Technical learnings: Thrust out of a Triangle

Limiting and Non limiting Triangles

 Now that we have covered most of the common forming triangles in my previous posts, the next question is how do we predict Market movement ( or set the target) once the Triangle is complete? To answer this question we need to carefully observe the triangle and try to find out if the Triangle is completing as " Limiting triangle" or "Non limiting triangle". Yes most triangle can further be categorized as Limiting or Non limiting. Thrust or move out of a triangle ( or target) is totally dependent on this.

To identify if the triangle in question is Limiting or non limiting one should look at the 'Apex Point' ( Apex Point is where both A-C and B-D line of the triangle meets). If the apex point is very near to E leg (meaning there is congestion near apex point) then its a non limiting triangle and if there is no congestion and apex point is far from end point ( i.e. E leg) then triangle is Limiting triangle

To make things more clear, lets have a look at below example



Limiting and Non limiting Triangles

Limiting Triangles:

• Like mentioned above, if the Apex point is far away ( general rule is total distance between E leg and Apex point should not be less than 20% of entire triangle). 
• Once the E leg is over you may take a trading position
• Trading target will be 75% to 125% of largest leg of the triangle

Non Limiting Triangle:

• Like mentioned above, in such triangles the apex point is very near to end point of triangle ( too much congestion near Apex point)
• Once the E leg is over, price action breaks in opposite direction
• But as the name suggests non limiting triangle has no specific range or target area and the thrust area out of it is 'non limited'
• Non Limiting triangles generally gives false break out and trend resumes in main direction pretty soon. In other words the movement which follows non limiting triangle may not last for long

Nifty View: Update for 3rd Jan 2019

Near Term Trend:  ↓ (Down)

Market update: After yesterdays sensation pull up in last hour, Nifty opened below 10900 again and traded weak whole day. It even touched sub 10750 levels momentarily before recouping some of the losses and closed at 10790 levels (down 120 points).

We have been saying for long that 10900 -10920 seems like the threshold for Nifty on the upside and that market trend still remained down even after the 100+ point recovery yesterday in late trade. I had also mentioned in my yesterdays post that "if market has to reverse then it has to reverse now there is not much time remaining" and we had a down move of 120 points today itself which proves that our chart reading and wave counts are more or less in right direction and for now we will stick to that.


Technically speaking, seems market has completed the G leg yesterday. It took exactly 4 days like the F leg now lets see if we can see a faster retracement of same in same or lesser time (which translates to Nifty breaking 10530 levels in next 3 days). However lets not think that far ahead and we should be taking each day as it comes. Today our immediate target was a close below 10810 and we achieved that as market finally closed at 10792 levels ( there were few attempts by bulls in the late trade to take Nifty above 10810 but those were not successful).

We had initiated a short trade yesterday (in just half qty) but exited later with a small loss. However today again we entered shorts around 10840 (full trade) and still carrying the same. 

Now slightly off topic, regarding yesterdays trade, many are writing me saying that we should have continued with our shorts yesterday. let me just reiterate, I never recommend carrying a trade if I am not convinced by the market movement or it is not moving as per my expectations. I am not afraid of exiting and booking small losses (and so shouldn't you). I am not a day traders and my aim is not to take 30-40 points. As a positional trader my aim is to catch the broader trend of the market and then ride along with it and if I lose 50-60 point in the process then its absolutely ok with me (in fact this is something I will  gladly accept any day). I understand its not easy and need lots of patience and a cool head so if you want to make money in stock markets then please start being mentally tough, keep a cool calm head always and don't worry about taking small losses. Waiting game in stock market can be dangerous when you know you are wrong then u have to exit ( no exception to this rule) there is no point in waiting because if market catches you on the wrong foot then it will wipe 100% of your capital in no time.

Overall  40-50% of my trades are wrong and will always be wrong, but my  profits are 50-100% time bigger  than my losses. Meaning my wrong trades will cost me 100 points but my right trades will give me 150-200 points. So in long run I will always be in profits (even if I am wrong half of the times). Cut your losses short and let your profits run. If  someone is expecting "100% sure shot calls each time" then I am definitely not the right person. 

Trading recommendation:  I have been advising exit from long position since last few days and still say the same. This is not a market to carry long, exit longs if you are still carrying. As far as our position we are concerned, we entered shorts today (like mentioned above) @10840 and still carrying the same. Need to observe market movement for next 2-3 days to decide our future course of action.

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Nifty Trade Update - 2nd Jan 2019

Update 12:35 PM:  Nifty CMP  10840 Sell

'Sell' is active 2 parts @ 10840.  we feel markets may begin down move from these levels.

Update 01:47 PM: Nifty 10755 : Hold positions , nothing to be done as of now. Nifty likely to be under some selling pressure for some time. Need to observe trading for next 2-3 days to plan our next move.

Update 03:12 PM: Nifty 10795: Hold position for tomorrow. Nifty has recovered 50 points from day low but that doesn't change our stand.

Overall Nifty has closed below yesterdays  low which is a encouraging sign for bears. Having said this, we need further signals from Nifty to confirm if its indeed a start of new down trend
 

Nifty View: Update for 2nd Jan 2019

Near Term Trend:  ↓ (Down)

Market update: Nifty opened 20 points at 10880 levels but quickly dropped to 10830 levels and kept grinding there for major part of day. It kept on trading weak and even touched a day low of 10805 but everything changed during last hour. There was a sharp upmove and Nifty rose nearly 100+ points from day low and gave a closing above 10900.Overall it was a low volume day with majority of world markets closed.

Up move in last one hour was indeed impressive and a close above 10900 does suggest that markets may be are not ready to fall down immediately in near term. However its too early to conclude that the down move is done with and Nifty is in bullish zone. Overall Nifty remains in a bearish trend and theres just a possibility now that this corrective move might extend ( if that happens we might see higher levels on Nifty).

The fall from 10980 to 10535 had taken 4 trading days and now this pullback from 10535 to 10916 (today) has also consumed 4 days but it has failed to post new highs. If this was indeed a bullish move then Nifty should have gone above 10980 by now. Nifty can still rise from here no doubt about that but even then it will remain a corrective move only.

If the down move has to start then it should start soon (there is not much time remaining now), otherwise there is a possibility that this corrective move will extend( both price wise and time wise). Technically speaking, the F leg of diametric lasted for 4 days and today G leg has also consumed 4 days so if it doesn't star falling in next 1-2 days then there is a probability of an extended G leg or Nifty starting a second corrective.

Strength above 10920 tomorrow will be positive for market and on the other hand break of 10840 on the downside will be negative.


Trading Recommendations: We continue to hold our existing shorts and had even initiated fresh shorts (light qty) today at 10823 but exited later in the day around 10885 levels. We need to see further strength in market above 10920 levels to change our near term perspective.

Happy Trading and a Very Happy New Year to Everyone!
 

Nifty Trade Update - 1st Jan 2019

Update 12:50 PM:  Nifty CMP  10823: Sell 1 part ( 50%). Will sell balance before day close if required

Update: 1:05PM: Nifty is lacking any momentum on the downside, we might cover our todays short if we don't see any momentum building before day end.

Update 2.45PM : Shorts exited @10885.Trade not going as per expectations.

There was no momentum on the downside and we had initiated shorts ltd qty in anticipation of downward momentum picking up in the later half (just one part-50% of qty)  however a sharp upmove in the end forced us to close our shorts.

 

Nifty View: Update for 1st Jan 2019

Near Term Trend:  ↓ (Down)

Market update: Nifty opened with a gap up of around 60 points at 10920 but saw selling pressure and immediately dropped below 10900. It traded whole day between  a narrow band of 10860-10890 before closing at par (10860). I have been mentioning in my previous posts that Nifty  has good resistance at 10900 (+/- 20 points) and today Nifty clearly showed that its not in a hurry to cross this zone.

Overall inspite of a big 350+ rise (from lows of 10530) in last 3-4 days, Nifty remains in a week trend ( hence the near term trend is still marked as down). There are many factor which are suggesting that this pullback  from lows of 10530 is just a temporary/corrective bounce and Nifty should resume its downtrend once this corrective move is over. Just to share one factor with you, if you see the high point of last 3 days then you would notice that it was hit in first 30 minutes of trade. In last 3 days Nifty has failed to cross the high it touched during first 30 minutes of trading. This suggests 'lack of follow up buying' and that bulls are not ready to commit yet.Even though the lows are protected and markets are closing in +ve territory everyday, its not seeing fresh buying which should be a cause of concern for Bulls going forward. Having said that Nifty is still making higher highs and higher lows on daily charts suggesting some amount of strength in the market and that goes in favor of bulls.

We need to see a close below previous days low and follow up selling after that for next 2-3 trading sessions to conclude the down move has started now. Till then corrective move can continue and it can even extend.

Technically speaking, I believe market is still making (possibly) a diametric pattern which is currently in its last leg ( G), however the shape of diametric has now changed from 'bow tie' to ' diamond' ( pls visit this link to know what diametric patterns are and how they work)  http://niftywaveindia.blogspot.com/2018/12/technical-learnings-7-legged-diametric.html

Nifty daily chart- Diametric pattern?

Overall this doesn't change anything about the markets and my view still remains same ( once this corrective leg is over then we might be heading towards lower levels)


Trading recommendation: No fresh trading recommended at this level. we are just holding on to our existing short positions. At appropriate time we will take fresh trading positions. If some one is long then he should exit/book profit at these levels.

Wish you a very happy new year!!


 

Nifty View: Update for 31st Dec 2018

Near Term Trend:  ↓ (Down)

Market update: Nifty opened with a gap up of around 50 points ( around yesterdays high point) and was in no time 100 points up. It kept trading in a narrow band of 10-15 points around 10880 levels for whole day before giving up 30-40 points in last 30 mins and closing around 80 points up at 10860.

Nifty has been showing strength since last 3 days ever since it hit the low of 10530. it has moved up 350+ points from day low it made on Wednesday. Nifty has shown remarkable strength and its definitely moved up a lot but the question is, is this enough to change the trend or has the new up move has begun now ? in my opinion No not yet. Nifty needed to do a bit more. We needed a strong close above 10900 today, there are indications that move today and yesterday was a just a corrective bounce which is extending and nifty should start its downtrend once this is over.

Frankly I was not expecting Nifty move much above 10800-10850 but entire band of 10800 to 900 (with +/- 20-25 points) is very important and till its crossed, there is no need to change our view and markets move today is still very much under threshold. Offcourse things will change if we see further strength from these levels in which case we will not hesitate to change our perspective. For now I would stick to earlier view only. However todays rise does warrants a  change in overall wave counts but it only a minor change and nothing which changes the overall trajectory or path for Nifty near term.

Divergence with Bank Nifty: Another imp thing I must mention is that while Nifty made a strong case for itself today, Bank nifty failed to cross yesterdays high and closed well below it. This divergence between two indices is not giving me enough confidence about sustainability of current upmove and should be a cause of concern for bulls.


Trading Recommendations : Though it appears that Nifty has broken free and started a new up move, however in my opinion its too early to say so. We need to see further strength to conclude that. As per my view, for now shorts can be carried forward and if someone is bullish then he should use these up moves to get out from Nifty. We initiated shorts around 10860 and 10690 and part booking was done around 10545 levels and part is still open. At appropriate moment we will take fresh trading call ( exit from current shorts or enter fresh shorts). 

Have a nice weekend!