Nifty - Point and Figure Analysis: September 2013

Sunday, 29 September 2013

Nifty - Point and Figure Analysis

5500 activated! Sell at breakout, sell at resistance!

Date: 30^th September 2013

No trade is triggered during the week except at the Friday close that has generated Double Bottom Sell signal to confirm the supply zone.

Most of the things about resistance zone were explained during last week write up along with chart showing anchor point set up. High pole pattern is formed in charts plotted with closing prices (Figure 1) and with high – low method (Figure 2). Subsequent double bottom sell signal cannot be missed.

Price is near anchor point support zone. And set up is negative!! 3 box reversal chart suggests price target of 5180 and the one who is not trading it for long will immediately quote it. Figure 3 is 2 box reversal high low P&F chart of Nifty. I use this chart whenever long column ‘O’ is formed from which vertical count is to be taken. Counts from this chart tend to work better and doesn't exaggerate. Past instances can be examined in the figure shown with counts. Hence I believe 5500 would be the first level to watch from here.

A corrective ‘X’ is possible due to long column of ‘O’ and a support zone. Long column of ‘O’ in simple words is 280 points drop from recent high without 30 points reversal on closing basis. I would be more comfortable to sell at fresh formation of ‘O’ from here after the corrective column of ‘X’.

Resistance zone is around 5920 – 5950 levels. But only reversal can confirm the resistance hence sell at fresh formation of ‘O’.

Setup is clear. Signal to sell is already triggered, sell more at next formation of ‘O’. Stoploss should be placed at Double Top buy signal. Double top buy signal above 5900 should be taken for long.

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 2 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, 22 September 2013

Let price confirm if this is a Supply zone!

Let price confirm if this is a Supply zone!

Date: 23^rd September 2013

P&F (following only price) remove the noises and I mean it. Noise is external and internal as well. There is so much that is been talked about markets and setup that may result in over analysis which is a disease. We need to create our island for not listening to others and our ‘gut feelings’ but to follow what price does.

I mentioned during last week write up that sideways are expected and P&F can help in trading them. First three days were sideways. P&F double top signal occurred on last Thursday and column reversal exit on Friday. Gap up made us enter at higher prices but that trade should have been taken because we decided aggressive exit at column reversal which triggered during next day.

I have been saying that price is near resistance since two weeks now. I am lucky to have understood that trading such assumptions is a dangerous business. Figure 2 is 10 box chart plotted with High low prices. High Pole bearish pattern is formed and we need double bottom sell signal from here to trade it. Figure 3 is a picture of Anchor Point set up. I apply anchor point from significant pivots to plot the levels of demand and supply zone. Price is trading at supply zone at the moment and all it need is Double bottom sell signal to confirm the supply.

Hence Double bottom signal from here should be traded that needs aggressive exit. Why aggressive exit? First sell signal in Bull set up should be ignored. But we will take it due to other confirmations with column reversal as exit point. Subsequent Double bottom sell signals can be taken with regular exit. Any Double Top signal occurred above 5900 should be taken. Signal above 5900 because that will confirm the breach of bearish objective line drawn from previous high box value of 6180 formed in the month of May 2013.

In brief, follow Double top signal only if it is occurred above 5900. And follow first double bottom sell signal from here with exit at column reversal (formation of ‘X’). No entry at column reversals.

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 cl P&F chart showing Anchor Point set up

- Prashant Shah

Sunday, 15 September 2013

Sideways expected, P&F offers clear rules to trade!

Sideways expected, P&F offers clear rules to trade!

Date: 16^th September 2013

Nifty has seen massive recovery from the recent swing low and trending up at the moment. Notice in Figure 1 and 2 that 45 degree bearish trend lines and anchor point supply zone are forming the resistance for the prices from here. The gap between moving averages and momentum indicators in daily bar chart signals the trend extension that shall be followed by change in trend.

Figure 3 is 10 box chart plotted with 5% MA envelopes to 5 column SMA. Trading well above upper band shows the strength in the trend but this might also act as a significant resistance unless bearish objective lines (A) are beaten.

So should I sell at resistance zone when medium to long term trend of Nifty is down? It will also generate an affordable trading opportunity with small stoploss, isn't it? It can never be the affordable trading setup to sell the price that is going up. Questioning the price is a dangerous business.

I felt that Nifty is trading near resistance during last week also but no sell signal is generated in P&F till date! I expect some sideways trend but P&F is making life very simple here. Need tight exit in long (column reversal) due to trend extension. No column reversal because one (up) trend is dominating at the moment. And double bottom sell signal to be taken because price is trading near resistance.

In brief, No column reversal to be traded for entries. Trade Double Top Buy signal if that occurs but with stoploss placed at column reversal, that will ensure early exit if trend reverses. Don’t miss the Double Bottom sell signal if that occurs. No trade unless any of these conditions are met.

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 cl P&F chart with 5,5 MA envelopes

- Prashant Shah

Monday, 9 September 2013

Nifty approaching Resistance! Enjoy the truncated week.

Nifty approaching Resistance! Enjoy the truncated week.
Date: 10^th September 2013

Nifty closed at 5680 on last Friday. As mentioned, 5680 – 5700 was possible if price manages closed above 5480. But agreed that fall of 200+ points in Nifty on Tuesday must have shaken longs and triggered them out. Shifting to P&F column change strategy worked in this case. Figure 3 explains P&F basic and column reversal patterns.

Larger term trend is down and I believe that we are witnessing a corrective rally. Several upside counts are developed during recent bottom formation. Two counts are shown in Figure 1. Count of 6070 is valid and active. But my experience suggests that count from previous column in case of vertical reversal is more effective and that comes at 5790 at present. Bounce from anchor point with bear trap formation has made the setup affordable for bulls.

Upside count direction and important resistance setup is pointing towards 5800. But resistance is a resistance when it is taken. Anticipating them is a dangerous business. Hence, wait for double bottom sell signal even when price approaches near resistance. Strategy from column change should be shifted to basic signals now. There is some possibility of price consolidation (Noise in price time charts). Better to enjoy the truncated week and look for good reasons to trade. Wait for the double top or double bottom signal to occur.

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

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

Figure 3 A: P&F Basic Double Top Buy and Double Bottom Sell signals

Figure 3B : P&F Column Reversal Signals

- Prashant Shah

Sunday, 1 September 2013

More to come if closed above 5480. Trade P&F column change!

More to come if closed above 5480. Trade P&F column change!
Date: 2^nd September 2013

Nifty ended flat in last week if compared to previous week closing price! Price has not moved in the weekly chart, only time has passed! But price range of last week (High – Low) is widest in last 108 weeks. This is to say it’s a serious range expansion.

Notice the consolidating columns in Figure 1 of 10 box P&F chart of closing prices. Price set up is negative and down side counts are dominating. Close above 5480 will activate the upside count and generate possibilities of price rally till 5680 – 5700. It will also trigger bear trap if another ‘X’ is formed in the current column. But bear traps in down trends are often not long lived. Rather their failures generate nice set up to trade.

Figure 3 shows Nifty Weekly and daily candle stick chart along with 10 box P&F chart to observe the patterns. Two consecutive hammers in weekly chart and now low pole in P&F chart. Double top breakout from here should be taken. 5530 will confirm the breakout from candlestick patterns and consolidation pattern in daily chart. It will also ensure breakout in P&F high low chart. Close above 5480 will trigger buy in P&F charts of various box sizes.

Having said this, I am bearish on price and would follow aggressive exits (column change) for any longs. Trend is down and possibilities of lower targets being achieved are more. Failure of a bullish pattern in this environment would be a mouth watering opportunity.

In brief, Buy If Nifty closes above 5480. Resistance area is around 5680 – 5700. No longs below 5440. Go short below 5390. I would recommend column change strategy for entry and exits to trade this set up.

Column change occurs when bullish column of ‘X’ turns to bearish column of ‘O’ or vice versa. Exit longs and Go short when column of ‘O’ is been formed. Cover shorts and Go long when column of ‘X’ is been formed. This ensures stop of 3 box and advisable strategy in corrective moves.

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 set up

- - Prashant Shah