Good Bye, the enriching "2009".

Thank you, all my readers...

You have truly enriched my life more than anyone can imagine
and more importantly brought out the best in me.
I am grateful for that.

Wishing you all a very very profitable and fulfilling "2010".

Nifty Intraday Update.

Weakness only if it closes below 5209 at 1.00PM.

Nifty PreMarket View

With a strong "Asia", the next big move up is likely to unfold, holding above 5176-5185.

Nifty entering the end of the month, settlement, Year & a long weekend..!!

Nifty Intraday Update

Res. @ 5190-5198+ ; Supp. @ 5165-5144.

Nifty PreMarket View

Another narrow trading day..?

Nifty in an upward pause post breakout.

Nifty Intra Update

Nifty Intraday Update.

Nifty PreMarket View

Expecting a sideways move after the sharp short term up move of last three days in an "abc" form. If it makes a new high in the first hour, then that could be counted as part of the "5". The negative divergence in 5-minute chart suggests of a short term correction. Positional Longs may be initiated during this correction to 5060 or 5040 or 5110. For aggressive traders, some trading range of 5100-5130 to 5190 to 5220.

An Invitation to enter the world of Elliott waves.(Part-1)

Success in the stock market is measured in terms of money earned. Luck is how the envious describe hard work and the successful use of skilled judgement.
Stock market offers no absolutes that it will do what it wants to do, when it wants to do it.
You need a guide to help define probabilities and the knowledge to weigh them, followed by the confidence to act on your own judgement and not be thrown off-balance by the arrival of the improbable.
The most rewarding aspect of the wave principle is that when only one option is offered, the probability of success is extraordinarily high. Markets are efficient but 90% driven by emotions and these emotions are reflected by the Nature's Law called "Elliott waves" named after Ralph.N.Elliott who discovered it and effectively applied to US markets on a larger time frame.
Most important intellectual quality for successful investment is the ability to keep an open mind. The biggest mistakes are made by those who do not know what they do not know. Genius is nothing but a great aptitude for patience.
The precise order of wave formation can often seem obscure, riddled with random noise, leaving you totally confused as to the position of the market within the framework of the overriding elliott trends. The forecasting error is not due to Elliott's wave principle but to our misuse of it. Markets and Elliott wave principle are like the Delphic Oracle; neither are ever right or wrong, they just are.
Be realistic - that is the best way to make money from the wave principle. When in doubt, Stay out. Even a slight acquaintance with the wave principle will reinforce your performance.
Markets are technically strongest after a sharp decline and technically at their weakest after a sharp upmove and EW suggests to sell into the strength and buy into the weakness quite contrary to the crowd behaviour.
Before you'd have been petrified by the falling markets. Now you can place them in context - a mere corrective wave, possibly time to buy in with both hands.
Before you were tempted to get wildly enthusiastic about bull markets getting yourself right at the top of the market every time. Now you see that the prices are rising in the fifth wave and you sell the market when there is euphoria all around.
Market's movement is a psychological phenomenon. The stock market is a creation of man and therefore reflects human idiosyncrasy. Wave principle represents this rhythm of man's response to external stimuli which shows itself in price fluctuation.

I feel no opportunity should be lost to help you understand this extremely valuable and potentially highly profitable investment tool. I want you to think, live and breathe Elliott and his wave principle.

I have put up a Elliott wave Tutorial Link in the blog. Go through them which are quite simple and lucid to understand. Spend your valuable time on them and allow it to take you through the whole teaching....and do not struggle to understand. If necessary go over again. From next week, we will start discussing various application of the Wave principles to our trading strategies.

Leading Technical Indicator - the Stochastics

Technical analysis is practiced in two main categories namely chart patterns and indicators. Indicators are calculations based on the price of a stock/ Index and indicates trends, volatility and momentum. Indicators are often compared to "pulse, pressure check" of a patient by the doctor to assess the extent of the illness. Indicators help you assess the market for its momentum, direction, etc.

Indicators are used as a tool to gain further insight into the supply and demand of securities. Indicators are used to confirm price movement and the probability that the given move will continue. Along with using indicators as secondary confirmation tools, they can also be used as a basis for trading as they can form buy-and-sell signals.

Indicators are of two main types - leading and lagging - both differing in what they show users.

Leading Indicators are those created to precede the price movements of a security giving predictive qualities. Two of the most well-known leading indicators are the Relative Strength Index (RSI) and the Stochastics Oscillator. I have often identified the reversal with the additional help from Stochastics.

Lagging indicator is one that follows price movements and has less predictive qualities. The most well-known lagging indicator is the MACD. The usefulness of this indicator tends to be lower during non-trending periods.

A leading indicator is thought to be the strongest during periods of sideways trading ranges, while the lagging indicators are regarded as highly useful during trending periods and produce fewer buy-and-sell signals which allow the trader to capture more of the trend instead of being forced out of their position.

The stochastic oscillator is calculated as a percentage of a security's closing price to its price range over a given time period. For eg: If a 5 day range of an index is 100 points and the index has closed to day 80 points up from that 5 day low, the stochastic will be 80, near overbought. Similarly if the index closes quite close to the 5 day lows, a mere 20 point away from it, the stochastic is 20, near oversold. The oscillator's sensitivity to market movements can be reduced by adjusting the time period or by taking a moving average of the result. In an upward trend the price should be closing near the highs of the trading range and in a downward trend the price should be closing near the lows of the trading range. When this occurs it signals continued momentum and strength in the direction of the prevailing trend.

This leading indicator will create many buy and sell signals that make it better for choppy non-trending(Sideways) markets instead of trending markets where it is better to have less entry and exit points.

The stochastic oscillator is plotted within a range of 0 and 100 and signals overbought conditions above 80 and oversold conditions below 20. The stochastic oscillator contains two lines. The first line is the %K which is essentially the raw measure used to formulate the idea of momentum behind the oscillator. The second line is the %D which is simply a moving average of the %K. The %D line is considered to be the more important of the two lines as it produces better signals.

There are two main ways this indicator is used to form buy and sell signals are through crossovers and divergence.

Crossovers occur when Stochastic moves up from below 20 or 30 to generate a buy signal or moves down from above 70 or 80 to create a sell set up. It signals that the trend in the indicator is shifting and that this trend shift will lead to a certain movement in the price of the underlying security.

Divergence occurs when the direction of the price trend and the direction of the indicator trend are moving in the opposite direction. This signals that the direction of the price trend may be weakening as the underlying momentum is changing.

There are two types of divergence - positive and negative. Positive divergence occurs when the indicator is trending upward while the security is trending downward. This bullish signal suggests that the underlying momentum is starting to reverse and that traders may soon start to see the result of the change in the price of the security. Negative divergence gives a bearish signal as the underlying momentum is weakening during an uptrend.

When it is combined with EW, the effectiveness increases as during 3rd waves, it tends to remain in the "Overbought" or "Oversold" for longer than usual. During such a 3rd wave, the lagging indicator,Macd, works well.

We, now, have trendlines & Channels, Pivots with supports & Resistances, leading(Stochastics) and lagging(Macd) indicators combination in a Trading system that forms the basis of our "Tech.Table". Note that we are not obsessed by any indicator or any method but each one contributing its worth as in a "Cohesive TEAM" that can lead you into any challenging trading day. What is the one most important team member missing.? The strategist who can peek into the opponents (Market's) next move. We will cover next the Strategist, Elliott wave.

Never ending Silent love....

From the very beginning, the girl's family objected strongly on her dating this guy. Saying that it has got to do with family background,& that the girl will have to suffer for the rest of her life if she were to be with him.

Due to family's pressure, the couple quarreled very often. Though the girl loved the guy deeply, but she always ask him: "How deep is your love for me?"

As the guy is not good with his words, this often caused the girl to be very upset. With that & the family's pressure, the girl often vent her anger on him. As for him, he only endured it in silence. After a couple of years, the guy finally graduated & decided to further his studies in overseas. Before leaving, he proposed to the girl: "I'm not very good with words. But all I know is that I love you. If you allow me, I will take care of you for the rest of my life. As for your family, I'll try my best to talk them round. Will you marry me?"

Nifty's "Make or Break" week made it..!

A trendline watcher would have benefited immensely by this weekly channel support @ 4945. Holding above the weekly pivot, Nifty is poised for higher levels(R1, R2). Now keep the levels of each week's channel top for "Booking out".( and may be to "Sell" at an appropriate future time when internals show weakening undercurrents). This weekly rising trendline gains significance having three points of supports.

A pause candle after a sharp upmove.Macd has come into positive zone. The pause can continue with a sideways move before heading higher provided any corrections are limited to 5100 or 5080. After a brief LH & LL, Nifty has started with a big HH.

At 11.00AM, Hour high ema indicated a correction and the same ended at Hour low ema and Nifty moved strongly then on. A trader who changes to "Buy on dips" once the reversal to "UP" was established would have benefited immensely. As long as the Daily close is above "Daily High Ema", the momentum will carry it higher. Closing below the same, "sell on rise" for a correction will be in place.

Merry X'Mas to all..

Nifty Update

Charts updated @ 2.40PM.Table updated @ 3.00PM.

Nifty Intraday Update

Onset of a minor correction as it closed below 11.00AM High ema. Healthy upto 5125 to 5105.

Nifty PreMarket View.

EOD analysis is intact.

Nifty's powerful 3rd wave(or C)

Nifty's irregular correction was discussed once earlier. Any correction having its "b" wave moving above the "A" starting point hints at the underlying strength. And the same must have unfolded today with many stocks(frontline) making new uptrend highs.

Some target calculations based on Futures prices.

The EW possibility for the coming days.

This chart below is for educational purpose and it was fairly easy to follow.

One day's price move has reversed the TA totally. However, tomorrow's close will have some bearing on the weekly TA.

Nifty Intraday Update

As per the Tech table, there are a lots of averages @ 5000-5005 which should now provide supports and there are many @ 5037 to 5050/5065 which would be strong resistances.
38% retracement is done @ 5034.After some correction to 4990-5000, it may attempt to retrace the 50% @ 5064.

NiftyPreMarket View

Nifty Technical Analysis Explained - 2.

• 5-D & 14-D: These are "Stochastics" indicators found in 8th&9th columns(H, I). A more detailed write up will be followed later. This indicator oscillates between 0 to 100 and helps in identifying "Overbought and Oversold" situations. It is generally observed as the prices of stock increase, the closing prices tend to be nearer to the upper end of the price range. As prices fall, the closing prices tend to be nearer to the lower end of the price range. This price range is selected for 5 days and 14 days and the positioning of the close price on any given day in this range is denoted as 5-D and 14-D. This confirms a rising, falling trend as well as Overbought and Oversold status. The colour changes to green when in uptrend and red when in downtrend.
  
• Columns L shows the high point of 5 period range, Column M shows the Low point of 5 period range, Column N shows the high point of 14 period and Column O shows the low point of 14 period. Here too, the colour changes as the index maintains or makes new highs or makes new lows. Also of importance is these columns give you the ready break down or Break out points of 5 period or 14 period which keep changing as the days pass by.
• PIVOT, Support & Resistances: These are shown in Column P,Q,R,S,T,U. and the same are copied and pasted in the Weekly Pivot table as well as the Daily Pivot table in the same sheet for easy viewing. The importance of Pivots & other S1,s2(supports) and R1,R2(Resistances) may be read here.
• Weekly Pivot & Averages: These are collected from the same sheet as mentioned above as well as from Data.W (Colum V to Z). Use the close by averages, and other numbers for weekly trading strategy.
  
• Daily Pivot & Averages: These are collected from the same sheet as mentioned above as well as from Data.D (Colum AH to AL for simple averages and column AN to Ar for emas). Use the close by averages, and other numbers for weekly trading strategy. Whenever the emas are above the simple averages, the near term strength is seen and the colour of the ema turns green and whenever the emas move below the simple averages, the colour of emas turn red. You can see all the emas have turned red as the near term strength is quite weak. And that is also an area bounces/ relief rally takes place. It is said "Market is weak when it is at its high and strong when it is at its lows" as advised by Robert Beckman of Elliott wave and hence EW encourages the trader to "Buy into the weakness and Sell into the Strength".

Nifty's relief rally is on..?

Nifty PreMarket View.

Below is the intraday chart of 16.11.09 which resembles today's..Courtesy: aarvee




This settlement has a high low @ 4807 to 5183 and 5000 happens to be in the middle.
We have a weekly sell in place and due to daily oversold nature, market may do a fight back in this week..
Nifty was brought down to 4944 below 5000 by 56 points and now the bulls may attempt to take it above 5010(5 day ema), 5025(5 week ema) and to 5042 - last week's tussle area & this week's pivot and may be a bit more depending on the strength left.

38% retracement for this fall comes @ 5034.
50% retracement for this fall comes @ 5064.

The last leg of this 5 wave fall happened from 5064 on 17th Dec. which may be attempted to retrace in quicker time for a trend reversal. And if 5064 is not retraced in quicker time(16 trading Hours), downtrend will be intact.

So we play this upmove in a "Three wave(a(5)b(3)c(5 or 3)) form" and then Sell.

Nifty Tech.Analysis File explained-1.

• Pivot Sheet: As you key in the high, Low, High of any stock or Index, this table calculates the "Pivot" point, three supports & three Resistances. This could be used for trading purposes. For more on this, read "Pivot, Supports & Resistances".
  

• Blog Data Sheet: This is the most important sheet in the file and it collects vital data automatically as you update the "Data.W(eek), Data.D(ay) and Data.H(our)" sheets.It has Date, High, Low & Close in the first four columns. If the high clears the previous two day's high, the colour changes in the cell. Similarly if the low breaks previous two day's lows, the colour changes telling us the change in the swing highs and swing lows.Generally a two day swing clearing is an indication of a change in direction. But there are also false breakout/ breakdown in this, hence I have taken 5-day high & Low breaking as one of the factors for "Conservative Trade" initiation.

• 5.Ema:This is placed in the 5th column(E) and it is the most important short term average. Unlike a simple moving average which averages the last 5 days prices equally, ema gives more weightage to the most recent prices by a mathematical calculation and thus it is a good indicator of short term strength or weakness of the market. The colour of the cell & the font changes to "Red" the moment the close price closes below this critical ema indicating the onset of weakness. And it changes to green if the close price closes above it indicating strength. As long as the weekly close was above this ema, the daily falls were bought into. Since the 18th Dec "weekly sell Signal" as per this ema, the first day resulted in a sell(21.12.09). Now the highly oversold daily as well as Hourly with positive divergences will attempt a reversal. For the week, the first week after the sell signal is the "fight back" week if there is any strength left in the earlier uptrend. A continued close below the week ema on 24.12.09 will more or less confirm a larger time scale reversal in trend. Similarly when the day close is closing below the 5day ema, a sell signal is generated and use this signal to sell in the hourly time frame everytime there is an intraday rally towards either hour ema or Hour high ema. Always give more weightage to the higher time cycle and play the lower time cycle till a "overbought or Oversold" situation arises in the higher time cycle when one should approach with caution but continue in the same direction.

• High ema:This is placed in the 10th column(J) and it is the 5 day ema of the highs made on the previous 5 days giving more weightage to the most recent highs. Thus, as the Close price stays above this the upward momentum is intact and the market is expected to make continued up moves and new highs.The moment the close price closes below this, the colour changes to yellow and font to red signaling the onset of a correction. Sell on rises come into play and market will attempt during this period to move higher than this "High ema" during intraday but only a close above this will bring back a lasting momentum. Similarly the moment the close price closes above this the colour changes to green and font to green signaling the resumption of the upward momentum. Buy on dips come into play and market will attempt during this period to move lower than this "High ema" during intraday which generally is bought into but only a close below this will bring in a correction.

• Low ema: This is placed in the 11th column(K) and it is the 5 day ema of the lows made on the previous 5 days giving more weightage to the most recent lows. Thus, as the Close price stays above this the uptrend is intact and any fall till this low ema may be construed as only a correction.The moment the close price closes below this the cell & font colour changes to red signalling the onset of a downtrend. Sell on rises come into play and market will attempt during this period to move higher than this "low ema" during intraday but only a close above this will bring back a "Neutral mode". Similarly the moment the close price closes above this the cell colour changes to blue and font to blue signalling the "likely end of a downtrend". Buy on dips for trading may come into play and market will attempt during this period to move lower than this "low ema" during intraday but only a close below this will continue the downtrend.
• D.Macd & S.Macd: These two are placed in 6th & 7th Columns (F, G) and they are the values of fast macd(5,10,9) and Slow macd(12,26,9). As this numbers are ascending, it is in uptrend and as the numbers are declining, it is in downtrend and the colour changes to Red during downmoves and to Green in upmoves. For more on this MACD, please read an exhaustive write up here.

More on the "File & Chart Reading" tomorrow - Part-II.

Nifty closer to 4900-4925 supports.

I do not wish to change the "Conservative Trade" recommendation during intraday. As this is mainly for the benefit of traders who do not monitor the market live and also not visit the blog during the day, "Entry & Exits" will be indicated only in the Pre-Market Views and no changes will be made during market hours. However, the levels for trading will continue as well as "Intraday updates".