Nifty - Point and Figure Analysis

Sunday, 27 April 2014

Nifty P&F analysis: Nifty witnessing Broadening formation!!

Nifty witnessing Broadening formation!!

Date: 28^th April 2014

Nifty weekly chart has seen ‘Hanging man’ candlestick pattern followed by ‘Shooting star’. Should longs be worried because this indicates the possibility of reversal?

Chart analysis:

Figure 1 is 10 box value chart plotted with closing prices. Nifty has formed Mini Bottom at 6690 as shown in the chart. This has given us opportunity to trail our objective line and make the longs affordable. We would want to be bullish as long as price maintains 45 degree trend line now drawn from the Mini bottom, meaning it is rising more than it falls after formation of the new bottom. The formation of Mini bottom also was a perfect demonstration of Shake out pattern that suggests that the first sell signal in bull trend should always be ignored. Far from selling, it is an opportunity to look for ‘X’ to trade long.

Price has formed Bullish Broadening pattern above upper Bollinger band. Setup is bullish and trend is up. However, price will form High pole reversal pattern if it closes below 6760 hence an exit trigger for current longs. Close below 6670 will indicate possibility of 6450 – 6500.

Figure 3 shows three box reversal charts of Nifty with box values 0.15%, 0.25% and 1% to compare the current position in all of them. If you notice, current formation in 1% and 0.25% charts is a simple Double top buy signal that avoids noise of lower magnitude price reversals. 0.15% (absolute 10 box value at current levels) chart adds some ‘price noise’ to it. P&F smaller box values gives us opportunity to analyse the time-less noise and study the structure. Simple double top buy formation in higher box value chart exhibits bullish broadening formation in lower box value charts.

This formation provides us opportunity to backtest the occurrence. Figure 4 is back testing results of Bullish broadening formation with exit rule of first double bottom sell signal after the occurrence. Pattern seems profitable and remains valid in current setup as long as Nifty remains above 6670 on closing basis.

Figure 2 is 10 box value chart plotted with High Low prices. We discussed the Bullish broadening formation in this chart during last post and that the pattern will be negated below 6650. Channel lines and support lines are shown in the chart suggests that the structure is bullish as long as price remains above the same.

P&F strategy:

Exit longs below 6760 due to High Pole reversal pattern. Trade every appearance of ‘X’ till Nifty is above 6660.

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 0.15%, 0.25% and 1% P&F charts

Figure 4: Back testing results of Bullish broadening formation

- 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, 14 April 2014

Nifty P&F analysis: It all comes to ‘X’ when trend is up!!

It all comes to ‘X’ when trend is up!!

Date: 15^th April 2014

Intraday price saw ticks below 6670 during last week but ‘X’ assured the control over trend immediately and reappeared to stand by longs.

Chart analysis:

Figure 1 is 10 box value chart plotted with closing prices. Statistical results of Double top buy pattern above upper Bollinger band were discussed here. It indicated the higher probability of higher bottom to be formed above 6480. Bottom is trailed up at 6700 box value during last week. Double bottom sell signal from here will be triggered bellow 6690. This has not only assured large gains from the first buy signal but also made fresh longs affordable from here. Existing longs should remain in unless price forms Double bottom sell signal.

Figure 2 is 10 box value chart plotted with High Low prices. A Bullish broadening pattern is formed in the uptrend. The pattern is formed in this chart due to noise of high low charts. It is basically a Bearish bull trap pattern immediately followed by Bullish bear trap pattern. This is a bullish set up and current column of ‘O’ turning to ‘X’ will trigger an affordable fresh long trade. The pattern will be negated below 6650. Double bottom sell signal from here will not only negate the bullish pattern but also confirm the Relative High formation (High box value below upper band) which is a bearish event for short term traders.

I have discussed prior pre-election setups in the previous post.The current setup is bullish and we should keep finding reasons to trade long till it is trading above bullish line. A Double bottom sell signal from here would actually give an opportunity to trail the mini bottom up and generate fresh upper counts. We keep analysing the setups and various formations but everything eventually comes to ‘X’ when trend is up. Best methodology is to stick to what price is doing, stick to ‘X’.

P&F strategy for next week:

Remain long above 6690. Fresh ‘X’ is fresh buy trigger.

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, 6 April 2014

Nifty P&F Analysis: Take a break below 6670. Let ‘X’ reappear!!

Take a break below 6670. Let ‘X’ reappear!!

Date: 7^th April 2014

Finally the column of ‘O’ appeared on Friday with 5 boxes. These are maximum boxes in negative column since the uptrend that has begun during Feb 2014.

Chart analysis:

Figure 1 is 10 box value chart plotted with closing prices. Column is turned to ‘O’ but chart set up is bullish. It seems that a price correction has begun and we might see some downside or column squeeze from here. A close below 6620 will trigger High Pole reversal pattern. If not short, it’s an exit trigger for longs. But the pattern doesn't make chart bearish and we keep finding High poles in uptrend just like we keep getting hammer and doji candlestick patterns in the uptrend.

Figure 2 is 10 box value chart plotted with High Low prices. A tick below 6670 will generate double bottom sell signal. The interesting thing is that the last column of ‘X’ was below the upper band hence qualified for the Relative High. The setup certainly calls for exit of longs.

Figure 3 is Three line break chart of Nifty. A first red line has appeared in the uptrend. Narrow lines in upper formation suggest that last several advances have been quiet weak. I posted one line break chart in one of the recent posts to discuss the structure. These charts sometimes confirm or deviate from the P&F patterns and provide very useful information about the setup.

There are evidences that some price correction is possible. But this doesn’t make charts bearish. A correction or double bottom sell signal from here will give opportunity to trail bottom & trend lines. The gap between bullish line and box value is been very high. A price correction will help to trail the trend line up.

We are approaching the event of general elections which is certainly not the ordinary event and things would be very volatile. It is very difficult to maintain the detached involvement during these times. We keep hearing developments and change our views accordingly. Nobody is certain about the outcome and a trader even doesn't need to. Figure 4 and 5 are pre-election P&F charts of Nifty during 2004 and 2009 respectively. The picture makes one thing very clear for sure, Price is a leading indicator. The only job of a trader in that case is to follow the price. P&F patterns can help doing that.

P&F strategy for next week:

Exit longs if price goes below 6670. Wait for ‘X’ to appear again!!

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 Three Line Break Chart

Figure 4: Nifty 0.25% x 3 cl P&F chart during 2004 (Pre-election phase)

Figure 5: Nifty P&F charts during 2009 (Pre-election phase)

- Prashant Shah, CMT, CFTe

Sunday, 30 March 2014

Nifty P&F analysis: What’s in store? Worship ‘X’ to know!!

What’s in store? Worship ‘X’ to know!!

Date: 31^st March 2014

When trend is up, everything becomes ‘X’. Price went above 6540 to trigger the buy signal as explained during last week. Exit conditions are not met since then and trade is on.

Chart analysis:

Figure 1 is 10 box value chart plotted with closing prices. Mentioned in last post that there is absolutely no reason to be bearish and Double Top buy signal above 6540 is a statistically profitable set up. Backtested results of the pattern (Double top buy above upper band) are shown in Figure 3. 10 box is 0.15% of current levels hence that box value is used for back testing. A lot can be discussed about numbers but in brief and simple words, there is higher probability that Nifty will not breach 6480 before making higher bottom.

Figure 2 is 10 box value chart plotted with High Low prices. Price witnessed bullish breakout from the consolidating columns developed prior to last week. The Anchor point of the uptrend is at 6500 levels now which might act as a support if price corrects.

Set up is bullish, price is going up. There was not even single ‘O’ formed during last week in either chart. There is no reason to think bearish at this moment. Rather a bearish double bottom sell from here will be an opportunity to trail the Bottom to higher levels.

Where is resistance and how far price will go from here? There is no need to know it.

I have mentioned during last posts that counts of 7000+ are open in Nifty and count direction is been up. Only ‘X’ knows what’s in store. Worship and follow it. All the macro, micro numbers of all sorts of analysis comes to it when trend is up.

I asked for trading long above 6540 and exit at column reversal because my general observation is been that the first breakout from narrow range proves misleading. There is no column reversal since breakout and trade is on.

One can exit at column reversal from here but must re-enter when ‘X’ appears. I would recommend staying long unless we get Double bottom sell or High pole. High Pole will be formed if price trades below 6610 from current levels. Levels will be changed if price trade at higher box values from here.

P&F strategy for next week:

Remain long unless exit conditions explained above are met. It’s a sin to miss ‘X’!!

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

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

Figure 3: 0.15% x 3 cl BT result of DTbuy above upper band

- Prashant Shah, CMT, CFTe

Sunday, 23 March 2014

Nifty P&F analysis: Nifty in tight range. P&F pattern would be clue!!

Nifty in tight range. P&F pattern would be clue!!

Date: 24^th March 2014

Last week is mostly been non-event for P&F charts. It was one of the weeks where only time is been spent and price hardly doing anything.

Chart analysis:

Figure 1 is 10 box value chart plotted with closing prices. Only one box of ‘O’ is been plotted in this chart during last week. This suggests that most of the action during last week is been a time consolidation with price not moving on the closing basis. It’s a classical bullish setup and there is absolutely no reason to think bearish at this point in this chart. Close above 6540 will generate double top buy signal and should be taken. Statistically, Double top buy signal above upper band in this chart is been a profitable signal. I will paste the result in the blog if the pattern is formed.

However, we need to analyse the intraday price behavior during the consolidation which is possible with aggressive P&F chart plotted with high low prices.

Figure 2 is 10 box value chart plotted with High Low prices. This chart gives us more information about price behavior during last week. A new box high is made during the week which was not sustained till closing of that day (Hence chart plotted with closing prices is not moved) and then price corrected. Black horizontal lines shown in the chart are Anchor Points in the uptrend started in the earlier Feb this year. It can be observed that anchor rows of current consolidating pattern (B) are equal to rows in the pattern at the lower base (A). These lines are suggesting the current price range and any breach of them will indicate the breakout. Anchor base of the pattern will shift upwards at current levels if more columns are appeared in this zone.

Double Bottom sell signal from here in this chart will form a Relative high pattern which would indicate the possibility of a short term top. It will also trigger Bull trap variation pattern (6 column pattern) that suggests the price correction. Hence price falling below 6470 will indicate bearish pattern for the shorter term.

This will also be a negative breakout from the current consolidation range in all the charts. Various systems would trigger a sell call below these levels. Range and standard deviation bands are very tight in bar and candlestick charts. My observation is been that the first breakout from very tight range often proves to be a misleading and false breakout. Hence I would suggest to book quick profit in the first range breakout that we get.

Price correction from here doesn't change the intermediate trend rather healthy for the bullish setup and form mini bottom to trail the bullish line at higher levels. I would like to chase the 'X' unless bullish line is broken.

P&F charts can be a very helpful tool when price trades in a narrow range. Basic Double Top and Double Bottom signals can guide the trades. Price range at the moment is 6540 (on closing basis) and 6470. Short term traders can sell below 6470 but exit the positions upon column reversal.

P&F strategy for next week:

Buy if close appears above 6540. Sell if price falls below 6470. Exit at column reversal.

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, 17 March 2014

Nifty P&F Analysis: Avoid noise. Track ‘X’!!

Avoid noise. Track ‘X’!!

Date: 18^th March 2013

Price has done very little during last week, There has been no fresh ‘X’ and a small column of ‘O’ is been formed.

Chart analysis:

Figure 1 is 10 box value chart plotted with closing prices. Trend is up and bulls are controlling the price. Recent column of ‘O’ is indicating some price correction but such columns make us realize that even ‘O’ looks bullish when uptrend is strong and established because they come with the possibility of fresh ‘X’ and help us in timing the trades. Formation of ‘X’ from here is an opportunity.

Figure 2 is 10 box value chart plotted with High Low prices. Recent column of ‘O’ in this chart has got more boxes compared to chart plotted with closing prices (Figure 1). This is because price made new low on Friday but recovered while closing. Price trend is been steep but this is one of the major features of massive bull trends.

Price if trades below 6380 will form High Pole vertical reversal pattern in both the charts hence longs should exit if that happens. But I would like to bet on every formation of ‘X’ unless the bullish objective line is broken. Support seems around 6300 – 6330 if price corrects from here. Major trend is bullish and upside counts of 6700 - 7000 are active at the moment.

Figure 3 is 1 line break chart of Nifty plotted with closing prices. Like P&F, Line break charts also don’t plot time & volume. Their construction logic is very much different from that of P&F hence they can be helpful at times to analyse the price structure along with P&F. If you observe the 1 LB chart, uptrend that is begun in earlier Feb this year is witnessing first appearance of two consecutive red lines since then. It indicates that a short term top is around.

Fresh appearance of ‘X’ in P&F will come with blue line in 1 line break charts as well which should definitely be traded but exit point should be the column reversal. In simple words, look for quick profit bookings in fresh longs.

I was recently reading a report explaining so many reasons of this bull market and the factors that are important to make it remain bull from here. May it be Technical or Fundamental, analysing and tracking so many factors would always be difficult for a person and result would either be the over-trading or no trading at all. While such things are very important for improving our knowledge they can’t help much while trading, rather they can be very dangerous. Avoid such noise and track ‘X’. Only that can make your ledger look better. Let analysts do rest of the things.

P&F strategy for next week:

Let the ‘X’ appear. Trade with stop placed at column reversal.

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 1 Line Break 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, 9 March 2014

Nifty Point & Figure Analysis: 7000?? Let ‘X’ decide!!

7000?? Let ‘X’ decide!!

Date: 10^th March 2014

Nifty makes new high and enters in new territory, new price zone. As per discussion during last post on trading strategy, a sell call was generated on Monday due to negative column reversal below trend line but it reversed to buy call when price traded above 6290 on Tuesday. The breakout has resulted in long column of X of 29 boxes (290 points).

Chart analysis:

Figure 1 is 10 box value chart plotted with closing prices. We discussed in the post of last week that ratio of ‘X’ and ‘O’ was exactly same and price was at equilibrium. Price went down initially and triggered negative column reversal but picture changed on Tuesday. Double Top Buy signal generated above bearish line and pattern clearly declared that bulls have gained the control.

Figure 2 is 10 box value chart plotted with High Low prices. Price has witnessed multi breakout pattern and all previous resistances are beaten. As shown in the chart, the breakout from long consolidating patterns suggests horizontal counts of 6720 and 7020.

I wanted to trade column reversal because I anticipated at least one bearish column even if price has to go up. Beauty of P&F is that it immediately signals when anticipation goes wrong and price is doing something else. My experience in the business of following price has been that serious gains happen when I am least comfortable in taking the signal!!

Previous bearish lines are breached and Trend is changed to up. Bulls have gained the control and ‘X’ is ruling. Correction or column of ‘O’ from here will be an opportunity to trade long because that will give ‘X’ a chance to arrive again. Count direction is up and price seems to be set for higher levels. We would not remain long if High Pole or Double Bottom occurs but ‘X’ is a dear friend till price is above bullish line. Let it decide if we are heading for 7000 or forming a bull trap.

Positive column reversal should be traded from here if occurred above 6380. High Pole bearish reversal pattern will be formed if price trades below 6380. Ignore Positive column reversal and wait for Double Top buy signal to enter if that happens.

P&F strategy for next week:

Remain long and trade fresh “X’ if it arrives above 6380.

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: