. Once bulls show their might and give me sufficient evidence of trend reversal, I will follow them as well. If I cannot identify any of them, the best I can do is to sit out until a leader emerges and then follow him. I am not interested in catching either the top or the bottom. I am trying to make money with least amount of risk. My initial stop would be above high of the last pivot where I took short. Initial target would be the last support and of course as and when the trade move in to profit (in this case making lower highs and lower lows), my stops will be moved downwards. I prefer to have a simple trading plan. I hate complexity. Sometimes I do take a stop hit, but that does not mean that I must change a trading method which is convenient to me. As for exits (if stop is not hit), there are very many strategies. You can follow any of them.

I sincerely hope you enjoyed your participation in this thread. I sincerely hope you learned a lesson or two from others. I definitely did.

I wish all of you good luck and many many profitable trades in future.

A final brain teaser. See the same Sensex yearly chart on log scale.



Is it bullish or bearish? Answer the question on your own. You need not post here.

Thanks a lot RSI for such an exhaustive explanation of price action interpretation and trading psychology. I am short of words. Sincerely appreciate the effort taken by you in writing such a detailed analysis. I wish I had come across this type of material in early stage of my trading career. It would have certainly saved me few years in growth as a trader.

All the best with your trading.

6 months have passed - INTERVAL now

but, picture abhi baaki hain mere dost




AN INSIDE YEAR eat AS OF NOW...

Sunil,

We shall see the climax (if any) and try to form an opinion at the year end.

By the way in almost all movies hero marries his lady love in the end and it is depicted as if they live happily thereafter. But why it does not happen in real life?:!

As per the recent chart posted by sunil as usual the minority who said up turned out to be right. :clap:

Excellent thread . Why not post some more nameless charts and have go at analyzing them.:clapping: