Trading Strategies Using Technical Analysis

[SwingKing]

@VJAY - Apollo Tyres.

Dear VJAY,

First of all good work done on Apollo tyres. Let me now explian how I am looking at it.

Apollo Tyre

1. Lows & Price Analysis - Stock was in a strong upmove as depicted by its rising lows from A - D. Once D was broken, the stock has consistently formed lower lows with minor rallies being retraced on the down side to extent of 100% retracements. What does this tell us? It tells us that on daily frame the stock is in extremely bearish mode. It is only now that the stock for the first time has taken a previous pivot high (Blue line). Hence now, we will wait for retracement to occur. Will then review it again.

2. Weekly Trend

On the Weekly trend, over the past one year it has largely remained Extremely Bullish to Weakly Bullish. However for the first time it has now retraced 100% of its move on weekly frame. Hence, I would be careful with it as the price structure is not very positive. As of now it is definitely indicating that the stock is in Extreme Bearish structure.

3. MACD and Momentum - Just for supplementary analysis, we can see that Momentum is negative on Weekly frame and MACD is still in Bearish shape.

4. Decision - Wait and Watch

Immediate Daily trend - Extremely Bearish but recent Pivot high breached
Weekly Trend - Extremely Bearish
Weekly Indicator - Bearish
Overall shape of Nifty - Bullish

We will watch how this retracement on the daily frame spans out. If weakness emerges, it will be time to go short.

Hope this helps dear.

Tc

 

[SwingKing]

Raunakbhai,
I tried to use TA, but can't get throught.
Is there any simple indicators that I must you first?

Dear Prashant,

As you may see here, we don't use indicators that much. Just a broad framework to trade in the direction of long term trend. Mainly price analysis and how the stock is structured on the whole.

What is the exact problem you are facing in TA. Let me know and I will guide you through.

Tc

 

[SwingKing]

Dear Raunak,

Thanks for the detailed explanation on Hindalco , I am curious to know why you mentioned adding of additional position after price crosses 220 ?. Is it because it is the current swing high .

When i look at the chart of hindalco i notice that on 22nd OCT the closing price is 222.35 , should we not be adding positions after the price crosses this value ?.

Thanks for your reply,

Best Wishes,
Nithin

Dear Nithin,

Thanks for pointing out the error. Yes we will add above 222.35

Tc

 

[SwingKing]

Hello Raunak

When analysing charts, what should be the ideal time-frame that we should use?
Suppose i am analysing Daily Charts on EOD basis as on 03-Dec-2010, what should be the time-frame (in months or weeks) to look back? How much data should be used for analysing?

Does it depend on whether we are Swing Trading, Positional Trading or making Investment? If so, can you tell me the time-frame in each case?

Also, can you tell me how much data should be interpreted in case we analyse charts on weekly or monthly basis?

Vmonu,

For Swing trade, this is what I will do.

Main Trend Reference - Weekly chart
Daily Trend - Daily chart with price analysis
Hourly chart - For timing purpose
Golden rule - Swing trade in direction of Weekly chart.

For Positional and Investment Trades.

Main Trend Reference - Monthly chart
Shorter Trend - Weekly chart with price analysis
Daily chart - For timing purpose
Golden rule - Invest in direction of Monthly chart.

Choosing time frame and nature of trades depend on the underlying goal. If the goal is clear, tools will show up. Else, one will just keep fluctuating between different time frames. Hence, set your goals and the time frame will show up. Good luck.

Tc

 

[rsingh2005]

Got the point.
Now what you advise , how I should create the basket of high beta stock initially, just stick to few like Hindalco, DLF, RCapiltal.or one should analyses high beta stock as a whole.
Also at initial stage , one should go for equity only, or can try hand in future too. In this same context, e.g., the trade of Hindalco, & how can we analyze the risk-reward ration in swing trade & in general what should be the risk-reward ratio.
I use Amibroker, so would you please tell how can I scan the high beta stock in Amibroker.
Regards

 

[vmonu]

Thanks for replying Raunak.

So, in case of swing trade we look at Weekly chart for direction.
Now, suppose a stock is in uptrend, if we analyse weekly charts and use 1 year's data. The same stock is in downtrend if we just use last 3 months data.
So, my question is how much time period do you look back to infer the trend or the direction?

Please see the attached chart. If we analyse it, starting 2010 till now, it has been making higher highs and higher lows, so it is in uptrend.
But, if we just take last 3 months data, it is in downtrend.

 

[VJAY]

Dear Raunka sir,
Wow ...& thanks for your great reply.....you are a good teacher..... how simple you described it....amazing...Sure by this 1 post am get too much for trading.....

 

[SwingKing]

Got the point.
Now what you advise , how I should create the basket of high beta stock initially, just stick to few like Hindalco, DLF, RCapiltal.or one should analyses high beta stock as a whole.
Also at initial stage , one should go for equity only, or can try hand in future too. In this same context, e.g., the trade of Hindalco, & how can we analyze the risk-reward ration in swing trade & in general what should be the risk-reward ratio.
I use Amibroker, so would you please tell how can I scan the high beta stock in Amibroker.
Regards

Rajesh,

1. Everyone in trading circles know that high beta stocks are best to Swing trade. But how many can actually trade them? They are extremely dangerous to trade with yet most profitable. These stocks have highest volatility when compared to other stocks and hence can wipe out small accounts in one trade. Untill and unless you have deep pockets (large account size), do not trade in High Beta stocks and do not venture into Futures. Learn trading the Nifty first. Then venture into stock specific trading.

2. To calculate Beta and plot it just go to the Amirboker help section. They have explained it in the most simplest way. As easy as adding any other indicator.

3. Risk reward in trading is dependent again on account size. Usually 1-2% risk on each trade is kind of fine. But again it depends on one's risk profile, account size, ability to tolerate pain and psychological makeup. I cant decide these factors for you and hence you will have to do some trades related soul searching.

Tc

 

[biggles]

Jagan My Dear,

Good question.

The key to finding one's psychological make up is to measure one's pulse rate.

Its as simple as that. If you put a day trade, and your pulse rate increases to a point where you lose your rationality, then day trades are not for you. Similarly, if this happens in Swing trades, then next thing to explore would be Investment horizon trades.

When I day trade, I have found that I cannot be relaxed. This is the first indication that day trading is not for me. The second thing which I would like to highlight is the ability to tolerate pain (in terms of losing money). I can tolerate immense pain in Swing trades, but I cannot do the same for Day trades. Hence, in a nutshell, two things which will tell you your psychological profile are; Pulse rate and Ability to tolerate Pain

Hope this helps.

Tc

Raunak (hopefully spelt rite )

Wonderfully put together. What a gem:clap:

 

[SwingKing]

Thanks for replying Raunak.

So, in case of swing trade we look at Weekly chart for direction.
Now, suppose a stock is in uptrend, if we analyse weekly charts and use 1 year's data. The same stock is in downtrend if we just use last 3 months data.
So, my question is how much time period do you look back to infer the trend or the direction?

Please see the attached chart. If we analyse it, starting 2010 till now, it has been making higher highs and higher lows, so it is in uptrend.
But, if we just take last 3 months data, it is in downtrend.

Vmonu,

When you are swing trading, you need not be bothered about the Monthly trend. This is precisely why I gave you two separate frameworks and this is why I stressed about more objectivity and goal specification. When you are looking to Swing trade, just look at dominant weekly trend and dominant daily trend. Last 6 months of data should be fine to work with.

Tc