Hi Kumar...
I'm not acquainted with the works of William O'Neil but what I can glean from my observations is written below.
As you may be aware, over a period of time all analysts making readings on the Nifty have suffered the egg on face syndrome.
The market has its own mind is no longer the clich, but 'liquidity driven' is all it's about. Even that phrase is now a clich. However, it's the simple reality of the times.
A clich can only stand on reality, else it's fiction.
For a few words on distribution days and its implications, for distributions days to give indications of a correction, they will start to crop up in the market where the index closes lower on heavier volume than the day before. Also there will be increased instances of a strong market opening which fizzles into a weak close. We have seen a few of these as pointed out by you, and if the market wants to correct, that's a good set-up for it. This is especially so coming off an overbought condition, and the Nifty has consistently been way overbought. As for volume, we have consistently seen the Nifty rise on diminishing volume for quite some time now.
But really, over the past few weeks we have not had true distribution days, and the up days are far exceeding the down days. There has been little selling conviction in the face of the strong underlying strength of the market, and no key levels have even been threatened by a wide margin for quite a while. Distribution means the market is being controlled by sellers, but this is not the case currently.
At these high levels where the analysts have been baying for blood, it’s to be expected that any tug to the down, or a down day, is always going to be accompanied by increased volume as the nerves are now quite frayed. This increase in volume on down days is also very common when the day is quite volatile in each direction, as I have observed currently.
Also, the Nifty has been climbing on poor a/d ratios, so the up days are logically bereft of volume.
Notice the Open-High-Low-Close of the days you have mentioned:
March 6: 3147.25-3194-3147.2-3190.4.
This is an outright up day, with no volatility. Open is same as low, and close is right behind the high.
March 7: 3190.45-3192.95-3266.75-3182.80.
Close is lower than open, high is a tad above open, and low is a good 28 points below the high. A volatile session, even if the close pulled back 16-17 points from the low.
March 13: 3184.1-3221.3-3174.05-3202.65.
Volatile yes, but the close is 18 points above open, and 28 points above the low on a clearly up day.
March 14: 3197.20-3223.45-3184.05-3195.35.
A long enough bar showing volatility with a 39 point difference between low and high. For the rest a near perfect Doji with the open and close being nearly equal. Hardly a down day, but for the volatility.
March 20: 3234.2-3268.25-3234.2-3265.65.
A straight forward up day, a long white candle, no volatility, open is same as low, and close is just below high.
March 21: 3264.65-3292.15-3247.25-3262-30.
Another Doji as the open and close are nearly the same, but volatile with 45 points difference between low and high. Bears could well have had a field day but for a pullback.
From the above it’s clear that the down days have not really been well defined, and the increase in volume is more on account of volatility and of course poor a/d ratios.
Again, too many up days and week on week higher closes, six in a row, showing strength.
The distribution days theory is negated.
This is not to say a pullback in not on the cards, but when it comes, it will be on account of sensible profit booking rather than on technical grounds. The market is currently living out the fantasy of greed and is getting its arm twisted from the bullying of big money.
In conclusion, while it’s great to be diligently following TA, it must not become like the blinkers. Be aware of the details and the patterns that are being consistently played out.
As in all the doctrines of TA, a pattern is a pattern till it’s conclusively broken. This pattern is far from being broken as of now.
Fibonacci pullbacks, Elliott wave extensions, four day distributions, trendline breaks, RSI, ROC, negative divergence in Trix, all these and more have been futile in calling a correction on the Nifty.
That’s all I can think of saying and this is what I believe. Hope it helps.
I'm not acquainted with the works of William O'Neil but what I can glean from my observations is written below.
As you may be aware, over a period of time all analysts making readings on the Nifty have suffered the egg on face syndrome.
The market has its own mind is no longer the clich, but 'liquidity driven' is all it's about. Even that phrase is now a clich. However, it's the simple reality of the times.
A clich can only stand on reality, else it's fiction.
For a few words on distribution days and its implications, for distributions days to give indications of a correction, they will start to crop up in the market where the index closes lower on heavier volume than the day before. Also there will be increased instances of a strong market opening which fizzles into a weak close. We have seen a few of these as pointed out by you, and if the market wants to correct, that's a good set-up for it. This is especially so coming off an overbought condition, and the Nifty has consistently been way overbought. As for volume, we have consistently seen the Nifty rise on diminishing volume for quite some time now.
But really, over the past few weeks we have not had true distribution days, and the up days are far exceeding the down days. There has been little selling conviction in the face of the strong underlying strength of the market, and no key levels have even been threatened by a wide margin for quite a while. Distribution means the market is being controlled by sellers, but this is not the case currently.
At these high levels where the analysts have been baying for blood, it’s to be expected that any tug to the down, or a down day, is always going to be accompanied by increased volume as the nerves are now quite frayed. This increase in volume on down days is also very common when the day is quite volatile in each direction, as I have observed currently.
Also, the Nifty has been climbing on poor a/d ratios, so the up days are logically bereft of volume.
Notice the Open-High-Low-Close of the days you have mentioned:
March 6: 3147.25-3194-3147.2-3190.4.
This is an outright up day, with no volatility. Open is same as low, and close is right behind the high.
March 7: 3190.45-3192.95-3266.75-3182.80.
Close is lower than open, high is a tad above open, and low is a good 28 points below the high. A volatile session, even if the close pulled back 16-17 points from the low.
March 13: 3184.1-3221.3-3174.05-3202.65.
Volatile yes, but the close is 18 points above open, and 28 points above the low on a clearly up day.
March 14: 3197.20-3223.45-3184.05-3195.35.
A long enough bar showing volatility with a 39 point difference between low and high. For the rest a near perfect Doji with the open and close being nearly equal. Hardly a down day, but for the volatility.
March 20: 3234.2-3268.25-3234.2-3265.65.
A straight forward up day, a long white candle, no volatility, open is same as low, and close is just below high.
March 21: 3264.65-3292.15-3247.25-3262-30.
Another Doji as the open and close are nearly the same, but volatile with 45 points difference between low and high. Bears could well have had a field day but for a pullback.
From the above it’s clear that the down days have not really been well defined, and the increase in volume is more on account of volatility and of course poor a/d ratios.
Again, too many up days and week on week higher closes, six in a row, showing strength.
The distribution days theory is negated.
This is not to say a pullback in not on the cards, but when it comes, it will be on account of sensible profit booking rather than on technical grounds. The market is currently living out the fantasy of greed and is getting its arm twisted from the bullying of big money.
In conclusion, while it’s great to be diligently following TA, it must not become like the blinkers. Be aware of the details and the patterns that are being consistently played out.
As in all the doctrines of TA, a pattern is a pattern till it’s conclusively broken. This pattern is far from being broken as of now.
Fibonacci pullbacks, Elliott wave extensions, four day distributions, trendline breaks, RSI, ROC, negative divergence in Trix, all these and more have been futile in calling a correction on the Nifty.
That’s all I can think of saying and this is what I believe. Hope it helps.
