Nifty: Daily Price Analysis

[AW10]

Oh, so I was already late to get this news. I just read it today.
Nimish, Greece issue is far different cause, they are not independent to take monetary decision. As a part of EURO zone, they have their contractual limitation. And kind of strict measure that govt is announcing to the world has major impact inside the country.
(think of situation if the salary our central govt staff is cut by 10/15%, their pension rules are changed, tax rate is increased to collect money when there is already no hope of growth in economy). How will our trade unions, political parties, people, industry will react to it. Germany and France banks have greek assets on their balance sheet which is valued at $ X billion today. If these assets loose value and goto (X - y) billion, then these banks to show the loss of -y billion or take a hit on asset side of balance sheet.

At this stage, the ink of first bailout talk has not dried yet. They are in the process of discussion real condition to get the money from IMF and ECB. That is certainly going to come with own carrot and whips. And, There are already indication that current bailout is not sufficient, they might need another bailout soon cause their projection of revenue inflow to govt are too optimistic at this stage.

So there is casecading effect of it and that's what is mkt watching closely. And when these equations change, it will shift the direction of global money flow from 1 asset class to another.. and specially away from risky asset class.

Atleast, I think that's what is the world watching for. And lets not forget, still there are 3more countires of PIGS in pipeline.

And don't forget the Hedge funds/smart money who are betting on it.

So, I don't think it is an issue with no base. Spreads on their bonds would not go wide for any reason. Maybe we have limited knowledge to understand it (I am trying to get more into macro economics recently to reduce my ignorance).

Happy Trading

 

[SwingKing]

Nifty Price Analysis - 23rd April 2010

On a broader note, Nifty managed to cross 5300 today but still fell short of the 5310 level which is the previous intermediate high. In all, today's session was positive, structure wise. Nifty managed to close within 10% of its high. This is a good sign but breadth wise, the market's were not strong. Today's session had 589 scripts advancing to 689 declining. Usually on such strong day's, the market's should have shown overall strength. Nevertheless, we will still count this day as a good positive day.

The thing to note now is that Nifty is rising, but on a very slow rate. Momentum is falling by the day and this is never healthy for the market's going ahead. To highlight this point, I have drawn 2 trend channels and one long term trend line. For the sake of better understanding, I have included a legend on the chart which would help you understand my point of reference. The first two top's were formed in the first trend channel. Following that, the third top, failed to reach the upper boundary of channel 1 and fell into the second trend channel. This very shift of peaks from one channel to another represents the falling pace/strength of the market. Furthermore, the last peak now has failed to reach the upper boundary of channel 2 and while doing so has violated a major trendline drawn from March 2009. This trendline is now acting as a major resistance. Price action of last 4 days has failed to put price above this trendline (yellow).

A potential right shoulder of Head and shoulder's pattern (Volume pattern's also confirming) is also suspected to be have formed and the channel 2 remains a valid neck line for the same. Trendlines are difficult to trade with in real time basis. But, they do offer some amazing insights once they have been constructed. In my experience, they are one of the few tools available which signal early reversals of the prices. Anyone following Elliot wave analysis should have noted that we have probably completed the Wave 5 (of lesser degree) of Wave 1 (larger degree). We now stand a high probability of forming a Wave 2 (either a ZigZag, Flat, Triangle or Combination). Usually wave 2 forms a zigzag correction which corrects to 0.382/0.618 level of wave 1 (larger degree). If the neckline (channel 2) and channel 1 break, this wave 2 formation could very well be on the cards.

We remain linked to global cues, and though Greece and now the Reliance results news is making waves, we should not be too bothered about it. News is never important but how people react to it remains of utmost importance. So let's see how things span out and let's have a good weekend ahead.

P.S. - AW10, excellent analysis about that Greece news wave. Market crashes and corrections are all about domino effect.

 

[SwingKing]

Nifty Analysis 26th April 2010

Global market's continue to show tremendous momentum. We, on the other hand, have been moving up with lack of significant strength. Advancing/Declining ratio continued to remain weak and with every positive day, volumes have been diminishing. This does not put us into a situation of extreme weakness. However, it does emphasize to move ahead with caution. No one can argue with the market's and hence as market participants we don't have much choice. For the very short term, a close above 5332 would ensure a short term trend reversal. On the short side, level of 5220 remains crucial.

Furthermore, momentum indicators are continuously falling with every peak. Not even one major peak since May 2009 has had a rising momentum structure behind it (lower highs and lower lows) and hence we need to be cautious. At the time of writing, European market's have again closed on a stronger note while the Dow is putting up modest gain. My bias still remains on the short side for shorter term as I don't foresee good risk to reward ratio on the long side.

Nifty and Momentum

Nifty and Volume

 

[SwingKing]

27th April 2010 Nifty Analysis

Another inside day for market's today and another dull day as far as the market action is concerned. Nifty remained in a range today and finally closed at 5308. Asia largely has remained weak with Hang seng and China correcting further today. China has decisively broken the triangle being formed and has moved down further from the triangle (refer previous post for image). Hang Seng continues to face resistance from the H&S neckline. Furthermore, European market's have not shown great deal of strength either. FTSE is facing tough resistance at the levels of 5700 and is unable to breach those levels. U.S. market's have also not made any significant moves in either direction as of now.

If Nifty turns from this level and starts moving down (and if it takes out recent low), then we could form an opinion that 2nd wave of ABC (Zigzag) formation could be underway. Although it would be premature to comment on it, still we would like to keep all the possibilities open. As of now though, the bias still remains on the short side and would reverse only if 5332 and 5382 are taken out on closing basis.

Europe Update: Just checked out Europe after reading Nimish's post and it indeed has closed up in mess. We need to see how Dow closes. If things get messy on Dow, then we could expect some action tomorrow.

 

[nimish_rulz]

27th April 2010 Nifty Analysis

Another inside day for market's today and another dull day as far as the market action is concerned. Nifty remained in a range today and finally closed at 5308. Asia largely has remained weak with Hang seng and China correcting further today. China has decisively broken the triangle being formed and has moved down further from the triangle (refer previous post for image). Hang Seng continues to face resistance from the H&S neckline. Furthermore, European market's have not shown great deal of strength either. FTSE is facing tough resistance at the levels of 5700 and is unable to breach those levels. U.S. market's have also not made any significant moves in either direction as of now.

If Nifty turns from this level and starts moving down (and if it takes out recent low), then we could form an opinion that 2nd wave of ABC (Zigzag) formation could be underway. Although it would be premature to comment on it, still we would like to keep all the possibilities open. As of now though, the bias still remains on the short side and would reverse only if 5332 and 5382 are taken out on closing basis.

Check your PM. Sorry for the late reply.

And Europe closed in a mess! For me short term reversal if we go below 5290 we should go back to 5160 before we go up again. So if we go below 5290 I agree with you time to go short with a stop of 5310 and first target of 5150 a breach of which should make us see 5050.

 

[AW10]

Oh, so I was already late to get this news. I just read it today.
Nimish, Greece issue is far different cause, they are not independent to take monetary decision. As a part of EURO zone, they have their contractual limitation. And kind of strict measure that govt is announcing to the world has major impact inside the country.
(think of situation if the salary our central govt staff is cut by 10/15%, their pension rules are changed, tax rate is increased to collect money when there is already no hope of growth in economy). How will our trade unions, political parties, people, industry will react to it. Germany and France banks have greek assets on their balance sheet which is valued at $ X billion today. If these assets loose value and goto (X - y) billion, then these banks to show the loss of -y billion or take a hit on asset side of balance sheet.

At this stage, the ink of first bailout talk has not dried yet. They are in the process of discussion real condition to get the money from IMF and ECB. That is certainly going to come with own carrot and whips. And, There are already indication that current bailout is not sufficient, they might need another bailout soon cause their projection of revenue inflow to govt are too optimistic at this stage.

So there is casecading effect of it and that's what is mkt watching closely. And when these equations change, it will shift the direction of global money flow from 1 asset class to another.. and specially away from risky asset class.

Atleast, I think that's what is the world watching for. And lets not forget, still there are 3 more countires of PIGS in pipeline.

And don't forget the Hedge funds/smart money who are betting on it.

So, I don't think it is an issue with no base. Spreads on their bonds would not go wide for any reason. Maybe we have limited knowledge to understand it (I am trying to get more into macro economics recently to reduce my ignorance).

Happy Trading

And finally yesterday rating agencies have called Greek bond as Junk. And also brought Portugal in focus now.

Immediate effect is crash in all risky asset - S&P 500 down, FTSE down, Oil down. Emerging mkts down... and run to safety of Gold which is hitting new 30day high and attempting to breakout from 1160/1175 resistance zone.

In our market, are we seeing the formation of right shoulder of H&S pattern ? I will be watching for increse in volume and strength in this leg of fall. IMO, without any doubt we have downward channel in place now and hence trend is down. I won't anticipate much action tomorrow but will be looking forward for Friday's market. Might like to using tomorrow mkt to buildup/adjust my positions and hedges.

Raunak, looking forward for your charts later today.

Happy Trading

 

[nimish_rulz]

And finally yesterday rating agencies have called Greek bond as Junk. And also brought Portugal in focus now.

Immediate effect is crash in all risky asset - S&P 500 down, FTSE down, Oil down. Emerging mkts down... and run to safety of Gold which is hitting new 30day high and attempting to breakout from 1160/1175 resistance zone.

In our market, are we seeing the formation of right shoulder of H&S pattern ? I will be watching for increse in volume and strength in this leg of fall. IMO, without any doubt we have downward channel in place now and hence trend is down. I won't anticipate much action tomorrow but will be looking forward for Friday's market. Might like to using tomorrow mkt to buildup/adjust my positions and hedges.

Raunak, looking forward for your charts later today.

Happy Trading

AW10 I agree I might be wrong the last time when I posted the message but from the low of 5160 we did go upto 5330. So short term reversal and me talking about banking stocks going up did happen. I m still not convinced that we will see a fall similar to what we saw in Jan-Feb.
Some reasons why I believe so:
For the past 1 year everytime we have fallen we have had a very strong correlation with the falls and rise. This is the first time all the markets are very different to each other usually when all the markets are at their 52 weeks high and a week later we have a fall this time not all the markets have yet hit the 52 weeks high.
The news about Greece Spain all the PIIGS you mentioned has been discounted and people are very bearish if you see there is not much participation in the market by retail investors. And usually when people are bearish the stock market doesn't tank. The American Market haven't hit significant resistances as of yet. All the selling has been news based none of the selling has been due to the participation of weak money or excess valuations. Hence I believe there is a lot of steam still left for the markets to go up. I ll be watching the critical level of 5160 in our market and the level of 10940 on Dow to be taken out on closing basis to become bearish.
A we speak most of Europe has started to recover. Sometimes I believe this plain old manipulation as Dow was inching up and going to test a new 52 week high the downgrade news came.
Today FTSE and rest of Europe opened well only a 0.1% down. Slowly as our market and other asian markets started to rise the European stocks fell and went down 2-4%. Now as soon as Asia is closed they are down again by only 0.5%-2% recovered a lot.

My problem here is the bad news about greece is already out it cannot get worse than this as some Ministers have suggested in Germany that Greece should default on its loan. The very interesting thing is that the dollar hasn't risen as much as the fall in everything else. Gold rising more than the dollar is not all that bad for the markets.
Today gold is falling again and it has failed to consistently break the resistance level of 1170 and has been in a sideways trend since December.


In short I am not of the view that we should not go long before we take out today's high 5275 and I also feel not the right time to go short until we break 5160(it has proved to be a support on 3 major down moves in the past 1 month). This was also the major support in January before we went down.

 

[AW10]

Nimish, don't get me wrong. I am not contesting your view or trying to say that u are wrong and I am right (will be too naive of me to behave in that way). I fully respect your bullish views. In the market people have different views and that is ok.

What I posted was the big picture views of mine.. (And many a time, I am also wrong in anticipating the market).

My approach of trading is slightly different. Whole world is waiting for 5160 to break to short the market. But I would rather play that now and manage my risk well. When 5160is broken, I will scale-in and go aggressive. And if it is not, then atleast I will come out breakeven on my trade. What I am adopting here is the - "sell at resistance" approach. rather then more popular - "Break of support" approach of price action trading.
IMO, short at 5160 with Stoploss at 5400 is risky.. and prefer to short at 5320 level with stop at 5400 and manage the additional risk of trading against the crowd well.

Happy Trading

 

[nimish_rulz]

Nimish, don't get me wrong. I am not contesting your view or trying to say that u are wrong and I am right (will be too naive of me to behave in that way). I fully respect your bullish views. In the market people have different views and that is ok.

What I posted was the big picture views of mine.. (And many a time, I am also wrong in anticipating the market).

My approach of trading is slightly different. Whole world is waiting for 5160 to break to short the market. But I would rather play that now and manage my risk well. When 5160is broken, I will scale-in and go aggressive. And if it is not, then atleast I will come out breakeven on my trade. What I am adopting here is the - "sell at resistance" approach. rather then more popular - "Break of support" approach of price action trading.
IMO, short at 5160 with Stoploss at 5400 is risky.. and prefer to short at 5320 level with stop at 5400 and manage the additional risk of trading against the crowd well.

Happy Trading

Sorry man I didn't mean to come out like what it might have sounded to you. I agree we are not contesting each other but good sound arguments. I too respect your view. The only thing I wanted to say was that there is a lot of manipulation going in the markets. For some reason I believe the smart money wants to keep the normal investor away whether its US or India.

On the trading view point I am still very young and lack the experience you have had. So will learn a lot from you as we move on.

Sorry if I sounded a bit rough. And for me the exit long level was 5290 which was broken convincingly today and will not go long until I see a close above 5275-5280.

 

[scplindia]

US and Europe have retraced back and covered their losses, so tomorrow looks we will be back above 5240.

But the puts building up at 5100, and unwiding at 5200 gives another picture, that we will go down tomorrow, this can change fast, so we have a very bright chance of going up tomorrow.