Nifty - Point and Figure Analysis: 2013

Sunday 29 December 2013

Nifty Point and Figure Analysis: Direction upward biased. Reversal at 6240!!

Direction upward biased. Reversal at 6240!!
Date: 30^th December 2013

Nifty witnessed consolidating sessions during last week as per the expectation. Though P&F doesn’t plot time, it gives us an idea about possible time consolidation!

Chart analysis:

Figure 1 is 10 box chart plotted with closing prices. The chart has not moved much from last week but current column of ‘X’ has got 14 boxes now which means 140 points move without 30 points reversal on closing basis.

Figure 2 is 10 box chart plotted with High Low prices. As mentioned in the last post, opposing poles pattern indicates some price consolidation but trend direction is up with double top buy signal in both the charts at the moment. Vertical counts of 6490 and 6670 have got activated during last week. Observe support areas marked by blue circle in the chart. All mini bottoms in recent uptrend are formed at 20 column moving average. Hence this average line is important to monitor going forward.

Exit level for longs is at 6240 at the moment. Double bottom sell signal will be triggered below 6250 in Figure 2 and High Pole pattern will be formed in Figure 1 at 6240. Longs have reason to exit if high pole is formed near resistance levels.

Objective Internal line drawn from recent mini bottom gives us opportunity to trail the trend. Generally I would not take fresh shorts unless price would trade below internal line or 20 column average line but a Double bottom sell signal at this stage would mean rejection of another attempt to pass the previous resistance point and multiple rejection of the breakout cannot be ignored. Hence a double bottom sell signal from here is recommended to trade short. It would also be a bull trap in Figure 2.

A trader might not feel comfortable in taking longs at the higher prices and handling the consolidation or even breakouts at these levels becomes difficult. Though this high & low levels is a subjective issue and more of a psychological problem for the business of trading. But if we look at PE valuation, Nifty was trading at 27+ PE when it was at 6300+ levels during Jan 2008 and today it is at 18.75.

Figure 3 is a P&F chart of PE Ratio of Nifty. Price and date is mentioned at important high and lows of PE levels in the chart. I have been tracking this chart since while and observed that the basic P&F signals proves to be very effective in analysing the scenario. PE ratio is approaching resistance level as well but it has breached 3 years bearish trend line and moved to the bullish zone with subsequent mini bottoms.

P&F strategy for next week:

Longs should exit below 6240. Column reversal exit (Formation of ‘O’) is recommended for profit booking. Fresh longs are to be taken at formation of ‘X’ and Double bottom sell signal from here is a good reason to trade short.

Figure 1: Nifty 10 x 3 CL Point and Figure Chart

Figure 2: Nifty 10 x 3 HL Point and Figure Chart

Figure 3: Nifty PE Ratio 0.25% x 3 Point and Figure Chart

- Prashant Shah, CMT, CFTe

Disclaimer:
All information provided above is for general information purposes only and does not constitute any investment advice. Company or Author shall not be liable for loss or damage that may arise from use of information provided above. The report is purely for information purposes and does not construe to be investment recommendation/advice or an offer or solicitation of an offer to buy/sell any securities. The readers of this material should take their own professional advice before acting on this information.

Sunday 22 December 2013

Nifty Point and Figure Analysis - Consolidation likely. 6160 reversal level!!

Consolidation likely. 6160 reversal level!!
Date: 23^rd December 2013

Nifty formed another vertical reversal during last week. I was expecting a double bottom sell signal and waiting for it to trade short but it did not occur, rather double top buy signal is triggered at 6220 on Friday. And more importantly, another Mini bottom is formed along with it.

Chart analysis:

Figure 1 is 10 box chart plotted with closing prices. A double top buy signal is formed that has confirmed another Mini bottom. This double top signal has given us opportunity to draw another 45 degree internal line to trail the trend further that makes longs more affordable from here. A vertical count of 6350 is activated as well.

Figure 2 is 10 box chart plotted with High Low prices. The vertical reversal of price has formed low pole pattern immediately after high pole pattern. This opposing poles pattern indicates some price consolidation going forward.

P&F setup in Nifty at the moment has become interesting. Longs are in and trend line from mini bottom is running close to the current columns to trail the trend. A double bottom sell signal below reversal point will give us an opportunity to trade short. Reversal level at the moment is at 6160.

Close below 6210 will form High pole pattern hence longs should be exited if closing price happens to be below the same.

P&F strategy for next week:

Longs should not remain in below 6210. Column reversal exit (Formation of ‘O’) is recommended for profit booking. I expect some sort of price squeeze or consolidation. Reversal level is 6160 currently and a close below the same or Double bottom sell signal should be the reason to trade short.

Figure 1: Nifty 10 x 3 CL Point and Figure Chart

Figure 2: Nifty 10 x 3 HL Point and Figure Chart

- Prashant Shah, CMT, CFTe

Monday 16 December 2013

Nifty Point and Figure analysis: Trend is up, Longs are out!!

Trend is up, Longs are out!!
Date: 16^th December 2013

News is that Nifty has made all time new high. Trade is that longs are out!

Chart analysis:

Figure 1 is 10 box chart plotted with closing prices. The High Pole bearish pattern is been formed near resistance line of a megaphone pattern and near previous price column resistance point. It is not advisable to trade short always at occurrence of High Pole but shall not remain long.

Figure 2 is same chart plotted with High Low prices. High Pole formation took place in this chart as well at 20 column Bollinger upper band. It is a serious vertical reversal when High Pole pattern also generates Double bottom sell signal in the same column.

High Pole is formed when reversals are vertical. There are some frequent High poles in this uptrend and it basically indicates lack of follow up buying that suggests weakness in the uptrend.

I mentioned that I would like to follow levels from High Low charts because price is approaching resistance point. The stop was trailed to 6230 but High Pole pattern triggered the early exit. Trend remains up until objective line from mini bottom is breached. Figure 3 shows the recent P&F setup in daily candlestick chart. Pattern A and C are High Poles and B is a Low Pole pattern.

P&F strategy for next week:

Go short at Double Bottom sell signal from here. We will have to take it in uptrend due to reversal pattern that has formed near resistance point. We usually long on formation of ‘X’ in a strong uptrend but we will have to wait for Double Top Buy signal to go long again in this setup.

Figure 1: Nifty 10 x 3 CL Point and Figure Chart

Figure 2: Nifty 10 x 3 HL Point and Figure Chart

Figure 3: Nifty Daily Candlestick & 10 x 3 HL Point & Figure Chart

- Prashant Shah, CMT, CFTe

Sunday 8 December 2013

Nifty Point and Figure Analysis: Let ‘X’ sail & keep MODIfying the levels!!

Let ‘X’ sail & keep MODIfying the levels!!
Date: 9^th December 2013

The week is been a good week with ‘X’ continues to ride the trend and trail the reversal levels.

Chart analysis:

Mentioned during last week that Nifty has formed Mini bottom and setup has become tradable. Figure 1 is 10 box chart plotted with closing prices. Trade is still on for Longs with stop loss trailed at 6160. It is approaching at previous resistance where bearish patterns were formed to push the prices lower.

Figure 2 is same chart plotted with High Low prices. Current column is ‘O’ because Nifty made low below 30 points from High of 6300 made on Thursday. Exit level for longs is 6140 in this chart. Setup looks bullish as price has managed to break out from the consolidating column.

Price is approaching resistance and upper band zone. Hence I would like to follow levels of high-low chart. Interestingly, If Nifty trades above 6270 on Monday without trading below 6230, than stoploss for long will be trailed to 6230.

State polls have made prices very volatile and it is always difficult to take a call on markets or trade them in such scenarios. And such nervous rides are expected till central elections. Sticking to price direction and following levels makes things easy. It also helps in attaining the detached involvement in markets which is very important for a trader. There is no point in trading if it doesn't make you enjoy it.

P&F strategy for next week:

Remain long with stop trailed at 6140. Let’s see if mentioned scenario is met and it gets trailed from here.

Figure 1: Nifty 10 x 3 CL Point and Figure Chart

Figure 2: Nifty 10 x 3 HL Point and Figure Chart

- Prashant Shah, CMT, CFTe

Sunday 1 December 2013

Nifty Point & Figure analysis : Nifty forms Mini Bottom!!

Nifty forms Mini Bottom!!

Date: 1^st December 2013

As expected, Nifty was range bound during last week and there was no signal to trade until Friday. Double Top Buy signal has occurred on Friday when Nifty traded above 6120.

Chart analysis:

Figure 1 is 10 box chart plotted with closing prices. Double Top Buy signal is formed after consolidating columns. And important thing is that Mini Bottom is confirmed at 5990 with this Buy signal. This has made setup very interesting and tradable. Mini Bottom has given opportunity to draw 45 degree internal line from 5990.This has helped bulls in trailing the trendline to upper level that has made long trades affordable. Vertical count of 6330 has got activated as well. More counts will be activated if price closes above 6200.

Figure 2 is same chart plotted with High Low prices. Nifty took Support at same box value of 5980 after Opposing Poles and now Double Top Buy Signal is triggered.

I expect some more range bound moves but ‘X’ has given breakout and must take this Double Top Buy signal for reasons discussed in earlier posts. Close below 6050 will result in Bull trap signal hence longs should be exited if that happens.

P&F strategy for next week:

Remain long and trade ‘X’s unless price closes below 6050. Short trades to be taken only below recent 45 degree line plotted from Mini bottom.

Figure 1: Nifty 10 x 3 CL Point and Figure Chart

Figure 2: Nifty 10 x 3 HL Point and Figure Chart

- Prashant Shah, CMT, CFTe

Sunday 24 November 2013

P&F Analysis of Nifty: Suspect rallies unless above 6220!

Suspect rallies unless above 6220! Sideways expected!

Date: 25^th November 2013

As discussed in the last post, we wanted to trade short upon column reversal to ‘O’ when it trades below 6160. The rally of about 150 points on Monday & Tuesday took Nifty to 6200+ levels to form Low Pole pattern which was bullish. But column reversed from there and an ‘O’ below 6160 took us to 5980 in the same column.

Had it not been a Low pole, we would have shorted upon column reversal only. Deciding entry and exit rules for confirmation of our assumptions always help. I would have stopped out had I went short on Monday based on my assumptions.

Chart analysis:

As shown in Figure 1 of 10 box P&F chart plotted with closing prices, High Pole immediately followed by Low Pole is Bullish opposing poles pattern. This should be followed by some consolidating columns.

To wait for column of ‘X’ to reverse to column of ‘O’ when there is a bull trap & High Pole pattern in the same column make sense because price might have gone in to oversold territory by then and we never know about magnitude of possible reversal especially when trend is been up. However the reversal to column of ‘X’ resulted in Low Pole!! I expect some consolidating columns from here because of this.

Figure 2 is P&F chart of Nifty plotted with High-Low prices. Triple Bottom sell signal will be triggered below 5980 if column is reversed to ‘X’ from here. As discussed during last post, some down side targets will be activated below 5980. Some supports lying around 5800 but 5600 cannot be ruled out in that case. It will also reject the Low pole bullish pattern which will make picture more bearish.

I would suspect rallies from here unless price trades above 6220. Column Low of 5990 will be a mini bottom if that happens.

P&F strategy for next week:

I expect Nifty to remain range bound between 6000 – 6220 for next few sessions. Let’s stick to basics and trade only double top and double bottom signals from here.

Figure 1: Nifty 10 x 3 CL Point and Figure Chart

Figure 2: Nifty 10 x 3 HL Point and Figure Chart

- Prashant Shah, CMT, CFTe

Sunday 17 November 2013

Trade ‘O’ below 6160!!

Trade ‘O’ below 6160!!

Date: 18^th November 2013

Nine red candles is a serious correction. Double bottom sell signal that was discussed in last week post is formed in Point & Figure charts along with Bull Trap bearish formation.

Chart analysis:

As usual, Figure 1 is 10 box P&F chart of Nifty plotted with daily closing prices and Figure 2 is same chart plotted with daily high-low prices.

Too many things are plotted in Figure 1 but I had to point them all. I discussed about Relative high and High pole formation in last post. A Bull Trap pattern is also formed along with them that makes picture more bearish. A close below 5990 will open targets of 5670 and more. A Fib level, Anchor point levels and Middle band indicates supports around 5800. High pole pattern in Figure 2 of High-Low chart is also accompanied by Bull Trap pattern.

Good to have column of ‘X’ after such bearish setup because they provide affordable trading opportunities. In simple words, rallies in bearish mode are good spots to trade short.

The setup has become bearish and signaling some downside but I am still looking at it as a corrective move to uptrend and would want to trade next double top buy signal because previous trend was up. Such corrective moves form Mini Bottoms during uptrends.

A trade above 6160 will form a Low pole pattern which is bullish and provide confirmation for Mini Bottom. Subsequent Double Top Buy signal is a trade to be taken then.

P&F strategy for next week:

Trade Short if column is reversed to ‘O’ and trading below 6160.

Figure 1: Nifty 10 x 3 CL Point and Figure Chart

Figure 2: Nifty 10 x 3 HL Point and Figure Chart

- Prashant Shah, CMT, CFTe

Monday 11 November 2013

Corrective begins!!

Date: 11^th November 2013

We had a bearish week that made Nifty lost around 176 points on weekly basis to close at 6140.75. Interestingly, all 5 candles of last week were red! I discussed about bearish set up in Nifty candlestick chart with RoC in last week post. Applying aggressive exit of column reversal to longs helped.

There are 4 ways to take entry and exit in P&F charts. They are Double Top, Double Bottom signals and bullish, bearish column reversals. These are the trading tools that can be used as per the state of the trend and chart setup. It can also help in ascertaining price confirmation to our expectations. Take a trade when price confirms our assumption and avoid when not.

Charts analysis:

Figure 1 is 10 box P&F chart plotted with closing prices and Figure 2 is same chart plotted with high low prices. Price in both the charts is trading above bullish objective support line hence trend is up.

But High Pole pattern is formed in both of them. It is formed at trend line resistance in figure 1 and at relative high in figure 2. Relative high is a high box value that is formed below upper band after previous high that was above upper band.

There are few high pole patterns in the same charts before this in the current rally but those were not followed by double bottom sell signal to confirm the trade. I expect it to happen this time due to negative setup in both the charts.

Next double bottom sell signal will occur if price goes below 6070 from here. But level would differ if another column of ‘X’ occurs before double bottom sell signal. A rally from here or formation of ‘X’ will be quiet interesting because it will generate better trading opportunity.

This is been a steep rally and serious P&F band expansion. Hence I expect price consolidation that forms some sort of consolidating columns. Breakout traders might find it difficult situation to trade. Sticking to P&F basic patterns is a strategy for me during such times.

Figure 1: Nifty 10 x 3 CL Point and Figure Chart

Figure 3: Nifty 10 x 3 HL Point and Figure Chart

- Prashant Shah, CMT, CFTe

Monday 4 November 2013

All time high is news! Follow Price. News does that!

All time high is news! Follow Price. News does that!

Date: 5^th November 2013

Nifty recorded all time high on closing basis on Sunday Muhurat session. Thanks to news-makers everything looks so bullish at new high. People started advising to create portfolios & give Diwali picks etc. Let this all be for them only. It’s an uptrend for a trader, just another trade. Price followers often get such surprises. News follow them.

Nifty closed below 6110 on Monday but reversed on next day. There was no Double bottom sell signal after that hence no short trade. Stoploss was triggered for aggressive treatment to High pole. Fresh buy trade was to trigger at 6210 on closing basis which happened on Tuesday. Chart is bullish at the moment and longs are open.

Charts analysis:

Figure 1: Nifty setup is bullish and trend is up. But recent formation in daily candlestick chart alarms some sort of correction or consolidation. 10 and 14 day RoC are signaling negative divergence setup and suggests that pace of the trend is been reduced at all time high.

Figure 2: Trend is up. Double Top after Triple Top is Catapult signal and makes the setup bullish.

Figure 3: Upper counts are dominating and suggests immediate target of around 6500. The recent pattern is Bullish Broadening formation occurred due to Bull Trap pattern followed by Bear Trap immediately.

High box of both the charts are not touching upper band and this along with daily candlestick chart signals exhaustion. I expect some sort of correction but this is my assumption which cannot be traded. Trend is up and need to remain long unless column is reversed.

Moreover this is a strong uptrend and any corrective might occur to trap weak bears & witness sharp recovery. Aggressive long exit can be planned but short selling need strong reason to trade. Double Bottom sell after relative high can be the reason for it. Hence no short selling unless Double bottom sell signal is formed.

P&F strategy for next week:

Remain long unless column is reversed to ‘O’. Trade long if column is turned to ‘X’ again and price is trading above 6200. No short trades unless Double Bottom sell signal is triggered.

Figure 1: Nifty Daily Candlestick Chart

Figure 2: Nifty 10 x 3 CL Point and Figure Chart

Figure 3: Nifty 10 x 3 HL Point and Figure Chart

- Prashant Shah, CMT, CFTe

Sunday 27 October 2013

Nifty: Point and Figure Analysis

Trend is up. 6110 important level!!

Date: 28^th October 2013

I have been saying that following price is a much better business and worth enjoying. Column reversal triggered exit from longs below 6170 during last week. So position is neutral at the moment and trend is up.

Charts analysis:

Figure 1: Trend is up and upper counts are dominating. Triple top breakout has made the setup bullish. So I am looking for longs. But close below 6120 will form High Pole bearish formation and longs cannot be taken then unless new high box is made. Hence Fresh longs are only possible if Nifty closes above 6210. Anchor Point supports are around 5850.

Figure 2: As can be seen in the chart, low below 6110 will form Bull trap bearish pattern and it will trigger opportunity to go short. Prices might come to 5900 in that case. Fresh longs to be taken if high is made above 6260.

P&F strategy for next week:

Hence setup will become quiet bearish below 6110. And subsequent double bottom sell signal must be taken. Aggressive traders can short at 6110 also with stoploss placed at 50 points (5 boxes).

Fresh long should be taken if price closes above 6210 or high is made above 6260.

Figure 1: Nifty 10 x 3 CL Point and Figure Chart

Figure 2: Nifty 10 x 3 HL Point and Figure Chart

- Prashant Shah, CMT, CFTe

Sunday 20 October 2013

Nifty - Point and Figure Anlaysis

Trend is up. No award is given for selling right at top!!

Date: 21^st October 2013

I mentioned in the last post that trend and count direction is up. Trading X in the uptrend is a delight. It is not very easy to trade long in markets that has is already rallied and many analysts keep calling tops.

Nifty has touched 6200. I could not predict this rally and it has surprised me. If you go through my past several posts, I was looking for resistance to short sell. But fortunately, the practice of price letting confirm worked and it never generated the sell signal. Rather it kept generating opportunities for long.

People trade reversals because they feel them affordable due to tight stoploss. But they forget that they are trading against the trend. In an uptrend, longs are more affordable. We keep feeling resistance as price accelerates but price needs to confirm the reversal before trading shorts. This will make one help in trading trade trending and range bound markets as well.

If I am asked about so called secret of the market to trade them successfully, I believe it is about differentiating between trades and assumptions.

Charts and analysis:

Triple top buy pattern is formed in the 10 box chart plotted with closing prices (Figure 1). The signal in uptrend is a bullish setup. And some more upside counts are generated. But the first achievable count seems 6430.

Price in 10 box chart plotted with high low prices (Figure 2) is trading near 20 column Bollinger band which happens in strong uptrends. But this also indicates temporary exhaustion and that makes me ask to exit longs on column reversal (from ‘X’ to ‘O’). This will secure the profits in the current uptrend. No short selling unless double bottom sell signal is generated.

P&F strategy for next week:

Remain long unless column is reversed. Go for fresh longs on double top buy signal and exit at column reversal. Go short only upon double bottom sell signal.

Figure 1: Nifty 10 x 3 CL Point and Figure Chart

Figure 2: Nifty 10 x 3 HL Point and Figure Chart

- Prashant Shah, CMT, CFTe

Sunday 13 October 2013

Nifty - Point and Figure Analysis

Trade ‘X’. No short Sell unless DB signal is triggered!!

Date: 14^th October 2013

Markets keep making my belief stronger that following the price is much better business than predicting the markets. There are so many factors affecting the price structure and no trader or analyst can track or know all of them. Fortunately, P&F objectivity helps to control such biases and follow what price is doing.

I was bit bearish looking at the resistance but discussed that let price confirm it by changing the column from X to O, which it did not happen. Also discussed that breakout above 5900 will be bullish and negate the downtrend. Double Top Buy signal in High Low chart is generated above 5960.

Charts and analysis:

Figure 1 displays daily candlestick chart of Nifty. Price has formed Hanging man candlestick pattern near horizontal resistance line. This indicates possibility of reversal or change in trend. Figure 2 is 10 box P&F chart plotted with closing prices. Chart shows that ‘Opposing poles’ bullish pattern is been formed because of High pole (bearish) pattern that is been followed by low pole (bullish) pattern. Figure 3 is 10 box P&F chart plotted with high low prices. Double top above 5900 has formed mini bottom and activated the count direction of 6430.

Trend and count direction is up and price is at resistance. We shall not trade negative column reversal now because price is above bearish resistance line. Wait for double bottom sell signal for price to confirm the resistance.

P&F strategy for next week:

Wait for double bottom sell signal to trade short. Buy formation of ‘X’ from here with aggressive stoploss (column reversal).

Figure 1: Nifty Daily Candlestick Chart

Figure 2: Nifty 10 x 3 CL Point and Figure Chart

Figure 3: Nifty 10 x 3 HL Point and Figure Chart

- Prashant Shah, CMT, CFTe