Trade ‘O’ below 6160!!

Trade ‘O’ below 6160!!

Date: 18^th November 2013

Nine red candles is a serious correction.  Double bottom sell signal that was discussed in last week post is formed in Point & Figure charts along with Bull Trap bearish formation.  

Chart analysis:

As usual, Figure 1 is 10 box P&F chart of Nifty plotted with daily closing prices and Figure 2 is same chart plotted with daily high-low prices.

Too many things are plotted in Figure 1 but I had to point them all. I discussed about Relative high and High pole formation in last post. A Bull Trap pattern is also formed along with them that makes picture more bearish. A close below 5990 will open targets of 5670 and more. A Fib level, Anchor point levels and Middle band indicates supports around 5800. High pole pattern in Figure 2 of High-Low chart is also accompanied by Bull Trap pattern.

Good to have column of ‘X’ after such bearish setup because they provide affordable trading opportunities. In simple words, rallies in bearish mode are good spots to trade short. 

The setup has become bearish and signaling some downside but I am still looking at it as a corrective move to uptrend and would want to trade next double top buy signal because previous trend was up. Such corrective moves form Mini Bottoms during uptrends.

A trade above 6160 will form a Low pole pattern which is bullish and provide confirmation for Mini Bottom. Subsequent Double Top Buy signal is a trade to be taken then.

P&F strategy for next week:

Trade Short if column is reversed to ‘O’ and trading below 6160.

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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