Nifty - Point and Figure Analysis

Monday, 15 April 2013

Time to buy P&F Double Tops in Nifty!

Date: 15^th April 2013

I have received many mails during last week asking the same question. Why did I not suggest short trades or selling at rallies when I was mentioning the bearish target of charts?

It is important to understand that though Nifty has turned from the mentioned resistance and seen the lows near 5477, price has only consolidated during last week. I don’t think there were any interesting opportunities for trading. We all know very basic thing in the business of trading that it is very important to know when not to trade!!

It is also very important to differentiate between analysis and trading. Every reading cannot be traded.

10 box Point and Figure Charts of Nifty for this week are shown in Figure 1 and 2 below. Nifty is hovering around support levels and prices are trying to settle some. Trend and count direction is negative. But base is formed and there can be affordable buying opportunity if double top buy signal is generated from here. It is not always advisable to buy double top signals in downtrend. But environment is affordable for long traders if that happens. At the moment double top buy signal will be generated above 5610.

Buy Nifty if it trades above 5610 or if double top buy signal is generated from here. We might see a tick of 5800 if that happens.

For those who trade P&F charts, wait for formation of higher ‘O’ from here and then buy when column of X forms. That will provide you affordable buying opportunity. Sell if double bottom occurs because trend is negative.

Let me also take this opportunity to thank the readers for praising, appreciating my work and sharing the feedback.!

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

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

- - Prashant Shah

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 opinions expressed are current opinions as of the date appearing in the material and may be subject to change from time to time without notice. Investors should not solely rely on the information contained in this document and must make investment decisions based on their own investment objectives, risk profile and financial position. The readers of this material should take their own professional advice before acting on this information.

Monday, 8 April 2013

Keep your monitors shut!!

Date: 8^th April 2013

I asked in my last week write up to avoid breakouts. Nifty couldn’t sustain resistance point of 5740 and eventually closed below 5630. I asked to shut terminals below 5600 and it seems they should remain in same mode for a while.

I have been writing that Nifty is in severe downtrend due to multiple bearish formations and supports having become tested resistance levels. As stated last week, weak bounces and strong downward breakouts provide affordable trading opportunities in such cases. Immediate breach of 5600 was not expected but it did it after testing the resistance and that is making the event quiet more important. P&F traders must have enjoyed double bottom sell signal.

Have a look at Figure 1 and 2 of 10 box Point and Figure charts of Nifty. Though I keep a watch on many box and reversal values, I trade these charts and paste them every week for your observation. Nifty is in established downtrend with multiple lower count directions. But it is very important to look left in Point and Figure analysis. Nifty 10 box close only chart is trading near support levels. Another strong support zone is seen around 5425 – 5450 levels. The gap players in bar chart must be looking for supports at the vacuum area in the chart at 5450 – 5525 created due to gap up opening on

14^th September 2012 if I ignore the dramatic low made on 5^th Oct 2012.

I follow a method of plotting Bollinger band in P&F analysis when I want to trade the extended trend. I have shown them in Figure 3 and 4 in 10 box charts of Nifty. Prices are trading below 2 standard deviation of their 20 column Bollinger band. Multiple box values have seen this set up. I would strictly wait for double top buy signal to trade long in this case. Aggressive traders can cover their shorts from double bottom sell on formation of higher ‘O’ from here.

Key resistance from here are around 5580 and 5630. Supports are around 5425 – 5450.

I don’t have any trading idea for this week. Nifty set up suggests that 5450 is on cards! Better keep your terminals shut and let prices settle. Trading is not compulsory in our constitution.

Brokers will have to trade; they shall only trade shorts unless it is closed above 5630. You might witness a tick of 5450!

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 Point and Figure Chart

Figure 4: Nifty 10 x 3 HL Point and Figure Chart

- Prashant Shah

Monday, 1 April 2013

Trade Supports and Resistances this week, Avoid Breakouts

Date: 1^st April 2013

As I wrote last week bounce of Monday in Nifty didn’t sustain and it is witnessing sideways trend. I also mentioned that Nifty will respect the support levels atleast once.

Truncated week with lack luster sessions have made P&F charts move very little. Point and Figure chart moves only when price moves. Time consolidations are not plotted in P&F charts.

Overall setup of the trend is negative with multiple bearish formations. Figure 1 and 2 are 10 box charts. Figure 3 is of 25 box High Low chart for observation of intermediate trend of Nifty. Multiple count direction, bearish formations and trend line breach suggests that lower levels in Nifty is quiet possible. But price is trading near support levels at the moment hence fresh short selling needs to be done at weak bounces or strong downward breakouts to make trades affordable.

Nifty has strong resistance at 5740 and 5790 levels from here. Supports are near 5630 and 5600 levels. Shut your monitors if it trades below 5600!!

I expect Nifty to remain within a range and don’t think that it’ll trade below 5600 immediately. But I am not an astrologer; I am a trader who does all sorts of analysis only to find the levels that can give convincing and affordable trading opportunity. Trading breakouts in sideways trend often proves expensive and trap the traders. Avoid them and trade supports and resistances.

From trading point of view, Aggressive traders can buy Nifty at lower levels near 5630 only if it doesn't close below it. Resistance is at 5740 and 5790 levels.

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 25 x 3 HL Point and Figure Chart

- - Prashant Shah

Monday, 25 March 2013

Bounce will struggle to sustain, Nifty to witness some price consolidation
Date: 25^th March 2013

I wrote last week that a tick of 5775 would be very dangerous signal for bulls. It proved indeed. Prices collapsed and saw levels around 5630.

The overall picture is very bearish for reasons explained in last week write up. Have a look at 10 boxes Point and Figure charts of Nifty pasted below. 10 box close only chart (Figure 1) achieved the target activated during last week only. A down side count is open but price is near important support levels. It shall respect the support levels atleast for a while.

10 box High low chart (Figure 2) suggests that a top is been formed with multiple anchor point resistance levels that makes it a strong supply area for any upside move from here. Price is near 45 degree trend and anchor point support levels which can stall the fall but overall formation has turned out to be very bearish due to multiple bearish formations in the set up.

Various momentum indicators in bar charts are signaling positive divergences and around 90% of Nifty components are trading below their 10 day moving average. It is signals that trend is reaching the stage of exhaustion and it may need some space to breath. And so I expect some consolidation.

Bounce from current levels cannot be ruled out but I suspect the sustenance. Immediate resistance is around 5740 – 5760 levels. I expect first bounce to be little weaker and I prefer trading double top buy signal in such cases. That assures me a formation of base before buying.

From trading point of view, wait for price to consolidate before buying. Nifty is expected to remain between 5760 and 5640.

For those who trade P&F charts, wait for formation of higher ‘O’ from here and then buy when column of X forms. That would provide you affordable buying opportunity.

Else, prefer to enjoy the truncated week. Wish you all a very Happy Holi.

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

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

- - Prashant Shah

Monday, 18 March 2013

Bears will regain control below 5800!! A tick of 5775 will open doors for 5600.

Date: 18^th March 2013

Last week view has worked well and Nifty witnessed a fall from 5970. As expected, it respected the resistance line and then didn’t close below 5840 to bounce back again.

I have plenty of charts to paste for your observation in this week write up. Figure 1 is 10 box High low chart of Nifty. Opposing Pole pattern has formed and low below 5800 would make this chart look really negative. A downside vertical count will be activated as well.

10 box close only chart (Figure 2) is yet to see opposing pole pattern but it will be formed if it closes below 5800. Opposing pole is bearish pattern and indicates weakness in recent upside rally. Figure 3 is 0.50% x 3 High low chart of Nifty to analyse the larger and compressed picture of 3 box price trend. This horizontal top formation at levels around 5950 has made that top very important resistance level for any upside rally from here. The support at the moment exist around 5780 – 5800 levels. As shown in the chart, the picture will look bad if Nifty will see a tick at 5775 during this week.

Figure 4 and 5 is Fib cluster levels of Nifty daily charts. I keep checking clustered levels of retracement and extensions from important tops and bottoms. Extension from corrective move A shown in Figure 4 has achieved it course. Figure 5 suggests that 5900 – 5950 is important resistance zone for Nifty from here and support lies around 5780 – 5800 levels.

The price structure observation through various charts are pointing towards 5780 -5800 levels for supports and 5920 – 5950 for resistance.

From trading point of view, Sell around 5900 - 5920 if price rallies from here. New upside count will be activated above 5960 and fresh longs should be taken only if that happens. Bears will regain control below 5800. A tick of 5775 will open doors for 5600. Shorts to be initiated with stoploss placed at 5840 on closing basis if that happens.

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

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

Figure 3: Nifty 0.50% x 3 HL Point and Figure Chart

Figure 4: Daily candlestick chart of Nifty

Figure 5: Daily candlestick chart of Nifty

- - Prashant Shah

Monday, 11 March 2013

Bet for follow through!! Buy dips!

Date: 11^th March 2013

Such a dramatic rally!! I would have stopped watching movies for entertainment had my positions were not always open in the stocks. I mentioned about expected short term bounce in last week write up. Nifty bounced in style from support levels to form Bullish Engulfing candle in weekly charts.

What’s next? We chartist and analysts become bearish when prices go down and bullish when they start going up. We are taught to listen to price and not to become rigid while forming views and opinions. But this flexibility while doing analysis is not adoptable in trading. I have read many tweets of well known analysts recently while budget speech is going on. I wonder if they would ever be able to trade such flexible approaches!! I don’t know what happened to listeners!!

I believe one should do analysis sufficient to form tradable views unless his business is to provide ‘Tips’!! Over thinking and over analysis will always result in over trading.

Coming to the point, 10 box Point and Figure charts of Nifty are shown below in Figure 1 and 2. I mentioned last week that Low Pole bullish pattern will be formed above 5820. It is formed in both the 10 box charts. This is bullish news and indicating strong comeback by bulls. But should I buy here then? Charts have become bullish but fresh Long trade is not affordable from here. Price horizontal resistance line in close only chart (Figure 1), Anchor point and Internal line resistance area in High low charts (Figure 2) suggests that prices have reached their important point of resistance. 5940 – 5970 is the area of strong resistance and I expect prices to respect these levels atleast initially.

5860 – 5880 seem importance support being previous resistance area. Opposing Poles will be formed if price goes below 5810. This will indicate reassertion of control from bears.

From trading point of view, bullish pattern and Count Direction (6020 in shown in Figure 2) is indicating upward trend so one shouldn’t go short now unless pattern is negated. Wait for some price consolidation or correction that can give affordable trading opportunity. Buy close to 5860 – 5880 area and don’t remain long if it closed below 5840.

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

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

- - Prashant Shah

Sunday, 3 March 2013

This week seems set for some price consolidation! Short term bounce from 5630 – 5650 likely!!

Date: 3^rd March 2013

As said last week, Nifty cracked below 5800. Have a look at 10 box Point and Figure charts shown below. A toppish formation in price is confirmed and Intermediate trend is down.

A toppish formation and a Bull Trap pattern that has recently formed in 10 box close only chart (Figure 1) is indicating negative setup in the trend. Near term important support levels are around 5630 – 80 levels.

Head and Shoulders pattern shown in Figure 2 of 10 box High Low chart is broken below neck line and indicating the target around 5450 for the Nifty. Point and Figure analysis allows multiple horizontal counts from toppish horizontal pattern such as H&S to define direction for different time frames. A count of 5750 is already been achieved. I said last week that achievement of 5750 will be more bearish for prices. Nifty is trading near anchor point support levels that are also clustering with a count taken from horizontal pattern and 45 degree trend line support formed from May 2012 lows. Nifty closing above 5820 this week might form low pole to indicate higher prices.

From trading point of view, Nifty is in down trend and count direction suggests 5450. Near term supports are around 5630 - 5650 levels. I expect prices to consolidate for a while. Don’t try bottom fishing and let the base form before buying. Short term bounce is possible from 5630 – 5650 levels up to 5750 – 5800.

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

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

- Prashant Shah