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

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