Trend is down. Love ‘O’s, Enjoy the screen!!

Trend is down. Love ‘O’s, Enjoy the screen!!
Date: 19^th August 2013

People calling it a Black Friday!! It’s a trend day in terms of Market Profile. I believe no day can be brighter than such for trend followers.

Negative setup is been already discussed and also mentioned reasons for probable support area in the last week write up. Support was taken and downtrend is resumed. Control is regained by the established trend. As said earlier, buying at supports in downtrend can never be affordable and need more confirmations. Shorts that were covered above 5600 have got Fresh Double Bottom signal. Missing Double Bottom in downtrend is a sin.

Trend is down and more downside counts are being active. Figure 1 shows 45 degree trendline from significant bottoms along with anchor points. Price is trading near 45 degree support cluster. Figure 2 also suggests that price is trading near lower Bollinger band and anchor point. Nifty is trading near long term trend line in daily bar chart. But there are some evidences that any recovery will be short lived and some significant support zone lies near 5250 – 5300 levels. Fresh Double Bottom signal will confirm the long term trend line break hence should be taken. People must be looking at H&S pattern in bar charts or Three Buddha top in weekly candlestick charts.

But all this is about analysis which helps little in trading. Important information is that Trend is down and there are some signs of support which keeps forming. We traders keep crying for narrow ranges when price is consolidating and keep looking for supports and resistances for reversal when trend is established!  As said earlier also, P&F basic patterns can help in such situations. It’s a tool to react to the price behavior.

Multiple Vertical Counts that signals price direction below 5000 are active. 5680 – 5700 is an important resistance zone. Column of ‘O’ is active. Trade all formations of ‘O’ and all Double Bottom Sell signals with stoploss at subsequent Double Top Buy signals.

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

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

 -          - Prashant Shah

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