Nifty P&F analysis: 7700 before 7000? Let’s follow ‘X’ to know!!

7700 before 7000? Let’s follow ‘X’ to know!!

Date: 19^th May 2014

Finally.. Ache din aa gaye! What a nice feeling to have a stable government with clear mandate.This definitely is a special Sunday. I have to deal with this sense of positivity while writing about the charts that are bullish as well J

At times it is very difficult even for an experienced trader to deal with the external stuffs especially when event is not an ordinary. Mentioned during last post that price has clarified the direction and set up is bullish. Longs have no reason to exit unless double bottom sell or high pole triggers. Still stand by that!

Price Analysis:

Figure 1 is 10 box value P&F chart plotted with closing prices. Count of 7160 discussed during last post is been achieved. Achievement of bullish count above bullish line is actually a bullish event. Current column of ‘X’ is consisting of 54 boxes now (540points) and High Pole pattern will be formed in this chart if price closes below 6930.

Do such long columns suggest that we should exit our longs and/or short because price must be ‘exhausted’ and some ‘profit booking’ or ‘correction’ may occur?  An acceptance of the fact that one cannot buy right at the bottom and sell at the top can make one realize and stick to a method of following the price. Rather give lot of piece in the life.

  

Figure 1A: Benefits of Price following

Picture 1A is a perfect demonstration of benefits of a disciplined of price follower. A long column followed after a complex expanding formation (whipsaws) in Nifty right before election week (Price noise).

Closing prices doesn’t pay attention to intraday noise and hence plots relatively clear patterns. All sorts of backtesting suggest that patterns of charts plotted with closing prices are more profitable than any other plotting hence I obtain signals from pattern formed in these charts only. Charts plotted with high low prices give more information about intraday moves. Though it display more noise but can benefit short term traders if tactfully used.Short term traders would like to lock in some profits and take another signal in the direction of the trend. 

Figure 2 is 10 box value P&F chart plotted with High Low prices. I think twice before plotting the vertical count in charts that are not plotted with closing prices. The column that has triggered 7700 is a breakout column of price consolidation pattern and appeared after a significant bottom formation that was indicating the negative break out hence a classical bear trap formation. And 7700 is a conservative count (2/3^rd) being the long column. Aggressive count signals 8230.

This chart plots high of 7560 that was formed on last Friday but some significant selling happened and price closed around 7200 in the end. A high pole pattern will be formed if price closes below 7330 on Monday. This information can be used by longs to book the profits for a while. And long again upon positive column reversal (Reappearance of ‘X’).

In brief:

I do believe that we are on for 7700. But a column of ‘O’ on closing charts is quiet possible before that which should not breach bottom of 7000. But this just the assumption and following ‘X’ is more profitable.

Remain long unless double Bottom sell or High Pole bearish pattern is formed. High low chart pattern discussed above can be used for exiting the longs. But reiterating, missing ‘X’ in such a strong chart is a sin.

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.

Nifty Point and Figure analysis: Only price… Har baar!!

Only price… Har baar!!

Date: 12^th May 2014

As we enter to the very important week being results of the 2014 General elections to be declared on the coming Friday, a trader must be aware that he has to deal with internal noise as well along with external. We are also a normal citizen along with a trader. Expectations of both should not be mixed and duties of both are different. Knowledge for one is noise for another. Wish of one should not be the reason of other to trade. Exit polls to be out on Monday will assure the happening week with various news, rumors coming in that will affect the price and increase the volatility.

Price Analysis:

Figure 1 10 box value P&F chart plotted with closing prices. A very rare expanding pattern is formed in this chart. A bullish broadening pattern was followed by Bearish Broadening formation when box value of 6660 was plotted on last Wednesday. Upon backtesting I found that there are only two occurrences of this kind of bearish pattern in the uptrend (above 20 columns SMA) in Nifty chart and both of them were failed.

Past occurrences of Bearish Broadening after Bullish Broadening:

Short Entry	Date	Short Exit	Date	G/L%
5616.11	16-11-07	5735.21	12-12-07	-2.12%
5590.92	09-11-12	5761.06	06-12-12	-3.04%

I wrote on Twitter about this and that the appearance of ‘X’ would be exciting. Knowing the occurrence of non-profitable bearish pattern in the uptrend is certainly an important information. ‘X’ appeared on Friday in style. And now this has become a seriously expanding pattern with another higher leg. The setup is certainly bullish and count of 7160 is active.

Figure 2 is 10 box value P&F chart plotted with High Low prices. Price bounced from critical Fib level and 20 column Moving average line with Double top Buy pattern. It is also a bear trap pattern that suggests that traders who shorted on downside breakout is stuck and trapped.  Figure 3 is 1 box chart of box value 10. Price above 6710 is a breakout from OSB pattern which is significant news.

Chart setup is certainly bullish and trading above bullish lines. But challenge this time even for experienced traders is to deal with the external noise and mood swings. Such multi-column expanding pattern right before election result reflects the confusion among the participants and difficulty of traders with whipsaws of the systems. So price has also generated some noise during last several days. Friday move in that sense is quiet satisfying because price seems to have cleared the direction. These setups in uptrend are definitely bullish.

In brief:

Not only ab ki baar... but har baar price should be the sole reason trade.And If that is the case, we are entering just another week! 

I would recommend to trade and remain long unless price closes below 6650. Missing any appearance of ‘X’ in this kind of a chart setup is a sin. There are only two reasons to exit longs, Double Bottom sell or High Pole bearish pattern. And fresh shorts can only be traded below 6650 being below bullish objective line.

 

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 0.15%, 0.25% and 1% P&F charts

                            

 -  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.