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

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