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!

Nifty View: Update for 28th Dec 2018

Near Term Trend:  ↓ (Down)

Market Update: Nifty opened 90 points up at 10800+ levels but couldn't sustain the momentum and after fighting 10800-825 levels throughout the day finally closed at 10780 levels up 50 points. Though it gave up most of the gains it still ended on a positive note. On intraday charts  while Nifty was not successful in crossing its opening high , it did not trade below yesterdays high either. As a result now we have a small gap on intraday chart ( 10750-10765) which Nifty must protect (if it wants to go up). A close below this gap zone and continuous weakness would suggest Nifty down move is about to resume again.

On the weekly charts too Nifty is making a 'hanging man' type of pattern ( which suggest buying and support at lower levels) however we still have tomorrows day left so lets see how it shapes up and how weekly candle is finally formed. Interesting thing to note is that last week Nifty had made ' shooting star' on weekly charts which is exact opposite of 'hanging man'. However taking a trading call merely on candle pattern doesn't wok out but it does show a big fight going on between Bulls and Bears and both are looking to defend their territory at the moment.

Coming back to technical patterns, and charts, few days back, I had pointed out a possibility of Nifty breaking below 10340 in next 3-4 days. That probability is almost over now, what we are seeing is a complex corrective in the process and Nifty might spend some more time in the range before it decides to break free.  Overall charts are telling that Nifty remains in a downtrend ( though it may spend some more time making zig zag moves and consolidation).

Those following Moving Averages, there is one very interesting development happening since last 2 months. 200 DEMA is trading flat since last 2 months. Historically speaking whenever 200 DEMA turns into sloping trend (i.e, start moving downwards) it remain in a downward trend for a long time ( because as the name suggests its an average of 200 days). Last time I noticed a sloping dip on 200 DEMA was way back in 2015 ( around Aug /Sep) and once it turned downwards it remained so till Aug 2016. As a result we did see some correction price wise and time wise and nifty remained weak for almost a year after that happened. Now reason I brought this point up and why 200 DEMA is trading flat is that I believe big market players and bulls are trying their best to support Nifty at lower levels and thus not allowing DEMA to turn down cause they know once it turns down it wont be easy to support Nifty afterwards. 200 DEMA is generally watched by many institution and a downward moving DEMA may not impress  or give confidence to new investors and FIIs to bring more money in India . So right now  bulls are firing on all cylinders to prevent 200DEMA from turning lower question is will it be enough? Just a food for thought.

So in a nutshell, if 200 DEMA turns down  now then the factors supporting market currently might stop doing that ( I say might) as it will be pointless (which would in turn give Bears a free hand). Please note that its just a possibility and merely one factor among many others. I brought this to your knowledge since its important and you should know. this doesn't mean you go and start shorting Nifty left right and center. Trading is a game of possibility and one must weigh all probabilities before choosing the best one. So for now it remains a possibility and we will keep it at back of our head and see how its developing.

Trading recommendations: Part shorts have been exited and we have made decent profit and the balance short which were initiated around 10684 level are still open and is currently in red. I don't recommend going short at CMP. For new shorts one must wait however if someone is long and bullish then he should take an exit at now, wait for market to show more strength and then enter again later.
 

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Nifty View: Update for 27th Dec 2018

Near Term Trend:  ↓ (Down)

Market Update: Nifty opened with a gap down of 50 points and crashed to 10540 levels ( down 125 points) and made a sharp recover later to close around 10730 levels ( up 70 points).

As soon as Nifty fell below 10575 levels it went in an oversold zone on the short term basis. There was a likelihood of an Intraday bounce today hence we covered our shorts around 10546 levels ( initiated at 10858 levels last week).

Todays bounce can be termed as a technical bounce. Market was heavily oversold so short covering coupled with value buying lifted the markets. Todays bounce doesn't mean that Nifty is done with the down move as of now. We need to see further strength in Nifty to confirm that. For now our assumption is that its a corrective bounce and surely market can move up another 100-150 points form here but the downtrend should resume again once this corrective move is done. Off course everything will change if Nifty start showing strength in which case we will be forced to change our view. So we need to carefully observe how Nifty movement is shaping going forward and accordingly we will plan our next strategy. Overall today was a good day for our followers as we ended up making a profit of 300+ points in Nifty.

Trading recommendations. We exited shorts initiated at 10858 around 10546 today making  a profit of around 310 Nifty points. Second trade (short) initiated @ 10684 on Friday is still open. for now current strategy is to hold on the balance shorts. If some one is long in market then use this bounce to exit your position.





 

Nifty Trade Update - 26th Dec

Update 09:43 AM:  Nifty CMP  10558 - Cover 50% of shorts initiated in Trade-1 @ 10858  ( hold balance short 50% of Trade-1 and 100% of trade-2. Will keep updating whenever anything needs to be done)


Update 10:15AM: Nifty CMP 10535  - Cover balance 50% of shorts initiated in Trade-1 @ 10858. Trade-1 closed. Carry Trade-2

Trade-1 covered @ avg price of 10546. Trade 2 is open.

Update 12:30PM: Nifty CMP 10600- Nothing to be done as of now. Hold shorts as told. 

Update 03:25PM: Nifty CMP 10740- Nothing to be done as of now. Hold shorts as told

Nifty is witnessing short covering +value buying from oversold zone that's the reason we booked part profit almost at day low.
  

Technical Learning:Extracting Triangles

Extracting Triangle: Extracting triangles are very important pattern, they do not occur very frequently and even the price action which follows once the pattern is complete is not very sharp.
Like all triangles they too have 5 legs can be found in both Bullish and Bearish markets.



Extracting Triangles

Important characteristics

As the name suggests, extracting triangle 'extracts' the power of bulls and bears ( depending on what type of triangle it is). This pattern causes 'fatigue' among players and is a 'tiring' pattern. In case of Bearish pattern as you can see Bulls are trying to take market higher but are failing with each attempt. Each direction leg ( i.e up leg) is getting smaller and smaller meaning Bulls are losing their strength, however each falling leg is getting bigger meaning Bears are getting stronger. Once the E leg is done and inspite of all their efforts Bulls realizes that they have failed to take market to new highs, they give up and that's when Bears take over and market goes for a downtrend which can be quite extended at times. Bullish triangles works just the opposite of what we  just discussed. Here Bears keep getting weaker and Bulls keep getting stronger and after E leg is done you see a fresh uptrend


 

Nifty View: Update for 26th Dec 2018

Near Term Trend:  ↓ (Down)

Market Update: Nifty opened slightly in positive territory around 10770 levels but couldn't keep up with selling pressure and succumbed to sub 10700 levels even touched 10650 levels before closing at 10663 (down 80 points). This is the third consecutive day for Nifty where it has posted a lower low and a lower high. Continuous trading below yesterdays day low and the way 10700 has been breached shows that markets trend has now changed to Down. I had mentioned in my previous post that if Nifty start trading below 10700 then all overall trend of market will be change do down and all longs should be exited.

We had initiated shorts around 10860 levels on Friday and have added more shorts today around 10685 levels in second trade. Both trades are still open and will be maintained with a trailing SL

Coming back to Nifty, like we have been saying that entire move from 10K to 10750 is looking like a corrective move. And thing about corrective moves is they end without a warning and when they do its not a pleasant sight for those who believed it to be a trending move.

Overall probably Nifty has taken a U turn now and the corrective move which I have been projecting as a '7 legged diametric' is over and what we are seeing now is a new impulse downward ( Wave-1 of new impulse). we need more evidence and need to observe market carefully for next few days to see if its indeed a new impulsive move which has started downwards. For now Nifty has reacted exactly from where we predicted G wave to end so currently we assume that its over and impulse has begun( unless proven otherwise by market).

There was lot of resilience being shown by Nifty in last few weeks where it was just shrugging off the losses in US markets and was simply marching on. However such Inter market divergence cannot continue for long ( it can last for months though) and sooner or later all market aligns to each other. Going forward we might see Dow recovering and adding on few points( as technically it appears oversold) but Nifty struggling to do that.

Trading recommendation: 2 trades open on short side. 10858 on Friday and 10684 today. Don't leverage excessively short term bounce can come anytime causing panic and wiping out your profits. For now just hold on to your shorts. If someone is long then its time to exit.

Wish you a Merry Christmas and a Happy New Year!

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Nifty Trade Update - 24th Dec

Update 10:07 AM:  Nifty CMP  10715 - Hold short positions


Nifty continues to be weak. Hold short positions as advised earlier, nothing is required to be done as of now

Update 2:30PM  Nifty CMP  10690 - Hold short positions

Nifty continues to be weak and showing good momentum on the downside. hold on to existing short positions ( we might even initiate more shorts soon). But pls don't get carried away and leverage, keep your risks managed at all time


Update 2:45PM  Nifty CMP  10684 - Sell ( Initiate shorts)
We have Trade-1 short open @ 10858. More shorts can be added around CMP

Nifty View: Update for 24th Dec 2018

Near Term Trend:  ↔️ (Sideways/with a strong negative bias)


Market Update: Nifty opened slightly positive around 10950 shrugging one more overnight carnage in US stock but today was different. Nifty couldn't display the strong character its been putting up since last few days and crashed 200 points to close around 10750 levels. I did mention in my post yesterday that we should not read too much in Nifty outperformance and sooner or later both indices ( US and India) will line up.

I have been expecting this move since last  2-3 days and have been saying that markets seems to have matured and there is a strong likelihood of down move from these levels. I marked the move from 10k as diametric pattern which is in its last leg (G). G might have completed both time wise and pricewise yesterday. We went short yesterday expecting a move like today but it didn't materialize so we exited however we entered shorts today again around 10860 levels ( you may want to refer to 'Nifty real time trades' page for details). Idea was to enter below yesterdays low ( 10890) level however the fall was steep so we got a lower entry point around 10860 only. But when you are doing positional trading 10-20 points shouldn't matter to you.

Having said all this can we say that near term trend for Nifty has now changed to down? Answer is No, not yet. That's the reason I am still showing the 'Near term trend' as sideways. There is a strong probability of Nifty changing the trend to 'down' from here but so far it hasn't changed. Not even after 200 point fall today. See in last 8 days Nifty has had just one bad day and one bad day cannot dictate the course of market for short term. Nifty can be in super bullish trend and yet it can fall 200 points and recover. Similarly one day of 200+ move in bearish trend doesn't mean trend has changed now.

So our overall stand remain same for now. We have been saying that there is a likelihood of a reversal from these levels and Nifty today has taken one step towards confirming that. It has very good support at 10700-750 zone. Continuous fall below this level with momentum will give us the confirmation we are waiting for.

Some are asking why we exited  shorts yesterday even though the SL was not triggered? Please note that Nifty trend had not yet turned negative yesterday, so holding on to shorts  required a strong negative momentum which we didn't have so we exited. Today we have it so we are carrying. Doesn't matter if we lose 70-80 points in the process. In the long run this rule will help you cut your losses.

Food for thought- If my chart reading and wave counts are correct then we are looking at a very steep fall and when I say steep I mean every likelihood of Nifty breaking 10340 in next 3-4 days ( not exaggerating).


Trading recommendation: Entered shorts around 10860 levels today and carrying. Will short more once I get secondary confirmation till then just hold on to your existing shorts. If some one is long then pls exit once Nifty start trading below 10700 consistently.

Have a nice weekend! Enjoy and take care.
 

Nifty Trade Update - 21st Dec

Update 10:27 AM:  Nifty CMP  10858- Sell

We have been expecting nifty to make a top around this area ( like mentioned in yesterdays post)

Note: Spot prices mentioned

Update 11:30 AM: Nifty CMP 10835- Please note nifty has not yet given any crossover sell confirmation yet ( inspite of this 100+ point fall today). Short call is merely on the basis I have been mentioning in my posts. We carry shorts if trade is moving in line with expectations or we exit ( like we did yesterday). So it could be slightly risky as we are trying to call out a top in markets (something which one rarely gets right). Overall trend of the market changes to down only when 10700-10720 range is taken out.
so just to reiterate, I see a strong possibility of a reversal hence these short calls. Once I get confirmed signal then we will initiate more trades (if you want you may wait for confirmation).


Update 2:25PM: Nifty CMP 10770 - Hold shorts for now. Will update if anything has to be done.  So far trade is moving in line with my expectations. (less Risky traders might want to book part profit)


Update 3:15PM: Nifty CMP 10740 - Carry Short for next week (less risky traders can book profits)

Enjoy and have a nice weekend. Trade well, Trade wisely.

Nifty View: Update for 21st Dec 2018

Near Term Trend:  ↔️ (Sideways/Corrective/Near maturing)

Market Update: Nifty opened with a gap down on the back of overnight fall in US equities and weak Asian markets but as the trend has been recently, Nifty outperformed each market and closed almost at par.

I have been expecting Nifty to make a near term top around this level and hence went short in the morning (10AM) around 10932 levels (Nifty did fall to around 10880 levels after that)  but overall movement of Nifty was not as per expectations so we exited from shorts at almost same price around 3pm. Even though our SL was a 'new high' and it was not triggered still a strong trading above opening rates suggested a bullish overtone. In such cases its always best to exit.

Nifty has still not given any negative crossover signal and remain very much in +ve trend. However and as per my view and analysis there is  probability that a top could be made around this area either now or in next 2-3 days so we have to be on look out for a trading opportunity on the short side.

For now Nifty has neither validated nor rejected my diametric assumption so there is still a likelihood of Nifty reversing from these levels, however if reversal has to come then it should come soon now else we are looking at extending this correction (both price wise and time wise). 

Even though Nifty covered almost all the losses intraday, it made a lower low and a lower high today which is an encouraging sign for Bears. Nifty now needs to close strongly above 10985 levels to negate the negative impact.

Another thing Favoring Bears is that Dow and S&P have broken their Feb lows already, so not sure if this outperformance by Nifty can continue for long. May be not today and may not tomorrow but soon both indices are likely to catchup ( Either Dow gives a strong rally or Nifty start falling)

Nifty Daily Chart

Trading Recommendation: Entered short around 10932 and exited almost at par. Need more sign of weakness to continue staying with short positions. 

Nifty Trade Update - 20th Dec

Update 09:55 AM : Sell Nifty @10932 CMP

As mentioned in previous post, considering various factors, this could be the topping area for Nifty with G leg of diametric almost completed. Short positions can be taken here with a SL of a new high.

Update 03:05 PM : Buy Nifty @10935 CMP- (exit from previous short position- no fresh buy)
Even though it fell to 10880 after our initiation,  the overall movement is not on expected lines so better to exit for now. Will enter again later.

Note: Spot price mentioned.

 

Technical Learning: Contracting, Ending Diagonals and Expanding Triangles

To continue with triangles, let me cover 3 types of triangles today. Contracting , ending diagonals or wedges and Expanding. Like all patterns, these too can be found in both Bull and Bear market. Bullish or bearish pattern is determined by direction in which prices are expected to move once the pattern is complete. In the below examples the prices are expected to reverse downwards hence these are 'bearish triangles' ( even though the prices in the pattern itself may be moving up). The shape of these triangles in bullish will be exact opposite i.e. 'A' leg will be pointing downwards.





Contracting, ending diagonals and expanding triangles

Important characteristics

Contracting triangles:

1. 'A' leg defines the overall range of pattern and is the biggest leg and rest of the legs are formed within same range
2. Each subsequent leg is smaller than the previous leg and the overall pattern forms a compressed or contracting structure (compressing price action just like a spring)
3. When the pattern is complete, the compression of prices stops (its unsprings) and gives a violent thrust
4. Prices move very fast once the pattern is complete
5. Buy/sell is recommended once the price breaches B-D support line ( line joining B and D leg of the  of triangle)

Wedges/ending diagonal:

1. Similar to contracting triangles only difference is that C leg though smaller than A leg, makes a new high.
2. 'D' leg is smaller than B and must finish above 'B' end point.
3. 'E' leg may or may not cross C but it should remain smaller than 'C'
4. Again, buy/sell is recommended once the price breaches B-D support line

 Expanding Triangle:

1. Most confusing of the lot as prices keep on expanding and making newer higher and newer low with every move
2. E leg is the largest and can be as much as 261.8% of C leg making it difficult to predict the end point
3. Price action that follows upon completion of triangle is very slow ( making it even harder to trade)
4. For entry point, either wait for  E leg to touch A-C line and reverse from there or if it crosses A-C line and enter below it again then buy/sell.
5. Though its not mentioned in the chart above, E leg can sometimes be smaller than D leg. In such cases wait for prices to go below D leg before initiating buy/sell

I know this can sound fairly complicated but trust me its not that difficult once you start recognizing patterns.






 

Nifty View: Update for 20th Dec 2018

Near Term Trend:  ↔️ (Sideways/Corrective/Near maturing)

Market Update: Market opened with a gap up and maintained the positive trend throughout the day and closed 60 points up at 10967 levels. Nifty today crossed the 10950 levels and made a new high. Still that doesn't change the overall character of the market and it remains a corrective leg. All up moves from 10K levels are carrying same characteristics and are pretty slow. Surely it can carry on for few more days but going forward Nifty might face strong resistance around 11000-11150 levels ( which is  also near the 61.8% of the total retracement). Technically speaking market can even retrace as much as 80% ( since the fall from 11750 to 10k was a double corrective).

Nifty might change trend tomorrow or might take few more days but the overall scenario and near term direction remains same. If my Diametric assumption is right then Nifty should turn back from these levels as both price and time wise the last (G) leg seems to be complete. Further rise in Nifty from these level would mean something else is cooking up. For now we are on the look out for a reversal point to short Nifty at appropriate level. I don't see much headroom for Nifty to go up from here but still we need to wait for a reversal point. However If we don't get a reversal point then we will wait.

Thing which are favoring Bulls right now are a) lower VIX and b) put call ratio ( its totally in favour of bulls right now) and c) shorts which got trapped at lower levels on negative election news.

Having said this, I still see very little value in going long at this stage  but that does not mean Nifty can not rise 200-300 points from here surely it can but still we prefer to wait.


Trading recommendation: No longs or no shorts at CMP. Wait for reversal signs to go short. As per my wave counts top could be in formation let markets validate or negate the pattern first.

Technical Learnings: 7 legged Diametric patterns

I was hoping to cover all triangles first before I move on to 'Diametric' but since in todays post mentioned the possibility of Markets making a 'Diametric pattern', let me explain it today itself.

Diametrics are corrective  patterns and once they are complete the price tends to move sharply in opposite direction ( similar to triangles). But unlike triangles Diametrics have 7 legs and are extremely difficult to trade. Difficulty arises from the price movement. Just when you think a new high is formed price will start moving down and just when you think you have a new low price will again start moving up and to complicate matter further, Diametrics have 2 shapes and its very difficult to identify them till they are almost on the verge of completion.




7 legged Diametric Pattern

Point to note:

 

1. Diametrics have two types: A) Bow type i.e. contracting first and expanding later and B) Diamond shaped i.e, expanding first and contracting later.
2. Price move in opposite direction once pattern is complete and its usually very fast
3. Price action that follows after diamond type completion is usually faster than bow types ( so diamond type are more bullish/bearish)
4. In case of Bow type the G leg can cross or end below E leg. if it ends below E leg or in other words fail to cross high of E leg then its called as 'G failure'
5. If G leg does end as a failure then the price action which follows is very very sharp. sometimes its so sharp that it doesn't even allow traders to enter into a trading position
6. Both these patterns can also be read as 'double corrective' i.e, ABC-X-ABC ( however I prefer to read them as one)
7. Diametrics basically signal confusion which is there in the markets which is explained by overlapping price movements and once the confusion is cleared i.e. diametric is complete, what follows is a clear trend
8. And like all patterns diametric too can be found in both Bull and Bear markets. Above example is a Bear market example ( since prices are expected to move down once G leg is complete)
9. Time action between most legs can be similar (i.e. all or most legs might last for same number of days)

 

 

 

 

 

 

 

 

Nifty View: Update for 19th Dec 2018

Near Term Trend:  ↔️ (Sideways/Near maturing)

Market Update: Market opened weak in line with weak global cues and traded negatively for the first hour but soon reversed the momentum and ended the day at 25 points up around 10910 levels.
We had gone short in the morning around 10825 but were forced to close our position around 10905. Nifty had to cross above 10950 levels to give us a confirmation that its building a new leg upwards but a weak opening below 10850 suggested a likelihood of a corrective upmove which had either matured or nearing maturity. However looks like Bulls have some more steam left in them. Let me show you the below chart with my wave counts to help understand my point of view in detail.

Market finished a major corrective move in Oct end around 10K levels after that what we are seeing is another corrective leg ( its too slow and has overlapping waves). Move after 10k can best be described as a 'diametric pattern'. a diametric pattern has 7 legs ( ABCDEFG) and it can also be read as double corrective ( ABC-X-ABC).I prefer to read it a single move with 7 legs. Important characteristic of a diametric is leg is similarity between most legs ( usually time wise). Here you can see each leg is taking around 5 to 6 days to complete and today was the 5th day for G leg. I was expecting market to complete the G leg in the morning and reverse from there (but it can last for 1-2 days more). A leg of the diametric measured 600 points (10k to 10600) now G leg has almost measured 575 points in almost same time (10345 to 10915 so pretty close to A leg). Even though the down move didn't materialize today and if the diametric assumption is correct, we should see a down move starting pretty soon. On the other hand if Nifty start trading above 10950 levels then will have to see and modify wave counts slightly.

On the bigger time frame, this up move from 10K levels today has consumed 35 days now and as per the time cycle all bear/bulls move in 2018 have ended around 34-40 days. So there are plenty of indications that either this rally has matured or its very close to maturing. Off course this is just one of the probability as per me and everything will change if Nifty start closing strong above 10950.

Trading Recommendation: We had gone short in the morning and exited later with a loss of around 80 points. Even though there is no change in my overall assumptions we had to exit since trade today was not moving on expected lines. Will watch and enter tomorrow again if I feel so. Nifty is consistently outperforming global markets but theres always a risk of catching up so don't rely too much on this outperformance.


 

Nifty Trade Update - 18th Dec

Update 10:30 AM : Sell Nifty @10825 CMP

Update 02:45 PM : Exit , pls cover short at CMP 10905



Note: Spot prices mentioned, you may trade in futures/call/puts basis spot price.

Technical Learnings: Neutral Triangles

Triangles are most commonly occurring technical patterns yet they are neglected the most. Its relatively easier to detect triangle pattern and usually they appear during the last leg ( 5th wave). Waves are usually overlapping and thrust/movement once the triangle pattern is complete is usually unidirectional and one sided thus making it easier to trade.

Neutral Triangle




Neutral Triangles

Just like all triangles Neutral Triangles has five legs too ( just like an normal impulse) but below are some of the important things to note.

• The most important characteristic of neutral triangle is that wave 'C' is the longest among directional wave ( i.e. wave A C & E) 
• Wave 'D' is always bigger than wave 'B'
• Wave 'D' may or may not surpass end point of  'B' (in the above example its surpassing but its not mandatory)
• Wave 'E' can be longer or shorter than wave 'A' (usually similar to  wave 'A' in terms of price and time)
• Once the Wave 'E' is retraced (in faster time) it can be assumed that trend has changed and long/short position can be taken with  a SL at end point of D wave (or beginning of E)

Nifty View: Update for 18th Dec 2018

Near Term Trend:  ↔️ (Sideways with a positive Bias)

Market Update: Nifty opened with a gap up of around 50 points and throughout the day maintained its upward trajectory before closing around 80 points up at 10888. Dow had crashed 500+ points on Friday and traders were expecting a weak opening however market obliged by doing exact opposite. Some positive sentiments are building in Nifty on back of lower inflation lower crude and New RBI Governor.

Nifty today crossed 10850 in style by a gap up and has given a secondary confirmation that its probably ready for its next leg upside. But like I mentioned in previous post too we need Nifty to cross 10950 levels (that too in faster time) to get complete confirmation. Till then the downside gates will remain open. Point to note is that VIX is now sitting at 14+ levels, previously when Nifty was at 10900 levels VIX was at 20+ levels so markets are way more calmer now ( especially with election results out of its way now).

To summarize, the entire up-move from 10K levels does seem like a corrective move only as its really very slow and has too many overlapping moves but that doesn't mean you can go and short Nifty ( corrective moves can last for a long time) . Let me take this moment to explain one important characteristic of the market. This entire year all Bull/Bear moves have consumed exactly 34-40 days ( alternatively). this has worked out like a charm till now ( pls see the below chart). Now the question is will this work again? Today was the 34th day for Nifty, so can we expect another top in next 1-5 days?



Nifty Jan-Dec2018

See all major bull/bear phases have lasted exactly 34-40 days. So its time to be cautious don't get overexcited by seeing Nifty outperforming global markets.

Trading recommendation: No position still. If Nifty crosses 10950 levels then we might look to go long at suitable entry points else create short position at appropriate time. Till then sit tightly. 

 

Basics of Markets: Technical Patterns

I will use this space to explain various basics technical patterns, which every trader should know. Will try to post one technical pattern at a time (whenever I get time) and explain how it works.

 Every technical pattern may not always turn out to be what you expect but when it does it can surely help make you lots of money. Trading is a game of possibilities and you continuously need to scan market movement for various possibilities that may be present.



 

Top 3 Reasons: Why Most Traders Lose Money in Stock Markets

Stock market is simple game It goes up and it goes down so chances of winning or losing is always 50-50. So even if you flip a coin and trade basis heads or a tail you should be fine and in long run you will probably end up being at a breakeven point i.e. no profit no loss. But if this is the case then why more than 90% of traders lose money in this market? What makes it so bloody difficult to trade? If you ask me this question then I would say this is because of the following 3 mistakes which every trader MUST avoid. 

Mistake#1 : Tendency to book small profits but inability to take small losses: To me this is the single most factor causing most traders to bleed big time in stock markets. Whenever we enter into a trade we are quick to book profits. We buy Nifty at 10500 it rises 20-30 points immediately our palms start itching and we book profit. So no harm done, good we have booked profits. But what happens when we buy Nifty and it starts falling? We wait. It falls 100 points we wait a little more. It falls 200 points. We wait a little more then in the evening Dow falls 500 points and there is panic all around Nifty opens with another 100 point gap down next day and our loss is 300 points now margin call is getting triggered what we do? We have no option but to exit. So we did two trades, made a profit of 30 points in trade 1 and took a hit of 300 points in trade  2. How long do you think one can survive like this? We have a target for profits but no target for losses. If your upside target is 50 points then your SL should not be more than 30points. So in long run you should always be 20 points up ( even if you are wrong 50% of times). Idea is 'cut your losses short and let your profits run' but we end up doing opposite. We immediately book profit and wait for losses to mount till they become so huge that we are unable to bear them. Basically we do not exit loss making trade on our own we wait for markets to kick us out.

Mistake#2 : Not having a trading plan and trading basis gut/News based trading- We either do not have a trading plan or we keep changing it frequently. We give too much importance to news flow and social media and analysts saying Nifty has made a top or bottom. Dow rises 400 points  next day we think Nifty will follow suit so we buy Nifty and then feel surprised when Nifty end up closing negative. We then start blaming speculators and operators and say this whole market is fixed. My advise is never change your stance by a single set of data point. Data point will keep changing frequently but market trend will rarely do so. "RBI hikes interest rate" or " BJP loses state election" is no reason to go and short this market. The one thing about News is that its not exclusively available to you, everyone already knows about it yet we act as if someone whispered this only in our ears. Do not do that. If markets want to go up it will go up regardless of BJP win or lose RBI hikes or reduces interest rates or crude is at 140USD or 50 USD. Everything comes secondary. news flow or data points can impact market movements for intraday or for very short term but soon it will resume the main trend. So try to catch the main trend always, Do not be impacted by change in data points or negative news flow cause it just does not work. Be a leader not a follower.

Mistake #3: Expecting markets to follow you instead of following Markets (Quick to call out top and bottoms)- Most traders have very narrow view of Market and they will keep looking at market with their predefined mindset only. The problem with predefined mindset is that whenever we see a fall of 500-700 point we assume its a good time to buy and we are quick to jump on the idea that bottom is in place and its a good opportunity to buy. Similarly when a stock has had a good run up we tend to say " it has gone up a lot now it must fall so lets sell". Please understand there is a reason a particular stock has gone up or down and even if a stock has gone up100% there is no reason why it cant go another 300% up. We should never assume the top is in place or bottom is formed. Market is supreme and there is always a reason why it goes up and down and till the time you do not understand that reason do not take a bet against it. Its always safe to assume that main trend will continue ( instead of assuming that trend will reverse now). Let market decide when it wants to change trend and when it does you simply bow to it and move out, you do not fight. We keep fighting markets by taking contrarian view and assuming it will change its trend. Trends can run for days months or even years. Simply follow markets do not expect it to follow you. Markets are way much bigger that what you and I think. Give it the respect it deserves, do not fight it. Simply listen to what it says and follow no question asked. Period.

I can go on and on and list out 10 more reasons but the broad undertone of what mistakes majority of traders make is covered in these 3 points already. Its very difficult to master 100% of these traits and even experienced traders fail to do so but even if you manage to follow them 70-80%  of the times it will be good enough for you. The key here is that as soon as one realises that he is wrong then he should move out immediately. Its better to sit out with NIL position and letting go of some the probable profits then getting into a wrong trade and suffering losses. After all money saved is money earned.

Stock market trading is nothing but a mind game. You need to be mentally strong to survive here so keep your emotions aside, market has no regard for what you or I think it has a mind of its own. It teaches humility, the moment you think you have figured it out you will be proven wrong. Its like a test match where wicket is totally favoring bowlers and you are batting on 5th day. So face every ball as if its the1st ball you are facing, doesn't matter if you are batting on 100 or 200. Just like the game of cricket, complacency can be fatal in stock markets too.



 

Nifty View: Update for 17th Dec 2018 (Monday)

Market Update: Flattish close today. Markets traded between high and low of yesterdays and didn't make any move at all and closed almost flat. You may call it consolidation you mall call it resilience or my you call it markets inability to climb new high it doesn't matter. Nifty just didn't give any clue about its intentions today but having said this I feel the time is running out for Nifty to climb to new highs. Its been almost 2-3 weeks and we are still stuck at 10700-800 levels. Next 2-3 days are going to be extremely critical  and Nifty's move will probably give us indication about which way it wants to go.

The previous move from 10965 to 10350 (6day)  and then shap rally from 10350 to 10850(3-4 days and counting) is just a volatile move by markets to get rid of weak hands. Right now Nifty looks strong but the downside gates have not been closed yet. There is a strong probability of testing 10350 again but there is no confirmation right now. On the upside we need Nifty to cross above 10965 in next 2 days. till now Nifty has retraced about 80% of fall (from 10965 to 103450) in about 65% of time so the move up does look faster. If nifty can cross 10965 levels then we are probably heading back to 11100-11200 or higher levels

Broad picture- If you look at overall picture then the entire fall from 11750 to 10K levels took about 40 days. From the lows of 10K so far nifty has consumed about 33 days and retraced about 55% of total fall ( in about 80% time) which is very very slow. So overall we remain in correction mode. There was a good chance about 2 weeks back (when Nifty broke above 10600-10750) of markets scaling back to 11500 levels ( that's when we had gone long too)  however with each passing day the chances look dim now. New moves always come faster ( called impulse) slow moves are corrective moves and they last till they last and after they are over the main trend resumes. So don't think that current move from 10K levels is a bullish move (unless we cross 11750 in next 7 days which is next to impossible).So if 10965 gets crossed in next 2 days then we can expect this corrective move to last a little bit longer and nifty might see higher levels of 11100 or 11200 like I mentioned above else the lower levels might be retested pretty soon.

I personally feel markets are more or less done with the 'cleaning act' and has removed weak hands already ( both long and short side) surely it can spend few more days in this range and keep us guessing but it should make a move pretty soon now.

Near Term Trend:  ↔️ (Sideways)

Trading recommendation: No position, same as yesterday. Don't recommend going long/short yet.



 

Nifty View: Update for 14th Dec 2018

Market Update: Nifty opened strongly at 10800 levels and registered a high of 10840 but couldn't sustain the momentum and dropped to 10750 levels before closing the day at 10790 levels. Nifty today made a Doji candle. Doji candle signifies indecisiveness where open and close rate are similar and market makes a big low and high shadow (and real body is small).

10750 was a good resistance level which was crossed today and Nifty traded above this level though out the day. This definitely count as a positive but Nifty is not out of woods yet. Even after rallying up almost 450 points we still need confirmation that bull trend has resumed. Nifty took 6 days to fall at 10350 from 10965 levels and after 3 days it has retraced almost 75% of the fall. We need Nifty to reclaim 10965 in next two days to signal a start of a fresh upmove. Nifty has given one confirmation today by crossing 10750 successfully today however secondary confirmation would be to make a new high above 10840 tomorrow and finally crossing 10965 levels (in 5 days).

What is worrying me is that entire rise from Oct low of  10k levels has already consumed too much time. Right now we are in 7th week ( from Oct low) and still below 61.8% (fall from 11750 to 10K) of total retracement. If this was a bullish move we should ideally have been sitting at 11K levels by now. Slower retracements are usually sign of corrective moves.

Even though market is making big moves, its indecisive ( we are still at same levels we were 10-12 days back). Need to give few more days to Nifty to settle down before we take trading call. Global markets can play a crucial role going forward. Dow and S&P have already touched their respective Oct lows and even though the correlation between S&P and Nifty is not working presently there is always a risk of catching up.

Trading recommendations: Still no open position, there was a whiff of a trading opportunity around 3pm ( updated here) but it didn't materialize. No point in doing any sort of trade just yet. Sit patiently.




 

Nifty Trade Update - 13th Dec

Update 2.45 PM:  Nifty trading at 10760 levels. We might enter into a trading position around 3.15 so be prepared

Update 3.15PM: No trade. Opportunity didn't materialize.

Nifty View: Update for 13th Dec 2018

Market Update: Big day today for Nifty, it traded strong through out the day (aided with short covering) and closed around 10740 levels ( up 190 points). So what can we expect going forward after last 5-7 days of wild swings and gap down/gap ups? For starters let me make it clear that  these wild swings are just a way or method by which market get rid of 'weak hands' or 'speculators' or 'undecided traders' who simply trade basis their gut feeling or the news flow. Usually such moves are seen just before when markets are about to give a trending move in either direction ( A cleaning act is required before such a move can take place). 
Trend going forward remains indecisive, the bullish scenario I was holding for Nifty was changed when it broke below 10650 but even then I was not bearish and still even after a rally of almost 400 points in last two days I have not turned bullish. Market made one important high today ( 10750). This entire range of 10650-10750 is extremely critical, if nifty can consistently trade above 10750 (todays high) then we can expect the rally to continue and I might turn bullish again. However if this not broken then we can expect a retesting of 10300 levels ( even 10K below that) pretty soon. So sit tight market is going to move big but to ride that movement you need to be patient.

As a smart trader one should not try to trade these wild moves its almost impossible to trade Nifty when you have 100-150 points in either direction so its always better to sit out and wait for market to remove the froth ( shaking up is required to generate and remove froth). Like I said in my previous posts too, the broader trend will remain in one direction these swings will come and go. One should not give too much importance to them and definitely shouldn't try to trade them.

I have not been able to post my wave counts yet ( as it needs some more validation) but will do so real soon. 

Trading recommendations: No open position and I don't recommend getting into one just yet. Movement we are seeing could be due to unwinding and short covering by speculators. But we should be getting a trading opportunity pretty soon ( whenever there is one, will try to update the same live here).

Nifty View: Update for 12th Dec 2018

Market Update: Nifty opened with a huge gap but recovered smartly to end the day up around 70 points at 10549  even though the news flow was all negative. Today was a classic example of age old rule of  "buy on rumor and sell on news" (or vice versa). Nifty saw a recovery of more than 200 points from day low once the 'rumor' of BJP losing became 'news'.

It was a 4th consecutive gap down in last 6 days and eventually turned to be the "exhaustion gap" I spoke about in my previous post. I had mentioned yesterday that index usually turns after posting 2-3 gaps down and the next gap down could turn out to be an exhaustion gap meaning it gets retraced fully ( below is the excerpt of my post) and this is exactly what we witnessed today.

To understand it much better please see the below chart ( hourly chart). We had 3 gap downs in a row which Nifty was unable to recover from but today it was 4th gap down and nifty recovered it on same day itself. Idea here is not to boast but to educate readers about few basic technical parameters. One should not get carried away when gap downs/ups are taking place consecutively. It can be a good trading opportunity if you are able to identify the pattern

 

 

 

 

 

Now when the election results out ( which are more or less as per mkt expectations), Nifty is happy to put the event behind and move on from here. Todays rally is basically a sigh of relief from Nifty. Market is range bound for now and hopefully in a few days the real trend should emerge. For now I am neither in Bull camp nor in Bear camp. Market is choppy and entering into a trading position at this stage will require a big stop loss so recommend waiting for few more days. As a trader we do not have to trade daily but keep observing markets all the time and as soon as the risk reward ratio is in your favor you should jump in.  Lot of short position were entered today in the first half and then we had some short covering+profit booking by speculators  which might continue  for next few more days.

 

 

Trading recommendation/Trade update: No open position right now and I don't recommend going long/short at this stage. Market is being choppy and the big swings might  cause you to get trapped or thrown out in no time. Happy Trading to you.

 

 

 

Nifty View: Update for 11th Dec 2018

Market Update: Nifty had another bad day and crashed below 10500 levels and ended up closing almost 200 points down. Todays fall was significant as it broke below the previous low of 10490 however it took Nifty 5 days to do that ( the previous rally from 10490 to 10950 had taken 5 days too). If you remember I had mentioned in my previous post that Nifty needs to break below 10500 in 4 days to signal a start of fresh downmove however Nifty refused to go down on Friday and gave a huge gapdown today. Break below 10490 in 5 days ( equal time) is counted as a negative too however the negative/downside impact of the same may or may not be that severe. Further on the hourly charts, the fall looks slow.

Thursday market was oversold on short term charts and  I had said further fall from here looks difficult. And on Friday (inspite of a 100 point rally), I had mentioned that downside risk has increased recently and Nifty might slide down below 10600 again. Bullish scenario has changed now and I am not in a hurry to long anytime soon. Please note that momentum on the downside is increasing and even after a 200 point fall nifty is not oversold today.

Technically speaking this is the 3rd consecutive gap down we have seen in last 5 days which is unique and usually after 2-3 such  gapdowns Index turns and the next gapdown becomes what you call an  "exhaustion gap". Meaning if we see another gap down then its likely to get retraced fully. We still have some +ve divergence on hourly charts with RSI and couple more indicators are still in positive zone but its definitely not in buy mode and don't recommend buying at this stage. There are contradictory signals in Nifty present so waiting it out for few days is the best strategy. Presently the election/exit poll result is ruling the market sentiments and this could cause few more wild swings in near term. Further weakness from these levels would suggest that Nifty is likely retest 10K levels however it might just give a sharp pull back once again before it decides to do so. I was bullish at 10600 and even when Nifty was at 10900 but have been proven wrong (but no significant loss suffered in trading as our entry point was low) and things changed once market broke below 10650 levels. Now we need to observe how market is behaving in next 2-3 trading sessions before taking our next trading call. As of now risk reward ratio is not in favour of trading (buy side as well as sell side).

Trading Recommendations: Our last trade ( buy at 10650 was exited at 10630) was closed on Thursday and like I mentioned above, we need to observe how market is behaving in next 2-3 days before taking next trading call. For now I don't recommend going long or short at this stage as the wild swings in market can throw you out in no time.







 

Nifty View: Update for 10th Dec 2018

Market Update: Nifty saw a sharp upmove today and closed around 90 points up around 10690 levels. I had mentioned yesterday that even though the Nifty is down its definitely not out. Bears may have been able to pull the markets down in last 2-3 days but overall the market remained in the bullish trend. Nifty was oversold yesterday and even the RSI gave a positive divergence so there was not much scope for Nifty to move down in short term. Bears had to take Nifty down below 10500 today to signal a fresh downmove but it was always a difficult task

Having said that now the question is whether Nifty is out of woods? We cant say that with surety yet. Todays bounce back was more on technical parameters. it was a bounce back from oversold territory. If nifty can build on the gains tomorrow and cross 10750-10800 levels then probably yes we can say that  Nifty has resumed its upmove but till that time there is always a risk of testing 10600 levels again. especially since the election results are round the corner and Nifty can be volatile for next 1-2 days. I am hopeful that soon the real trend will emerge and we should be able to take a trading call. For now the fall from 10930 levels to 10600 does look like a corrective fall (inspite of a vicious 174 points fall yesterday). I still believe Nifty is in bullish phase and unless proven otherwise I will continue to believe so. That's what I mentioned yesterday ( todays rally is a testimony to that) and even today I will stick to that. Reason we are not taking a trading call right now or we exited from our longs is that risk on the downside has increased a little bit. There is always a risk when you take a trading call in market but once the risk reward ratio is not in your favour then you should always sit out and that's how you respect markets.

As per my wave count the move from 10930 to 10600 its still a corrective move which means a move on the upside is pending. But probably the corrective move is not yet finished so we can see another leg down. On the other hand if the rally continues that would mean corrective move is over and the fall yesterday was a bear trap ( will publish charts soon).

Lots of my friends and followers are asking me why I am not  bearish even though Dow is falling 800 points daily and when election results ( which BJP is expected to lose) are around the corner. My answer is simple, Nifty will do what it wants to do irrespective of what Dow or election result does. For short term we might see some swings here n there but overall the tone of market will remain same and as a swing trader we have to stay with broader trend. Short term swing of 100-150 points should not bother us.

Trading recommendation: We have no position right now and waiting for next trading call. I do not recommend any long or short at current levels. Markets could turn volatile and you may find yourself on the wrong side in no time. Overall trend remains bullish just wait for risk reward ratio to be in your favour before you act even if it means entering a bit late and losing 100-150 points . Enjoy your weekend.

Nifty View: Update for 7th Dec 2018

Market Update: Nifty was totally in Bear grip today and momentum on the downside (which was missing yesterday) was clearly visible. Frankly speaking todays fall has come as a surprise to me as I wasn't expecting Nifty to go below 10750 and finally 10650 levels. this zone was a major resistance area for Nifty and it took more than 3 weeks for Nifty to cross this hurdle and once this was crossed I expected it to hold. But market always surprises and we should always be ready for all probabilities. So what does todays fall indicate? Does this mark the beginning of a new Bear trend? Probably no. Though Bears have surprised bulls with their power today, the overall structure still remains bullish. let me explain.

It took Nifty 5 days to touch 10930 from 10500 levels and till the time Nifty breaks 10500 in faster time the bullish trend stays (as per Neo wave, for new trend to begin the last move  should be retraced in faster time). Today was the third day of fall from 10900 levels. So if Nifty breaks 10500 levels tomorrow then we can say that Nifty has started a new leg downwards.

On daily chart Nifty is still making higher highs and higher lows which confirms that market is still in bullish mode. Fall stretching beyond here will definitely mean that things are changing. Also, on daily chart as well as hourly chart clear divergence is visible between RSI and Nifty and Nifty is oversold on short term charts. So it will be very tough for Bears to carry on with the same momentum from here.

So even though I exited our longs today at 10630 ( bought at 10650) I am still not in bear camp. Need to observe market behavior for next 1-2 days to take my next trading call. Todays fall has definitely changed and altered few wave counts I was assuming ( will try to post an updated wave count tomorrow).

So to summarize, Nifty is down but not out ( not today atleast). As a trader once you are with trend don't change your stand till you have conclusive proof. At the same a bigger mistake would be to keep sticking to your stance even when market has shown you otherwise. So for now we will stick to your original stand but will not hesitate to change once market start telling us differently.

Trading recommendation: Longs were exited today @ 10630 (bought at 10650) with a small loss of ~20 points. Due to gap down openings on last 2 days I couldn't exit as per original SL but when you are doing positional trading at times this happens. Now need to observe nifty for 1-2 days before taking a fresh call. I don't recommend going short or long at this point as Nifty is trading in no mans land and can move either way.

 

Nifty Trade Update - 6th Dec

Update (08:10AM): Nifty again likely to open with  a gap down today and below its support area of 10750. Since its a second consecutive gap down the opening rates becomes crucial today. If mkt is trading below its opening low after 9:45 (30 mins) then we exit else hold on.  Trading weak below its opening price will be negative for Nifty. However overall trend still remains up for Nifty.

Update 09:55 AM Nifty spot 10665 Not able to sustain above the opening lows (opening price is 10670-10700) and momentum is increasing on the downside however on short term chart indicators are suggesting nifty is in oversold territory. Hold on to your longs for now. Will keep updating. Need  a sharp recovery from here soon.

Update (12:35 PM):  Nifty spot 10665 Nifty is maintaining a trajectory below opening price ( that is definitely a negative sign). Next couple of hours (second half of the trading) is very crucial as it will decide the trend of Nifty going forward. Hold on to longs need to see how the second half is shaping up before taking a decision

UPdate 2.25PM : Nifty spot 10630 Exit longs. momentum is building on the downside. pls exit all longs