Nifty Weekly Charts: Inside bar pattern

Nifty View: Inside bar pattern on Weekly chart

In the morning I tweeted about Nifty making a "inside bar" pattern on weekly charts. Inside bar patterns occurs when Market trades between the high and lows of previous trading session. Here we are discussing weekly charts ( one candle for one week) hence 'inside bar' means for entire week Nifty failed to take out the highs and lows of previous week. This again point us in the direction which says markets are contracting and usually all contractions are followed up by expansion which might begin with an violent action.

Now why this pattern assumes significance is because this is something which is not very common, in 2018 it happened just 2 times and you can see both times it followed by a trend movement in Nifty.  Another point worth noticing is that last week candle was actually a Doji candle  (Doji signifies indecisiveness where open and close rates are almost same). So there are more than 1 or 2 factors which are saying that markets are ready to move from here now. 

Nifty Weekly chart

Markets can not remain in a range, off course they can spend some time in a narrow range but sooner or later they have to break. It happens because traders and investor get bored of seeing same prices day in day out. I do not want to predict the direction of the breakout however regular reader of my blog are aware that I have been bearish on Markets for quite some time so I wont be surprised if the breakout happens on the downside. I am bearish because charts and prices are telling me so but if charts changes tomorrow so will my views. As a trader, we have to be prepared for all scenarios ( including bullish ones) and while today charts are pointing down it can change anytime.

Just one word of caution, this contraction of range has become too obvious and most traders are now aware of it so don't be in any hurry to trade the breakout even if that means losing 40-50 even 100 points. I don't think it will be easy to trade going forward even though you  knows that break out is going to happen. Reason I say so is that  Initial break out may be (I say may be) a false breakout so first let market show that its actually broken out and trend has begun. No one can time the markets and no one can buy at bottom and sell at top so don't even think about doing so.

Nifty View: Update for 14th Jan 2019

Near Term Trend:  ↓ (Down)

Market update: Nifty opened at par and as the trend has been recently, failed to add any points above the opening price but at the same time support came when Nifty turned lower and touched 10740 levels. Market finally closed at 10795 levels down 25 points.

Bulls are supporting market whenever market turns lower and 10740-10750 area has turned out to be a formidable support for Nifty. Please note its in line with our view that market is in 'contraction' mode and support area is moving up and up ( 10340 /10530/10630 now 10740).  Similarly the resistance area is also coming down. Bulls are supporting Nifty at every drop but at the same time failing to take Nifty higher above the opening prices.

Overall it was again a lackluster day of trading where Nifty didn't make any kind of move and volatility was missing. This calmness in the market is probably just the silence before the actual storm comes. One should keep light position and trade with a strict stop loss. Divergence continues between Bank Nifty and Nifty and key oscillators still suggesting that Nifty remains in a down trend. Nifty made a lower low today and made a closing below yesterdays low which is definitely a weak sign. However markets have a tendency to bounce back after 2 bear candles (today was the 2nd bear candle on intraday chart). So we need to observe markets for signs of strength in the next 1-2 trading session.

Technically speaking- diametric is still in formation, prices remain in contraction mode and trading range is getting shorter and shorter everyday. Going forward it will not be easy to trade as there is every likelihood that this contraction will first see a 'false breakout' first to suck in the traders. So pls don't get carried away after seeing a sudden spike out of this range, observe the markets and then only take a trading call.

Trading Recommendation: We exited our one part short today @10810 levels (initiated at 10840)now just carrying one part. Still don't suggest going long at this stage. For now one  should carefully observe the markets and then only take a trading call. Like I said volatility can increase anytime trapping you on wrong side so pls be very careful. If you must trade then trade with a strict stop loss.

Have Nice weekend!

Nifty Trade Update -11th Jan 2019

Update 10:40 AM:  Nifty CMP  10810- Nifty cover one part (50%)short now. Hold balance short ( 1 part)

Open short Positions
Trade 1 @ 10840 ( 1 part)
 

Bank Nifty, RSI and Nifty

Strong Negative Divergence- Bank Nifty with RSI & Nifty

This is one important development taking place since last few days.Bank Nifty is consistently showing negative divergence with RSI and Nifty. Divergence happens when Price move upwards but the oscillators ( like RSI) moves downwards. This shows even though the price is moving up the strength is missing  and such up moves are not to be trusted with.




Bank Nifty Divergence with RSI & Nifty

Here you can see bank nifty is consistently moving in upward trajectory while the RSI ( relative strength index is making lower high. Similarly even the Nifty is making lower highs. With so many negative divergences all around, this is the time to be careful off course divergences can continue for long and sometimes even reverses too. But this is not something one can ignore and should be definitely be part of your analysis while you are devising your trading strategy.

For a genuine bull run I would ideally like to see no divergences.

 

Nifty View: Update for 11th Jan 2019

Near Term Trend:  ↓ (Down)

Market update: Nifty opened at par ( even though SGX was indicating a positive open) and kept drifting in a narrow range today and finally closed at 10825 levels  (down 30 points). It was a pretty listless trading session ( yes you may call it boring) and Nifty made an "inside bar" meaning high and low of yesterday were not breached.

Even though todays session was boring, it assumes lot of significance. I had mentioned in my yesterdays post that " the sharp pull back in last hour has potential to change the trend for Nifty for short term" Bull needed to trade strong above 10870 levels today to bring some strength in markets however they failed once again. Even though Market didn't fall, the inability of bulls to take market higher above the opening prices ( since last 4 days) is weighing heavily on the markets and it assumes a lot of significance in the near term.

There were also a probability if the sharp pull back witnessed yesterday was indeed a 'bear trap' but now the chances of same are almost zero.

Bank Nifty is consistently giving divergence with Nifty, looking at bank nifty chart ( even though I don't track it) I can see its looking much weaker and today while Nifty fell 0.3% Bank Nifty fell 0.7% generally its not very often that one see divergence between bank Nifty and Nifty and sometimes when its there ( not saying always)it might be a sign for something bigger which is cooking in markets.

Another point worth noticing is the negative breadth of the market. Since last few days the declining stocks are outnumbering the advancing stocks ( even though Nifty was rising) which again raises the concern if the distribution is going on in the markets (and to me its nothing but distribution only).

Still no change in my Bearish view, doesn't matter how much pull back Nifty gives and for how long it consolidates till the time I see the actual strength in the prices I wont change my stance. It took Nifty 3 days to reach 10870 levels ( from lows of 10630) now to start a new leg downward, Nifty must break 10630 in next 2 days ( sound difficult? lets see).

Again I reiterate, even though the volatility was totally missing today ( sharp contrast to yesterday) it can increase anytime now so please be very careful while trading and keep the qty in check always. if you feel you have made a wrong trade then don't hesitate to cut your loss and exit. If market catches you on the wrong foot, it will wipe your 100% capital in no time.

Trading recommendation: No change in views still. We are carrying our shorts initiated at 10840 levels ( exited our previous shorts around 10700 levels). Many traders are adding long/shorts and getting chopped and suffering losses on both sides (which happens during sideways trading). For now one must avoid compulsive trading and trade only if you are reasonably sure. Don't recommend going long at this stage so if you are holding longs then either exit or keep a tight stop loss.

Good Day and Happy Trading to you!




 

Nifty View: Update for 10th Jan 2019

Near Term Trend:  ↓ (Down)

Market update: Nifty opened on a strong note at 10870 levels and kept trading in a tight range for most of the day. There was violent fall in second session and index dropped to 10750 levels and immediately staged a smart recovery of 100+ points to close above 10850.

Markets were extremely volatile throughout the day. I have been mentioning in my posts everyday that volatility is likely to be picked up and if one is not careful or try to be too adventurous, hes likely to be trapped by market in these choppy moves. Today many traders got trapped on both sides and suffered heavy losses. Todays move was just one small example and one needs to be extremely careful about trading in such markets.

Overall, today was another day where Nifty dropped first and then recovered from day lows but at the same time not able to post any gain above the opening price. I mentioned in my yesterdays post that "Bulls are supporting market on every drop but are not willing to invest further above opening price" same thing we got to see today as well. So much of choppiness is suggesting that markets are preparing for its next move ( up or down) and its likely to  be violent and should come soon now ( surely choppiness can remain for few more days but that doesn't change anything)

Prices are still contracting, if you ignore the intraday volatility then Nifty has been able to add just 50 points today which is still very much within threshold of 'contraction'. If you notice daily charts, it took Nifty 3 days to fall from 10916 levels to 10630 and now it has taken 3 days to retrace around 80% of the fall. Ideally bulls would have liked to see full 100% retracement by now ( we still need to see how tomorrows trading goes because on Sensex chart this down move took about 4 days).

We maintain our bearish stance for now, however todays sharp pull back is capable of changing Niftys trend for short term as todays last hour move felt like a perfect 'Bear Trap' (depends on how Bull take it from here).

Trading recommendation: No trade is recommended at these levels. if someone is long he can square off his position and wait for markets to give confirmation and enter again. We are still holding 2 parts short ( 10840) and even though temptation was high to add shorts below 10800 levels we resisted as the nifty movement was not convincing. Many intraday traders did enter short below 10800 levels today were seen running for cover in last 30 minutes). 


Happy trading to you!

Nifty View: Update for 9th Jan 2019

Near Term Trend:  ↓ (Down)

Market update: Nifty opened slightly positive around 10795 levels made a high of 10819, low of 10733 and closed at 10800 levels up 30 points. On daily charts Nifty made a 'Doji' candle with a long down shadow. such a 'Doji' indicate indecisiveness with support at lower levels. 'Doji' occurs when both open and close point of day are roughly in same region.This shows though bulls are ready to support market at lower levels they  are not ready to invest further beyond the opening prices.

Overall there is no change in Nifty view, and as per my view Nifty still remains in a bear trend. We need a strength from 10800+ levels & then 10900+ to signify bulls are getting stronger, till the time that happens we prefer sticking to bearish stance.

Compression of prices still continues in Nifty it may finish in a day or two or it may continue for few more days but not much time remaining now and nifty should give a breakout in either direction pretty soon (our preferred direction remains on the downside).

If you look at Nifty weekly charts you will notice that since last 7-8 weeks, Nifty is consistently hovering in a tight range of  10600-10900. For positional traders its a very difficult phase because markets are absolutely doing nothing and there is no clear trend emerging that's why its important to be patient and keep a calm head always. Whenever market gives a break out we should be ready for it. Such  'Nothing' phases are expected in markets ( especially when markets have already given a fall of 1700+ points in 6-7 weeks ( from High of 11750 to 10K levels). Just FYI (though its not mentioned on the blog) we were short around 11600 levels and covered our positions around 10500 previously so we can afford to be patient.

Technically speaking, still believe its a diametric pattern (Markets have not given me any reason to doubt it so far) and we should patiently wait for either for completion of this pattern or for markets to prove that its wrong.

Trading Recommendations: We covered our 1 part short today around 10767 levels in the morning, there were signs of consolidation continuing so we thought reducing some positions at this stage will be wiser ( Intraday Nifty went 50+ points from that point). For now we are only holding shorts initiated @10840 levels but wont hesitate to short again the moment we feel market is ready for a down move.