Nifty - Point and Figure Analysis

Sunday, 12 January 2014

Nifty Point and Figure Analysis: Nifty seems set for 5850. ‘O’ is a friend!!

Nifty seems set for 5850. ‘O’ is a friend!!
Date: 13^th January 2014

It is been a lackluster week with range bound moves and consolidating bars.

Chart analysis:

Figure 1 is 10 box chart plotted with closing prices. Not much has happened in this chart since last week. Price has remained in the same column of ‘O’ and currently trading at the previous column support level. Fib level and Anchor Points indicate important support levels at 6100 – 6070. Price is currently testing the bullish internal support line.

Figure 2 is 10 box chart plotted with High Low prices. Recent formation of small columns indicates price consolidation which has resulted in trendline breach. Double bottom sell signal below 20 column average line and recent internal line is a bearish event. Downside vertical count of 5850 plotted from recent high of 6350 has got activated. A vertical count of 5570 from the box high of 6410 occurred during earlier December has also got activated. But first task of that count and a horizontal count indicates possibility of levels around 5800.

Figure 3 is 1 box reversal chart of box value 10. Breach of OSB pattern described in the earlier post has proved to be the important information. I have always observed that breach of weak breakout level (pattern failure?) works well. Process of following price is easier said than done. I do it with P&F method of analysis where I seek price confirmation to all sorts of news and assumptions.

Supports exist around 6130 and 6070 levels. But setup is bearish and I expect price to see 5850. Support level needs price confirmation that happens when follow up buying occurs after the bounce. Hence Double Top buy signal is important logical setup.

P&F strategy for next week:

A bounce or column of ‘X’ from here is an opportunity to trade short. When setup is bearish, negative column reversal can also be a price confirmation to the resistance. Hence I would recommend to trade occurrence of fresh ‘O’ from here.

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 1 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.

Sunday, 5 January 2014

Nifty Point and Figure Analysis : Time has come to trade ‘O’!!

Time has come to trade ‘O’!!
Date: 6^th January 2014

It’s been a bearish week that formed Bearish engulfing pattern in weekly candlestick chart. Profit booking at column reversal and 6240 as a trend reversal level was mentioned during the last week post which is triggered.

Chart analysis:

Figure 1 is 10 box chart plotted with closing prices. Price has traded below 6240 to form High Pole bearish pattern in this chart. Notice consecutive High Poles at the same level that indicates the strong resistance and immediate supply coming in to form vertical reversal patterns.

Figure 2 is 10 box chart plotted with High Low prices. Relative High formation (High below upper Bollinger band) at resistance zone is a bearish event. Double bottom sell signal is formed at 6270. The opposing pole pattern discussed in the earlier post is followed by some consolidating columns and a Double bottom sell signal. This is a classical case of patterns behaving their nature and generating affordable opportunities. Chart is attempting 45 degree internal line and 20 column average line. But the test is yet to be confirmed and these levels might act as a support zone to produce some temporary bounce.

Figure 3 is 1 box reversal chart of box value 10. Reason to show the same is recent One Step Back formation broken at 6270. OSB in the column of ‘X’ indicates weakness in the upward breakout. Price trading below the pattern confirms the weakness and form reversal. One box reversal count shown both the sides is a current trading range in the chart which is 6330 – 6030. And 6180 is a center level (Anchor Point) of this range. The breach of OSB pattern at 6270 came along with Double bottom sell signal in 3 box reversal High-Low charts (Figure 2) and Bearish engulfing candle in daily candlestick chart.

I don’t see reason to think long unless this bearish setup is violated which will happen if price trades above 6320.Some bounce on closing basis is expected due to some short term supports coming in to play. But they are the opportunities to trade short. When supports are broken resistances should be traded! In P&F argot, time has come to trade ‘O’.

Price is trading above bullish line. I would like to cover my short trades at column reversal till the day it trades below this line. Only double top buy pattern is a reason to cover the shorts once that happens.

P&F strategy for next week:

As mentioned above, I don’t see reason to think long unless price trades above 6320. Trade ‘O’s. Trade short at Double Bottom Sell signal, trade short at negative column formations.

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 1 cl Point and Figure Chart

- Prashant Shah, CMT, CFTe

Sunday, 29 December 2013

Nifty Point and Figure Analysis: Direction upward biased. Reversal at 6240!!

Direction upward biased. Reversal at 6240!!
Date: 30^th December 2013

Nifty witnessed consolidating sessions during last week as per the expectation. Though P&F doesn’t plot time, it gives us an idea about possible time consolidation!

Chart analysis:

Figure 1 is 10 box chart plotted with closing prices. The chart has not moved much from last week but current column of ‘X’ has got 14 boxes now which means 140 points move without 30 points reversal on closing basis.

Figure 2 is 10 box chart plotted with High Low prices. As mentioned in the last post, opposing poles pattern indicates some price consolidation but trend direction is up with double top buy signal in both the charts at the moment. Vertical counts of 6490 and 6670 have got activated during last week. Observe support areas marked by blue circle in the chart. All mini bottoms in recent uptrend are formed at 20 column moving average. Hence this average line is important to monitor going forward.

Exit level for longs is at 6240 at the moment. Double bottom sell signal will be triggered below 6250 in Figure 2 and High Pole pattern will be formed in Figure 1 at 6240. Longs have reason to exit if high pole is formed near resistance levels.

Objective Internal line drawn from recent mini bottom gives us opportunity to trail the trend. Generally I would not take fresh shorts unless price would trade below internal line or 20 column average line but a Double bottom sell signal at this stage would mean rejection of another attempt to pass the previous resistance point and multiple rejection of the breakout cannot be ignored. Hence a double bottom sell signal from here is recommended to trade short. It would also be a bull trap in Figure 2.

A trader might not feel comfortable in taking longs at the higher prices and handling the consolidation or even breakouts at these levels becomes difficult. Though this high & low levels is a subjective issue and more of a psychological problem for the business of trading. But if we look at PE valuation, Nifty was trading at 27+ PE when it was at 6300+ levels during Jan 2008 and today it is at 18.75.

Figure 3 is a P&F chart of PE Ratio of Nifty. Price and date is mentioned at important high and lows of PE levels in the chart. I have been tracking this chart since while and observed that the basic P&F signals proves to be very effective in analysing the scenario. PE ratio is approaching resistance level as well but it has breached 3 years bearish trend line and moved to the bullish zone with subsequent mini bottoms.

P&F strategy for next week:

Longs should exit below 6240. Column reversal exit (Formation of ‘O’) is recommended for profit booking. Fresh longs are to be taken at formation of ‘X’ and Double bottom sell signal from here is a good reason to trade short.

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 PE Ratio 0.25% x 3 Point and Figure Chart

- Prashant Shah, CMT, CFTe

Sunday, 22 December 2013

Nifty Point and Figure Analysis - Consolidation likely. 6160 reversal level!!

Consolidation likely. 6160 reversal level!!
Date: 23^rd December 2013

Nifty formed another vertical reversal during last week. I was expecting a double bottom sell signal and waiting for it to trade short but it did not occur, rather double top buy signal is triggered at 6220 on Friday. And more importantly, another Mini bottom is formed along with it.

Chart analysis:

Figure 1 is 10 box chart plotted with closing prices. A double top buy signal is formed that has confirmed another Mini bottom. This double top signal has given us opportunity to draw another 45 degree internal line to trail the trend further that makes longs more affordable from here. A vertical count of 6350 is activated as well.

Figure 2 is 10 box chart plotted with High Low prices. The vertical reversal of price has formed low pole pattern immediately after high pole pattern. This opposing poles pattern indicates some price consolidation going forward.

P&F setup in Nifty at the moment has become interesting. Longs are in and trend line from mini bottom is running close to the current columns to trail the trend. A double bottom sell signal below reversal point will give us an opportunity to trade short. Reversal level at the moment is at 6160.

Close below 6210 will form High pole pattern hence longs should be exited if closing price happens to be below the same.

P&F strategy for next week:

Longs should not remain in below 6210. Column reversal exit (Formation of ‘O’) is recommended for profit booking. I expect some sort of price squeeze or consolidation. Reversal level is 6160 currently and a close below the same or Double bottom sell signal should be the reason to trade short.

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

Monday, 16 December 2013

Nifty Point and Figure analysis: Trend is up, Longs are out!!

Trend is up, Longs are out!!
Date: 16^th December 2013

News is that Nifty has made all time new high. Trade is that longs are out!

Chart analysis:

Figure 1 is 10 box chart plotted with closing prices. The High Pole bearish pattern is been formed near resistance line of a megaphone pattern and near previous price column resistance point. It is not advisable to trade short always at occurrence of High Pole but shall not remain long.

Figure 2 is same chart plotted with High Low prices. High Pole formation took place in this chart as well at 20 column Bollinger upper band. It is a serious vertical reversal when High Pole pattern also generates Double bottom sell signal in the same column.

High Pole is formed when reversals are vertical. There are some frequent High poles in this uptrend and it basically indicates lack of follow up buying that suggests weakness in the uptrend.

I mentioned that I would like to follow levels from High Low charts because price is approaching resistance point. The stop was trailed to 6230 but High Pole pattern triggered the early exit. Trend remains up until objective line from mini bottom is breached. Figure 3 shows the recent P&F setup in daily candlestick chart. Pattern A and C are High Poles and B is a Low Pole pattern.

P&F strategy for next week:

Go short at Double Bottom sell signal from here. We will have to take it in uptrend due to reversal pattern that has formed near resistance point. We usually long on formation of ‘X’ in a strong uptrend but we will have to wait for Double Top Buy signal to go long again in this setup.

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 Daily Candlestick & 10 x 3 HL Point & Figure Chart

- Prashant Shah, CMT, CFTe

Sunday, 8 December 2013

Nifty Point and Figure Analysis: Let ‘X’ sail & keep MODIfying the levels!!

Let ‘X’ sail & keep MODIfying the levels!!
Date: 9^th December 2013

The week is been a good week with ‘X’ continues to ride the trend and trail the reversal levels.

Chart analysis:

Mentioned during last week that Nifty has formed Mini bottom and setup has become tradable. Figure 1 is 10 box chart plotted with closing prices. Trade is still on for Longs with stop loss trailed at 6160. It is approaching at previous resistance where bearish patterns were formed to push the prices lower.

Figure 2 is same chart plotted with High Low prices. Current column is ‘O’ because Nifty made low below 30 points from High of 6300 made on Thursday. Exit level for longs is 6140 in this chart. Setup looks bullish as price has managed to break out from the consolidating column.

Price is approaching resistance and upper band zone. Hence I would like to follow levels of high-low chart. Interestingly, If Nifty trades above 6270 on Monday without trading below 6230, than stoploss for long will be trailed to 6230.

State polls have made prices very volatile and it is always difficult to take a call on markets or trade them in such scenarios. And such nervous rides are expected till central elections. Sticking to price direction and following levels makes things easy. It also helps in attaining the detached involvement in markets which is very important for a trader. There is no point in trading if it doesn't make you enjoy it.

P&F strategy for next week:

Remain long with stop trailed at 6140. Let’s see if mentioned scenario is met and it gets trailed from here.

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, 1 December 2013

Nifty Point & Figure analysis : Nifty forms Mini Bottom!!

Nifty forms Mini Bottom!!

Date: 1^st December 2013

As expected, Nifty was range bound during last week and there was no signal to trade until Friday. Double Top Buy signal has occurred on Friday when Nifty traded above 6120.

Chart analysis:

Figure 1 is 10 box chart plotted with closing prices. Double Top Buy signal is formed after consolidating columns. And important thing is that Mini Bottom is confirmed at 5990 with this Buy signal. This has made setup very interesting and tradable. Mini Bottom has given opportunity to draw 45 degree internal line from 5990.This has helped bulls in trailing the trendline to upper level that has made long trades affordable. Vertical count of 6330 has got activated as well. More counts will be activated if price closes above 6200.

Figure 2 is same chart plotted with High Low prices. Nifty took Support at same box value of 5980 after Opposing Poles and now Double Top Buy Signal is triggered.

I expect some more range bound moves but ‘X’ has given breakout and must take this Double Top Buy signal for reasons discussed in earlier posts. Close below 6050 will result in Bull trap signal hence longs should be exited if that happens.

P&F strategy for next week:

Remain long and trade ‘X’s unless price closes below 6050. Short trades to be taken only below recent 45 degree line plotted from Mini bottom.

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