Please explain which positive indications? I am skeptical that this green thing is short lived.
Sir,
as regard to the chances of green thing being short-lived, I am still clue-less. It may be short-lived or otherwise; but I am expecting a strong and clear indication before this greeny start changing its color to red.
regarding positive indications
First take Jai prakash associates' chart
The chart denotes a trending zone between 125-170 since May 2009, with increase in volumes at almost every rise (around 170) denoting supply, which resulted in down move towards the level of around 125. Except on one occasion of 13th July; all other upmoves are backed up with decrease in volumes denoting decrease in supply. Therefore, the upmoves in this chart are caused by lack of supply while the downmoves are results of excessive supply. Had the script being in uptrend (in background) the current levels and movement can be taken as a preparation of a downside move; but because the script is in trending zone, the demand and supply factor has to be applied accordingly.
Now, on 5th feb the volumes were 2,10,75,116 (almost double of 30 days average volume). The bar was red, the spread was between 122-128 (6 points only); which is not acceptable in terms of bearish movement. The spread should have been wide with such huge volumes which it was not. And as per VSA (that I could understood after reading the book which you were kind to provide in you signature), during falling markets the strength is to be checked in downbars with the aid of following factors.
1. Principle One -
During panic selling situations,
and after substantial fall
I need to ask myself
Are the smart players are prepared to absorb the panic selling at these price levels?
In order to check it, I need to focus on down bars.
Why focus on down bars?
Because the strength will always appear on down bars as high volume
closing in the middle or highs;
Or
the next bar has reversed sharply closing on highs.
Therefore,
volume must be high on down bars
and
the closing be in the middle or high on the same bar or in the next bar.
And, if the answer to first principle question is yes. then this is a strong sign of strength.
The closing of jpassociate on 5th feb was 124.80. The spread was 122-128 - middle point will be 125. The closing is almost near to it. The second bar is of no value being saturday's special trading. On 8th feb the volumes were 150% more than average volumes. The spread was 123.25 - 127.80 (middle point 125.50). the script was making new highs and the close was 126.15 - again the close was near the middle point. The rest is history. The volumes are decreasing day by day while the script is going higher - in other words, the supply is being absorbed. The move is expected to continue till we see a narrow-spread bar with high volumes and the script is trading at highs. The average middle point of the trending zone of jpassociate is around 147 [ (125 + 170)/2 ]. so expecting a rise at least to these levels, where from, it has to be addressed again in the light of demand and supply.