Vertical count cluster suggests Nifty to trade below 5000!!

Vertical count cluster suggests Nifty to trade below 5000!!
Date: 5^th August 2013

We know that prices are falling and trend is down. Mentioned in last week write up that Double top buy signal is to be taken only above 5860. Coincidentally, High of corrective rally during last week was 5861. This can be seen in price-time charts only (bar, candles etc). Nifty continues to plot more Os with a fall of about 200 points during the week.

We have discussed about bearish set up in prices with Bear Trap and Relative high pattern formed near bearish objective trendline. Vertical count of 4860 is been activated in High Low chart during last week (Figure 3). I generally avoid taking count from such long column of Os but this column  is significant and  fulfilling all the conditions of taking a vertical count. I prefer going to 2 box chart when such long column vertical counts arise (Figure 4). Vertical counts from 2 box charts are short term counts but they often prove effective. Figure 5 shows 0.25% and 0.50%  3 box reversal charts to observe the activated counts and their levels. Figure 6 show charts with same box values plotted with 2 box reversals.. 3 box charts suggests counts direction below 5000 and 2 box charts are showing them near 5300.Count is established in chart with closing prices but not activated as yet due to consistent fall in prices without any reversal on closing basis.

Knowing about count direction can help us in designing the trading strategy. Figure 1 shows 10 box chart plotted with closing prices that has touched 20 column lower Bollinger band after formation of Relative High. Set up is bearish but near Anchor point support level and Internal objective line. Figure 2 is showing the larger degree pattern plotted with High Low prices to observe the important support levels. Anchor Point levels of different patterns are shown in the chart.

Fresh short doesn’t seem affordable unless column of reversal is formed. Trade formation of Os and all Double bottoms unless price goes above 5900. Trend can be trailed with 45 degree internals. We need low pole or Relative low to buy double tops and will write about if something like that is formed. I would never ask to buy first column of reversal unless low pole is formed.

For those who don’t understand much of P&F,Levels below 5000 are possible in future hence look for bearish set ups when price witness corrective rallies that doesn’t close above 5900.

 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 10 x 3 HL Point and Figure Chart

Figure 4: Nifty 10 x 2 HL Point and Figure Chart

Figure 5: Nifty 3 HL 3 Box Reversal Point and Figure Charts

Figure 6: Nifty 3 HL 2 Box Reversal Point and Figure Charts

 - -     Prashant Shah

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