Nifty - Point and Figure Analysis

Sunday, 17 November 2013

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

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.

Monday, 11 November 2013

Corrective begins!!

Date: 11^th November 2013

We had a bearish week that made Nifty lost around 176 points on weekly basis to close at 6140.75. Interestingly, all 5 candles of last week were red! I discussed about bearish set up in Nifty candlestick chart with RoC in last week post. Applying aggressive exit of column reversal to longs helped.

There are 4 ways to take entry and exit in P&F charts. They are Double Top, Double Bottom signals and bullish, bearish column reversals. These are the trading tools that can be used as per the state of the trend and chart setup. It can also help in ascertaining price confirmation to our expectations. Take a trade when price confirms our assumption and avoid when not.

Charts analysis:

Figure 1 is 10 box P&F chart plotted with closing prices and Figure 2 is same chart plotted with high low prices. Price in both the charts is trading above bullish objective support line hence trend is up.

But High Pole pattern is formed in both of them. It is formed at trend line resistance in figure 1 and at relative high in figure 2. Relative high is a high box value that is formed below upper band after previous high that was above upper band.

There are few high pole patterns in the same charts before this in the current rally but those were not followed by double bottom sell signal to confirm the trade. I expect it to happen this time due to negative setup in both the charts.

Next double bottom sell signal will occur if price goes below 6070 from here. But level would differ if another column of ‘X’ occurs before double bottom sell signal. A rally from here or formation of ‘X’ will be quiet interesting because it will generate better trading opportunity.

This is been a steep rally and serious P&F band expansion. Hence I expect price consolidation that forms some sort of consolidating columns. Breakout traders might find it difficult situation to trade. Sticking to P&F basic patterns is a strategy for me during such times.

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

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

- Prashant Shah, CMT, CFTe

Monday, 4 November 2013

All time high is news! Follow Price. News does that!

All time high is news! Follow Price. News does that!

Date: 5^th November 2013

Nifty recorded all time high on closing basis on Sunday Muhurat session. Thanks to news-makers everything looks so bullish at new high. People started advising to create portfolios & give Diwali picks etc. Let this all be for them only. It’s an uptrend for a trader, just another trade. Price followers often get such surprises. News follow them.

Nifty closed below 6110 on Monday but reversed on next day. There was no Double bottom sell signal after that hence no short trade. Stoploss was triggered for aggressive treatment to High pole. Fresh buy trade was to trigger at 6210 on closing basis which happened on Tuesday. Chart is bullish at the moment and longs are open.

Charts analysis:

Figure 1: Nifty setup is bullish and trend is up. But recent formation in daily candlestick chart alarms some sort of correction or consolidation. 10 and 14 day RoC are signaling negative divergence setup and suggests that pace of the trend is been reduced at all time high.

Figure 2: Trend is up. Double Top after Triple Top is Catapult signal and makes the setup bullish.

Figure 3: Upper counts are dominating and suggests immediate target of around 6500. The recent pattern is Bullish Broadening formation occurred due to Bull Trap pattern followed by Bear Trap immediately.

High box of both the charts are not touching upper band and this along with daily candlestick chart signals exhaustion. I expect some sort of correction but this is my assumption which cannot be traded. Trend is up and need to remain long unless column is reversed.

Moreover this is a strong uptrend and any corrective might occur to trap weak bears & witness sharp recovery. Aggressive long exit can be planned but short selling need strong reason to trade. Double Bottom sell after relative high can be the reason for it. Hence no short selling unless Double bottom sell signal is formed.

P&F strategy for next week:

Remain long unless column is reversed to ‘O’. Trade long if column is turned to ‘X’ again and price is trading above 6200. No short trades unless Double Bottom sell signal is triggered.

Figure 1: Nifty Daily Candlestick Chart

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

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

- Prashant Shah, CMT, CFTe

Sunday, 27 October 2013

Nifty: Point and Figure Analysis

Trend is up. 6110 important level!!

Date: 28^th October 2013

I have been saying that following price is a much better business and worth enjoying. Column reversal triggered exit from longs below 6170 during last week. So position is neutral at the moment and trend is up.

Charts analysis:

Figure 1: Trend is up and upper counts are dominating. Triple top breakout has made the setup bullish. So I am looking for longs. But close below 6120 will form High Pole bearish formation and longs cannot be taken then unless new high box is made. Hence Fresh longs are only possible if Nifty closes above 6210. Anchor Point supports are around 5850.

Figure 2: As can be seen in the chart, low below 6110 will form Bull trap bearish pattern and it will trigger opportunity to go short. Prices might come to 5900 in that case. Fresh longs to be taken if high is made above 6260.

P&F strategy for next week:

Hence setup will become quiet bearish below 6110. And subsequent double bottom sell signal must be taken. Aggressive traders can short at 6110 also with stoploss placed at 50 points (5 boxes).

Fresh long should be taken if price closes above 6210 or high is made above 6260.

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

Sunday, 20 October 2013

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

Sunday, 13 October 2013

Nifty - Point and Figure Analysis

Trade ‘X’. No short Sell unless DB signal is triggered!!

Date: 14^th October 2013

Markets keep making my belief stronger that following the price is much better business than predicting the markets. There are so many factors affecting the price structure and no trader or analyst can track or know all of them. Fortunately, P&F objectivity helps to control such biases and follow what price is doing.

I was bit bearish looking at the resistance but discussed that let price confirm it by changing the column from X to O, which it did not happen. Also discussed that breakout above 5900 will be bullish and negate the downtrend. Double Top Buy signal in High Low chart is generated above 5960.

Charts and analysis:

Figure 1 displays daily candlestick chart of Nifty. Price has formed Hanging man candlestick pattern near horizontal resistance line. This indicates possibility of reversal or change in trend. Figure 2 is 10 box P&F chart plotted with closing prices. Chart shows that ‘Opposing poles’ bullish pattern is been formed because of High pole (bearish) pattern that is been followed by low pole (bullish) pattern. Figure 3 is 10 box P&F chart plotted with high low prices. Double top above 5900 has formed mini bottom and activated the count direction of 6430.

Trend and count direction is up and price is at resistance. We shall not trade negative column reversal now because price is above bearish resistance line. Wait for double bottom sell signal for price to confirm the resistance.

P&F strategy for next week:

Wait for double bottom sell signal to trade short. Buy formation of ‘X’ from here with aggressive stoploss (column reversal).

Figure 1: Nifty Daily Candlestick Chart

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

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

- Prashant Shah, CMT, CFTe

Sunday, 6 October 2013

Nifty - Point and Figure Analysis

Sell at column reversal! 5900 important level!

Date: 7^th October 2013

Price declined earlier during the week and rallied latter. The reversal or column of ‘X’ was discussed in last week write up. Given resistance levels are seen on Friday.

But as said, I don’t know if price will respect this resistance zone or it has something else in store. Let the column reverse to know the resistance level.

Charts and analysis:

Figure 1 is 10 box chart plotted with closing prices and 6% bands of 10 day SMA. Price has rejected the upper band and trading near significant resistance. Figure 2 is chart plotted with high - low prices and shows anchor point levels in Nifty. Recent high and low box values are exactly between those anchor point bands. Breakout or rejection needs confirmation by formation of basic P&F patterns.

Notice the figure 3. It displays subjective trend lines on 1 column SMA on 10 box chart plotted with closing prices. 1 period average is simply a midpoint level of every column. Such trend line analysis helps in removing the noise and analysing a trend of column reversal. Chart also shows the Fib retracement levels.

Downside counts are dominating and trend is down. This downtrend gets negated if price trades above bearish resistance objective line. A breakout (Double top buy) signal above 5900 will confirm this breach and negate the downtrend. Hence the 5900 level on closing basis is important and strategy needs to be formed around that level.

P&F strategy for next week:

Go short at first formation of ‘O’ from here with stoploss placed at Double top buy signal. This would be a trade with tight stoploss. Apply aggressive exit (column reversal) if that reversal is above 5900. Double top buy signal above 5900 is a breakout above bullish support line hence should be taken.

In simple words, Set up is still negative but sustenance or breakout above 5900 levels will make downtrend weak. Breakout in P&F charting is simple Double top buy and 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

Figure 3: Nifty 10 x 3 CL 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.