Nifty - Point and Figure Analysis

Sunday, 2 February 2014

Nifty P&F analysis: Downtrend established. ‘X’ comes with opportunity!!

Downtrend established. ‘X’ comes with opportunity!!
Date: 3rd February 2014

As expected and discussed, Nifty witnessed sharp fall during last week to close around 177 points lower compared to its previous week close. Short trades have done well. I mentioned during the last post that ‘O’ has never been such a mouth watering. Have been talking about negative trend during last several posts and discussed about target of 5850.

Chart analysis:

Figure 1 is 10 box value chart plotted with closing prices. As discussed during the last post, Nifty has formed a classical Bull Trap formation below 6260. Bullish internal objective lines are breached and downtrend is been established with some more downside counts being activated. Price is currently trading at a Fib support level.

Figure 2 is 10 box value chart plotted with High Low prices. Setup is negative and count direction is down. A horizontal count from the entire top pattern and a Vertical count from a recent breakout column come to the same count direction of 5570 meaning that the pattern is square. I mentioned about Anchor Point support area at 6180 levels and that support can become bearish when trend is down. Circled spot in chart shows the formation at Anchor Point. Bounce in prices witnessed resistance at previous support levels. ‘X’ becoming ‘O’ was an opportunity near that area.

I plot and trade 10 box charts but also track other box values and reversal values to anlayse the overall set up. Figure 3 is 1 box reversal chart of Nifty with box value 100. Two consecutive One step back patterns are followed by the downside breakout. Nifty has seen stiff resistance at 6300 box value. Rejection of uptrend is being confirmed with the breach of 6100. 300 to 500 points correction cannot be ruled out in this case. 5900 is a possible short term support area.

Downtrend is established with the breach of bullish internal lines. 6180 – 6200 should work as a strong resistance in case of recoveries from here. In a downtrend, ‘X’ looks more bearish. It comes with an opportunity of another column reversal that makes trades affordable and ensures that weak shorts are out. Price might opt to settle down or witness some bounce after such a steep fall which can be taken care by ‘X’.

P&F strategy for next week:

Trend is down and ‘O’ should be traded. ‘X’ comes with opportunity of column reversal that can give affordable levels for fresh short trades.

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 100 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, 26 January 2014

Nifty P&F analysis: ‘X’ is being rejected. ‘O’ eager to become a trend!!

‘X’ is being rejected. ‘O’ eager to become a trend!!
Date: 27^th January 2014

Nifty traded above 6330 during last week to trigger the stop of earlier trade. I thought my assumption is going wrong but another ‘O’ is formed on Friday near resistance levels to generate the sell signal again.

Chart analysis:

Figure 1 is 10 box value chart plotted with closing prices. Price touched the box value of 6350 during last week that generated the Double top buy signal above upper band and above bullish line. This was a bullish formation and triggered the stop for shorts. As discussed during earlier post, Long formations were to ignore for a while being Nifty trading at resistance. Column reversed to ‘O’ on Friday again from the band resistance levels. It would be a classical bull trap formation if Nifty closes below 6260 from here.

Figure 2 is 10 box value chart plotted with High Low prices. Price turned to negative column at upper band in this chart as well. Bearish Bull trap formation in this chart will be formed if price trades below 6240. Anchor support point levels are around 6180. I would like to monitor price at those levels. Support also gives opportunity to trade short when set up is negative. Double bottom sell signal below them is a delight.

Figure 3 is Weekly candlestick chart of Nifty. Bearish engulfing and shooting star formation in the weekly chart were discussed during the last post. The Doji formation of current week which is nearly a Gravestone Doji is formed at same levels. This indicates the consistent supply at higher levels and certainly not the good news for the bulls.

I have been discussing the bearish setup since last two weeks but it is my assumption based on the price behavior at resistance levels. Trend is more of sideways at the moment. Double bottom sell signal below 6200 will turn intermediate trend to down. Price trading below 6100 will be very bearish event and activate some more downside counts based on 1 box chart analysis. I shall present the chart explaining the setup if that happens.

‘X’ is being rejected consistently by the supply at higher levels. Current formation of ‘O’ has strengthened my bearish view. I am looking for 5800 but would not like to remain short above 6350 or any double top formation when it is trading above bullish line. Looking at current setup, I feel that ‘O’ has never been such a mouth watering.

P&F strategy for next week:

Remain short and trade ‘O’s unless price trading above 6350.

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 Weekly Candlestick Chart

- Prashant Shah, CMT, CFTe

Sunday, 19 January 2014

Nifty P&F analysis: Nifty at resistance! ‘O’ remain exciting!!

Nifty at resistance! ‘O’ remain exciting!!
Date: 20^th January 2014

Nifty bounced from support level of 6170 to test 6340+ levels during last week to close near 6260 on Friday. P&F chart column has turned to ‘O’ on Friday that has triggered the short trade with stoploss of four boxes.

Chart analysis:

As mentioned during last post, I am anticipating lower levels going forward. There are benefits of attaching methods to anticipation or analysis. As explained, I wanted ‘O’ to arrive for trading short which happened on Friday that generated the trade. And due to this I have not been shorting the price that is going up but shorted it when it stopped going up and with logical stop in place.

Figure 1 is 10 box chart plotted with closing prices. Price witnessed sharp bounce from support levels and tested the Upper Bollinger Band. Colum turning to ‘O’ from upper band confirms the resistance and indicates some downside even if it has to remain sideways for a while.

Figure 2 is 10 box chart plotted with High Low prices. Price tested the Upper Bollinger Band in this chart as well. Shrinking band indicates price squeeze and some indecision or uncertainty that is prevailing in the market at the moment. Bull Trap bearish signal will be generated below 6230 in this chart hence this level becomes important.

Figure 3 is Weekly candlestick chart of Nifty. Last week candle is a bearish shooting star that has occurred near levels of Bearish Engulfing pattern that was formed 2 weeks before (Both are circled in the chart). This indicates some supply that is coming at higher levels and possibility of downside in the prices going forward.

Overall setup is negative and there are some confirmations as well. But shrinking bands are indicating range that is becoming narrower and trend is more of sideways at the moment. Breach of 6230 will strengthen the bearish view. Price is trading above bullish objective line at the moment hence I would like to treat 6330 as a reversal level. One should not remain short above the same.

P&F strategy for next week:

Trade ‘O’s and trade Double Bottom sell signals unless price trading above 6330.

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 Weekly Candlestick Chart

- Prashant Shah, CMT, CFTe

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

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