Nifty - Point and Figure Analysis: November 2013

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

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 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