Trading Strategies Using Technical Analysis

[SwingKing]

Raunak

Can u do a small analysis and post here re what went wrong where wrt Sterlite.
Just want to get some insight ... coz as per me there was nothing wrong till y'day closing to show that the stock would just gap down by a huge 6%+ on opening itself !!!

Whenever u r free.

Yes, I already knew that from the morning papers.

BUT

It is generally a technical fault for which stocks fall and not news based i.e. the charts reflect everything in advance.

It was not there OR I was unable to catch it.

So asked Raunak-bhai

SM Bro,

Just check after 15 minutes.

It will be posted.

Tc

 

[SwingKing]

Here we go SM bro.

I have attached two images below. The first one is a chart legend. Understand this before reading the chart. Since I have explained the entire 2010 year for Sterlite, the chart might seem confusing. Hence, its absolutely essential to understand the chart legend first (which is self explanatory).

Now, since the legend is clear, we will come back to Sterlite chart. In my opinion, this stock should never have been bought in the first case. For a stock to remain in an upmove, stock should exhibit significant strength. By strength we mean, a stock should not retrace more than 38.2%. Here are some guidelines.

Extremely Bullish - Retraces less than or equal to 38.2% of previous move.
Weakly Bullish - Retraces more than 38.2% but less than 50%
Neutral - Retraces more than 50% but less than 61.8% but remains sideways
Weakly Bearish - Retraces more than 61.8% but less than 100%
Extremely Bearish - Retraces more than 100% move.

Lets review the sterlite chart now. I have marked points 1-5 depicting the entire upmoves. Not even once has this stock stabilized at some level. The above framework that I have given classifies Sterlite as an Extremely bearish stock since starting of 2010. Hence the line of least resistance has always been on the downside. Any trade taken on the upside is just fighting the trend.

I hope this helps SM bro. I don't emphasize too much on patterns or indicators, hence I have not discussed any indicators here. Price is sufficient if looked at from all angles.

Tc

 

[MurAtt]

Thanks Raunak.

So what I learnt was that overall the trend was weak right from the beginning.
EVEN IF the current upmove was strong BUT that was extreme short term and therefore just went kaput w/o warning .. or rather I did not see the overall warning in the larger TF.

 

[crown]

Crown,

There are 'n' number of theories regarding something happening to market around expiry. With all due respect, I can show 'n' number of instances when those theories don't work. Regarding your particular observation, I would say that those systems which are related to volatility could be affected near expiry. Markets do tend to be volatile near expiry. Otherwise, on the top of my head, I can't think of anything else.

Tc

Raunak bhai

you are right, after reading your post I checked and found that the system I am using is very much related to the volatility.

Bhai, is there any thing which can be done and/or understood to deal with it.

thanks a ton bhai

 

[babukraman]

Thanks Raunak for a nice explanation and SM a special thanks for such a nice question. :clap:
Regards,
Babu Kothandaraman

 

[SwingKing]

SL updates for the present trade.

GSPL - 110.8
Bajaj Auto - 1430

Ashok Leyland remains positive. Will be looking to re - enter beyond 75.

Tc

 

[crown]

Raunak bhai

As you explained to SM bro, regarding the retracement percentage being more than 50% makes the stock somewhat weak. The GSPL chart is also showing more than 50% retracement, is that the reason that you said it was a high risk trade? And when you have taken the trade, there had to be some reason, which I am not able to understand. Please guide Raunak bhai

 

[SwingKing]

Raunak bhai

As you explained to SM bro, regarding the retracement percentage being more than 50% makes the stock somewhat weak. The GSPL chart is also showing more than 50% retracement, is that the reason that you said it was a high risk trade? And when you have taken the trade, there had to be some reason, which I am not able to understand. Please guide Raunak bhai

What I had explained earlier was Overall price structure of Sterlite which was bearish since long.

For GSPL, the overall price structure remains ok. It will get weak if it breaches the current base and then the stock will get weak. That is why it was termed as risky bet.

Tc

 

[crown]

What I had explained earlier was Overall price structure of Sterlite which was bearish since long.

For GSPL, the overall price structure remains ok. It will get weak if it breaches the current base and then the stock will get weak. That is why it was termed as risky bet.

Tc

Thanks Raunak Bhai

It cleared the confusion; coz I have entered long in Castrol India and BGR, and after reading ur message, I was scared to have entered the wrong stock.

Now, I will take extra care of the trades.

Thanks again

 

[crown]

One off the beat question Raunak Bhai

When do you sleep? How you manage to answer each and every question, that too promptly, without getting tired? BTW, I have started avoiding heavy meals during market hours to be able to remain alert and active.

Thanks a Ton Bhai for all your help