Nifty - Point and Figure Anlaysis

Trend is up. No award is given for selling right at top!!

Date: 21^st October 2013

I mentioned in the last post that trend and count direction is up. Trading X in the uptrend is a delight. It is not very easy to trade long in markets that has is already rallied and many analysts keep calling tops.

Nifty has touched 6200. I could not predict this rally and it has surprised me. If you go through my past several posts, I was looking for resistance to short sell. But fortunately, the practice of price letting confirm worked and it never generated the sell signal. Rather it kept generating opportunities for long.

People trade reversals because they feel them affordable due to tight stoploss. But they forget that they are trading against the trend. In an uptrend, longs are more affordable. We keep feeling resistance as price accelerates but price needs to confirm the reversal before trading shorts.  This will make one help in trading trade trending and range bound markets as well.

If I am asked about so called secret of the market to trade them successfully, I believe it is about differentiating between trades and assumptions.

Charts and analysis:

 Triple top buy pattern is formed in the 10 box chart plotted with closing prices (Figure 1). The signal in uptrend is a bullish setup. And some more upside counts are generated. But the first achievable count seems 6430.

Price in 10 box chart plotted with high low prices (Figure 2) is trading near 20 column Bollinger band which happens in strong uptrends. But this also indicates temporary exhaustion and that makes me ask to exit longs on column reversal (from ‘X’ to ‘O’). This will secure the profits in the current uptrend. No short selling unless double bottom sell signal is generated.

P&F strategy for next week:

Remain long unless column is reversed. Go for fresh longs on double top buy signal and exit at column reversal. Go short only upon double bottom sell signal.

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

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

 -  Prashant Shah, CMT, CFTe

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