Don’t Long, Wait for price consolidation!!
Date: 27^th May 2013

I asked in my last week write up to avoid Nifty and we had a bear week in deed wherein all the days of the week ended in red to form 5 red candles in the row!!

I demonstrated the possible scenarios for of double bottom sell signal formations in the last week write up and possibility of vertical fall shown in case 1 has turned out to be real. Also wrote about High Pole formation in that case which is been triggered in the charts at 50% retracement of last column of Xs as shown in below Figures 1 and 2 of 10 box P&F charts of Nifty.

It can be seen in the charts that Double bottom sell signal is generated in the prices and down side vertical counts are activated that suggests levels below 5800 in prices. I already have wrote about band expansion and so possible price squeeze in coming days. And so double bottom signal is to be taken. But as mentioned earlier, these are to be taken with aggressive exits because this is just the first sell signal in the uptrend.

In brief:

For P&F traders, Go short at next formation of O and apply aggressive exits.

For others, Resistance is around 6050 – 6070 levels. Look for opportunity to go short and keep booking profits. Don’t Long. Let price consolidate.

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

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

-         -  Prashant Shah

  

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 opinions expressed are current opinions as of the date appearing in the material and may be subject to change from time to time without notice. Investors should not solely rely on the information contained in this document and must make investment decisions based on their own investment objectives, risk profile and financial position. The readers of this material should take their own professional advice before acting on this information.

Avoid Nifty this week, Trade other charts!!
Date: 20^th May 2013

Nifty closed at 6187.30 on last Friday to record 5^th straight bull week! Bulls are cheering and brokers are hoping for good time to back!

Wrote last week that Double top should not be questioned during uptrend and double bottom is to be taken. Double top buy signal was generated above 6100 and there is yet to form a double bottom sell signal! I wrote about Bank Nifty out performance to Nifty with the help of P&F Relative Strength Chart. Asked to trade Bank Nifty breakout and Buy on formation of column of X!! Nifty has gone up about 1.31% during last week and Bank Nifty has closed 4.20% up compared to its previous week. This is how P&F relative strength charts can help us. Shown 0.25% chart of Bank Nifty in Figure 4 to observe the Double top buy signal occurred during last week.  

Nifty trend is up with multiple upward count directions and witnessing the series of Double Top buys. Price is going up and a trader should be in the business of reaction than prediction. But affordability is an important factor for a trade to be taken.

I am marking more things in 10 box Point and Figure charts this time for your observations. Have a look at Figure 1 and 2 below.

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

Figure 1 is 10 box P&F chart of closing prices of Nifty. Price is in 45 degree uptrend and as can be seen in the chart above, Double top buy generated at 5590 has not given exit as yet with double bottom sell. Several horizontal and vertical count directions are signaling higher prices and uptrend. Double Top buy signal generated during last week when it crossed the box value of 6100.

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

Figure 2 shown above is High Low P&F chart of 10 box in Nifty. 45 degree trend is up and recent box is crossing upper Bollinger band which indicates strength in the uptrend. Bear Trap pattern occurred recently has formed mini bottom and made 45 degree internal line trailed up for bulls.

Observe the Band expansion in the chart above. P&F Band expansion indicates price stretch and that the prices are quiet more extended and some consolidation is likely. Beauty of P&F is that it will tell us when to exit longs or look for short. Wait for it to generate double bottom sell signal.

Many have been asking me about Double Bottom Sell signal of P&F. Have a look at Figure 3 to understand why the formation is so important to trade reversals.

  Figure 3: Double Bottom Sell Formation

Double bottom sell signal in P&F chart is generated when column of ‘O’ goes below previous column of ‘O’. I have shown 2 cases in figure 3 that shows the possibility of formation that will generate double bottom sell signal in 10 box closing price chart of Nifty from here.

Case 1 shows about double bottom sell that will be generated in case of vertical fall in prices from here. Case 2 shows that there will be some initial correction which will be retraced back and then price will generate double bottom sell signal. Second possibility is more affordable in terms of risk reward.

Why not to sell at the formation of column of ‘O’ then when we are anticipating reversal? We have seen the benefits of waiting for formation to occur during last weeks. Let price tell us when to trade.

Note that Case 1 will form High Pole formation and I would always go for double bottom sell signal generated after High Pole. They are certainly tradable. This is important piece of information to people who trade P&F charts.  

 Figure 4: Bank Nifty 0.25 x 3 CL Point and Figure Chart

Nifty has marked strong uptrend and First double bottom sell in such a bull market is opportunity to look for long rather than going for short (Shake out pattern).  Increase your bet size if Double top is generated after forming mini bottom from here.

Finally:

Double bottom sell signal from here can be taken due to band expansion but for short term and with aggressive exits. Nifty is in extended up trend and I expect some price consolidation. Let the same happen. If you are long, trail your stops. Else avoid trading Nifty this week and look for opportunities in stocks.

-  Prashant Shah

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 opinions expressed are current opinions as of the date appearing in the material and may be subject to change from time to time without notice. Investors should not solely rely on the information contained in this document and must make investment decisions based on their own investment objectives, risk profile and financial position. The readers of this material should take their own professional advice before acting on this information.

Beauty of P&F, Price tell us when to trade!!
Date: 13^th May 2013

The beauty of P&F must have been revealed to many with my last week write up. I was looking for Bull trap kind of situation above anchor point levels and wanted to short the price if it confirms me the same through P&F double bottom sell signal. But signal didn’t occur!! And as wrote, price didn’t signal us to short. Rather levels that will generate shorting opportunities are trailed up!! Price has gone up the one way and double top signal taken even with tight stops has worked in favor.

A formation of column of O in closing price chart is one of the methods of using aggressive stops in up trend. Stop would be placed below 30-40 points in that case if you are using 10 box charts.

We assume, expect, imagine and pre-empt the patterns but they often proves dangerous in the business of trading. Objectivity in P&F signals can help us in trading them.

Technical Observation:

Nifty has closed above 6100 on Saturday. This is significant. I am pasting a 0.25% P&F chart (Figure 1) for medium to long term pattern analysis. Nifty has confirmed the bounce from the highs of horizontal base pattern. Breakout from Fulcrum pattern with series of Catapults and Semi – Catapults is a Bullish setup with upward count direction that can be seen in the chart.

Have a look at Figure 2 and 3 for 10 box chart analysis. Chart with closing prices suggests uptrend with upward count direction and 45 degree line. But Nifty is trading near previous box high and hence at resistance. 20 columns Bollinger Band applied on High – Low chart shows that price is trading near upper band. Trading at upper band gives more information about strength of the trend.  

Pattern Observations:

A shake out pattern suggests that one should avoid first sell signal during bull markets and I have all the belief in the idea. But Double bottom sell signal generated after price test of upper band is quiet an affordable signal that needs aggressive exit strategy.

Another observation is that Nifty if closed below 6030 will form the High Pole pattern. I would not like to miss any double bottom sell signal that is been generated after the formation of this pattern. And a low below 6050 will generate double bottom sell signal in high low chart. Levels might change as price progresses. But this is to give you an idea about set up that can make price tell us about affordable short selling opportunities.

P&F RS Chart:

Let me also paste an interesting chart this time. Figure 4 is a P&F Relative strength chart of Bank Nifty to Nifty. Trend of Bank Nifty outperformance to Nifty is been very interesting and recent bounce is indicating a breakout. Formation of X would be an opportunity to look for Bank Nifty than Nifty at this point in time. In simple terms, Breakout in Bank Nifty might give some interesting opportunities when we are looking for some time and price consolidation in Nifty.

In Brief:

The trend is up though at resistance. Double tops from here should not be questioned but must be traded with aggressive stops. Not to short unless double bottom sell is generated. Look for breakout in Bank Nifty for outperformance.

 Figure 1: Nifty 0.25% x 3 CL Point and Figure Chart

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

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

 Figure 4: 0.25% x 3 Bank Nifty / Nifty Relative Strength Point and Figure Chart

-      Prashant Shah

  

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 opinions expressed are current opinions as of the date appearing in the material and may be subject to change from time to time without notice. Investors should not solely rely on the information contained in this document and must make investment decisions based on their own investment objectives, risk profile and financial position. The readers of this material should take their own professional advice before acting on this information.

Time to Sell P&F Double Bottom Signal!!

Date: 6^th May 2013

Last week view worked well. Asked not to sell though Nifty is at resistance, rather buy subsequent double top signals!  People who shorted because it was trading at resistance were caught. P&F signals can help in avoiding temptation of trading our guesses, news and assumptions. 

Figure 1 and 2 are 10 box P&F charts. Nifty strong up move is trading above Anchor point now. I said that I expect sort of trap formation above anchor point!! I am monitoring the occurrence because that’ll provide us an opportunity to trade.

Keep your stoploss tight in case of double top buy signals from here. But it is time to trade double bottom sell signal now if that occurs. Vertical count will give direction for target area in that case.

I expect prices to respect Anchor point levels. And so I want to trade double bottom sell from here. Why not to sell now then? Answer is simple. Let price tell us that we can short! Why to trade assumptions? They are not affordable. Understand that double bottom sell signal from here will make a bull trap above anchor point resistance level and activate a vertical count. It’s a tradable pattern. Stoploss should be any subsequent double top buy signal.

What if double bottom sell doesn't occur? Simple, don’t short!! Nifty above 6100 will open doors for many counts.

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

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

- -          Prashant Shah

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 opinions expressed are current opinions as of the date appearing in the material and may be subject to change from time to time without notice. Investors should not solely rely on the information contained in this document and must make investment decisions based on their own investment objectives, risk profile and financial position. The readers of this material should take their own professional advice before acting on this information.