Insight into why the NIFTY is probably heading down

[pasha]

Looks like our markets are waiting for the RBI policy, before going down further.

 

[rajadawn]

We are technical traders. We don't bother about news dear. The fact is that charts were weak since one week. And now the news may reflect whatever it wants to.

Tc

Raunak,

Technical trading has its basis in behviour of investors. What better example of behavioural volatility than a situation where a leading market player getting indicted by SEC. If fear and greed rules the charts then it is the turn of fear now. Rightly the global markets have shown a dip on Monday. It is coincidental that time for a correction is also evident in NIFTY from various parameters.

 

[SwingKing]

Raunak,

Technical trading has its basis in behviour of investors. What better example of behavioural volatility than a situation where a leading market player getting indicted by SEC. If fear and greed rules the charts then it is the turn of fear now. Rightly the global markets have shown a dip on Monday. It is coincidental that time for a correction is also evident in NIFTY from various parameters.

Rajadawn, every investor/trader in the market has his/her own comfort level. For me, It is important to remember that the principal reason that I am in the market is to make a profit. If the odds of that happening have decreased, then I have little justification for maintaining the position. News and other random noise, distort my comfort levels a lot and often make me believe that my odds to make a profit have decreased. I believe that charts don't lie and hence I always disassociate myself with any kind of rumor or news around.

Tc

 

[rajadawn]

Rajadawn, every investor/trader in the market has his/her own comfort level. For me, It is important to remember that the principal reason that I am in the market is to make a profit. If the odds of that happening have decreased, then I have little justification for maintaining the position. News and other random noise, distort my comfort levels a lot and often make me believe that my odds to make a profit have decreased. I believe that charts don't lie and hence I always disassociate myself with any kind of rumor or news around.

Tc

I think the fundamental difference between our viewpoints stems from the fact that you treat market movements to be isolated and unaffected by news and events whereas I feel events are the basis of market movements in the first place. Since on a regular basis these mass of events follow a predictable patterns the charts too look regular. (why ? it in fact follows the Fibonacci series )

My hypothesis is that events can be categorised and each category has a particular impact on charts. Most of the times seemingly unrelated events are actually repetition of a particular category. Since that random mix of NORMAL category of events occur frequently we get a predictable indications. However, once in a while we get abnormal events out side this category (like 9/11) and then predictive powers of the charts (and their derived parameters) break down completely.

GS indiction is not that extreme but well it is a strong event.

It is like in normal circumstances mostly Newton's laws hold but in special cases ( like when a body approaches speed of light) it doesn't hold - Einstein's theory of general relativity has to be used to explain the fate of the body. Extreme case is like inside a black hole all Normal laws of Physics break down completely.

 

[nimish_rulz]

I think the fundamental difference between our viewpoints stems from the fact that you treat market movements to be isolated and unaffected by news and events whereas I feel events are the basis of market movements in the first place. Since on a regular basis these mass of events follow a predictable patterns the charts too look regular. (why ? it in fact follows the Fibonacci series )

My hypothesis is that events can be categorised and each category has a particular impact on charts. Most of the times seemingly unrelated events are actually repetition of a particular category. Since that random mix of NORMAL category of events occur frequently we get a predictable indications. However, once in a while we get abnormal events out side this category (like 9/11) and then predictive powers of the charts (and their derived parameters) break down completely.

GS indiction is not that extreme but well it is a strong event.

It is like in normal circumstances mostly Newton's laws hold but in special cases ( like when a body approaches speed of light) it doesn't hold - Einstein's theory of general relativity has to be used to explain the fate of the body. Extreme case is like inside a black hole all Normal laws of Physics break down completely.

I love your answer but beside that not much..Check the volumes on Dow on 13th and 14th. Especially 14th with such a low range movement the volumes were massive greater than the day of fall so obviously someone had seen it coming.

For nifty like Rauank said it has been showing weakness for a while. The sheer breakdown from 5399.98 levels is another indication that shorts were building check the FIIs acitivity they were buying in cash but they were shorting index futures more than 3 times what they were buying.

I guess news can be anticipated by charts if you are very very disciplined. I am not and hence even though in one of the post where i mentioned 5290 should be a stop and one must exit all longs I couldn't.

 

[nimish_rulz]

Also after watching the banks rise in the last one and a half hour of trading we might not see a significant Interest rate movement tomorrow. I believe market will take it positively as we already have discounted a 0.5% increase hence the correction from 5400 to 5160 levels. Now I think it will be based on global triggers and earnings.

 

[saivenkat]

Rajadawn, every investor/trader in the market has his/her own comfort level. For me, It is important to remember that the principal reason that I am in the market is to make a profit. If the odds of that happening have decreased, then I have little justification for maintaining the position. News and other random noise, distort my comfort levels a lot and often make me believe that my odds to make a profit have decreased. I believe that charts don't lie and hence I always disassociate myself with any kind of rumor or news around.

Tc

Dear Raunak, Let me come up with an argument, so that i can learn in the end..
You say that I believe that charts don't lie and hence I always disassociate myself with any kind of rumor or news around.

Then why should you relate in your posts about the macro economic data and the global happenings, like that of Hangseng index, china, Dow charts..
What is the necessity to look in to these charts? ( In your daily analysis of nifty.. i saw charts of these) Why not stick to our nifty chart alone and come up with a conclusion?

Thanks a lot for explaining me.

Regards
Saivenkat

 

[SwingKing]

Dear Raunak, Let me come up with an argument, so that i can learn in the end..
You say that I believe that charts don't lie and hence I always disassociate myself with any kind of rumor or news around.

Then why should you relate in your posts about the macro economic data and the global happenings, like that of Hangseng index, china, Dow charts..
What is the necessity to look in to these charts? ( In your daily analysis of nifty.. i saw charts of these) Why not stick to our nifty chart alone and come up with a conclusion?

Thanks a lot for explaining me.

Regards
Saivenkat

Dear Sai,

By looking at the Macroeconomic data (inflation, P/e's, investor confidence index) I am not focusing on news. I am taking raw data and forming my own opinion about it. Similarly, by analyzing other countries charts I am essentially doing Intermarket analysis (again not focusing on what their media channels are reporting) but focusing on what the "Charts" of those countries are representing. Anyone not relating global market's to measure sentiment is missing out on a major principle of market analysis.

There is a vast difference between analyzing news and analyzing charts. Relying on News is when I am basing my decisions on it. Analyzing charts means i am potentially basing my decision on price analysis. Hope you get my point.

Tc.

 

[saivenkat]

Dear Sai,

By looking at the Macroeconomic data (inflation, P/e's, investor confidence index) I am not focusing on news. I am taking raw data and forming my own opinion about it. Similarly, by analyzing other countries charts I am essentially doing Intermarket analysis (again not focusing on what their media channels are reporting) but focusing on what the "Charts" of those countries are representing. Anyone not relating global market's to measure sentiment is missing out on a major principle of market analysis.

There is a vast difference between analyzing news and analyzing charts. Relying on News is when I am basing my decisions on it. Analyzing charts means i am potentially basing my decision on price analysis. Hope you get my point.

Tc.

Dear Raunak,
Still i am not clear, how you say that the opinion framed about Macroeconomic factors, is independent of your price analysis? Is my interpreting correct?

Or, when you say that you don't act on news based, does this mean, say for example..just because the TV channels predict that the market will go down.. you won't go short? So you would analyze the market based on the data gathered and see that if it is reflected in the chart.. and then take a decision on it. Is it?

If the second part of it is correct, does not this news factors influence in the framing ( forming) of charts?

For example, suppose CEO of a company x, is interviewed during market hours, and suppose he says that there is a likely bonus share that is to be declared in the ratio of 1:1.. This is unconfirmed news.. when the news is flashed.. the share trading say at 100 spikes up to 120 or so.. and this trend continues for few days, say it touches 145.. and then the share price retraces to 100, say after a week.

Will not this news factor have an influence on the candles formed in charts? Also, How far it is correct to interpret the patterns created in the charts because of this unconfirmed news on the stock? Will it be trust worthy?

Finally Raunak bhai, another novice question.. why to bother about all these data and global index etc.. Say you see a " Bearish Abandoned baby pattern" or a " Bearish harami" pattern in a chart.. What is wrong in taking a decision simply by looking in to these patterns alone.. May be not all times these patterns are valid.. when one take a decision on it ? Am i correct? Or is there any other reason beyond that?

Sorry for putting a counter response.. and also making a larger post..

Thanks and regards
Saivenkat:thumb:

 

[AW10]

Dear Raunak, Let me come up with an argument, so that i can learn in the end..
You say that I believe that charts don't lie and hence I always disassociate myself with any kind of rumor or news around.

Then why should you relate in your posts about the macro economic data and the global happenings, like that of Hangseng index, china, Dow charts..
What is the necessity to look in to these charts? ( In your daily analysis of nifty.. i saw charts of these) Why not stick to our nifty chart alone and come up with a conclusion?

Thanks a lot for explaining me.

Regards
Saivenkat

Saivenkat, thanks for raising very valid question. Raunak has already answered it and I agree with his views on it.
Just wanted to add my views as well.
I believe that various financial markets are interrelated. You know it well, how much our mkt depends on the direction of FII fund direction. So if we need to be ahead of CNBC then we need to understand the
clues of FII before it happens. When US mkt sales-off, and all other risky assets like emerging mkts go down, we know the Global smart money is moving away from Risky mkts.. And hence it is going to impact our mkt, sooner or later. But question is how to understand it, certainly it is not when CNBC reports it. Charts tell us all much in advance, provide we know how to get those clues.
If we want to compare RSI / MA with CMP then thats what chart will tell us,.. but if we adopt different approach like VSA, Correlation with other mkts etc then we get very different info from same chart.

And most of the time, by the time news reaches the media, it is already late. In my view, Charts tell us the important price levels and market attempts to go towards them.
It is just that news helps in that move. If mkt is having a support at 5200 level, then due to news, it might take 2 days to reach that level.. or 2 weeks in absence of any news.
IMO, mkt leads the media.. but unfortunately, the sound of media is much louder hence we ignore the signals from market i.e. charts and give attention to media cacophony.

Happy Trading