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.