May not be Deep Trouble

Last time I posted NIFTY Chart, it was October 2012, NIFTY around 5600-5700 and things looked very positive then. Our optimism was not for nothing as NIFTY made high above 6100 and looked all set for more. However, looking at the present chart, there are signs of trouble. See below;

Weekly Chart:

Daily Chart:

US S&P 500:

First about the NIFTY. It has broken the channel after a nice run up. It is stationed between 50 MA and 200 MA now and it is basically in no man's land. After looking at many things I am still not totally convinced that we are in a downtrend. Sure, the correction has been deep but it is not unusual. There have been headwinds in terms of macroeconomic indicators like GDP growth figures, Purchasing Manager Index (PMI) showing slowdown in growth and lack of good news. At the same time there is little positive as in a rational (and not populist) budget, steps to spur growth and some respite in S&P 500 chart.

All in all, 5555 which is around 200 MA is a key level for NIFTY. We may see a play around and may be even test of this level before we get a clear picture.

S&P 500, as you will recall, I think has close relevance with NIFTY is slightly more comfortable though it may be due for a small correction. It definitely seems to be in a better shape than when we last saw it in October. However major risk seems to in terms of US Dollar. It seems to be gearing up for a short to medium (or even long) term top after which a correction becomes due.

What follows with a Dollar correction is a spike in commodity prices including Oil, Precious Metals like Gold, Silver and also Industrial Metals. This strokes inflation around the World and it can spell trouble for the fragile growth that India is aiming for.

I am still trying to catch up with many things. Being away from Markets have given me a fresh perspective and also my thinking is not clouded by barrage of information which sits in subconscious. I will keep looking for some firm cues to find out any trades. At this point, I think it may be a good idea to pick and choose some blue chips for investment purpose. I am having a re-look at some of my long term investments and will try to post more on that. I hope you won't mind if I post some idea (my thoughts) for long term investment rather than positional trade. Anyway I will be looking for Derivative trade also and it may just beat the investment idea to the next post. Whatever it is, it shall come soon.

'Just Like That'

Hey Guys,

I am back... 'just like that'. There are many things to share as to where I been, what was I doing and what are future plans, etc. All those things can wait as I actually had a look at the charts today after a longggggg gap. Not many charts and not many indicators; just NIFTY.

To cut the long story short, on a daily chart NIFTY is in trouble. On a weekly basis however we have some margin before all hell breaks loose. Lets just hope that NIFTY doesn't breach 5950 on a weekly closing basis (if you are a Bull of course).

I am terribly out of practice so am not posting any charts today. Hope to do that soon.

I most sincerely apologize for taking off 'just like that' but I sure am happy to come back 'just like that'. Please forgive me 'just like that'. It can and will only get better from here.

USA and India

As promised, I am back with second installment of my 'NIFTY Comparison with rest of the World' posts. We had already seen Europe and India at the start of the month and in fact it now warrants a re-look at the charts in that post. Will do that sometime. Today, let us see what the US Markets have in store for us. As all of us know that US continues to be largest and most influential market around the World and I do not see any short or medium term threat to its dominance. Any trader or investor anywhere in the World cannot ignore signals from US Markets and we have always been taking cues from it in this blog. Today though I am afraid that I do not have all the positive news for the bulls.

Like Europe, US also has a maze of various indices which you can look at and refer and trade upon. Not only US Dollar, Gold, Commodities, Shipping, Minerals, Oil, etc is decided in US Markets but hosts of Bonds, Money Market Instruments, Exchange Rates and all that has origin and maximum trading there. US Markets also track a variety of sentiments, housing prices, jobless claims and what not. Get the Alice in Wonderland feeling? What we know of them is just the start of the rabbit hole.

Anyway, we will only see the three most directly impacting indices today. Just to keep it simple.

S&P 500

Upward channel is broken as well as 50 Moving Average has been taken out convincingly. Series of higher highs and higher lows is also violated. Now if any of you follow cycle theory then you will know that it is not unusual for corrections in a left translated cycle to go below the earlier low... or in simple terms it may not be a sign of sure shot correction but it still is a threat and considerable at that. Caution advised.

Positive thing is that 200 MA is still at some distance and a close eye to be kept at that level. A bounce above 1435 will give some respite for Bulls though I will not count on that with all my bets.

DJIA

Quite the similar story here too though it is little more bearish than S&P 500. Both these indices are a close reflection of NIFTY in composition and both are showing signs of stress. Most serious signs of problems though come from NASDAQ Composite which may not affect NIFTY as much and as direct as these two.

NASDAQ

NASDAQ appears to be in serious trouble here. It is extremely close to 200 MA and looks to be in downtrend. It is also a victim of below expectations results from Google, Microsoft, Apple and other technology companies. Many of these companies also hold the key to general sentiments of US Investors and hence they do affect everything else indirectly. NASDAQ may bounce from its 200 MA and may go up to upper end of the channel at 3050. Beyond that, it is difficult to say the direction of next move.

Intriguing signals from US and surely interesting times for NIFTY. I am not really interested to drawing any conclusions here for NIFTY and will leave it to you guys to comment on. So let me know what you think of these charts and its possible effects on NIFTY... Will be very happy to have a dialogue on this so don't disappoint me.

Happy Trading as always.

Back Again...

Hello there guys n gals. Finally I am back here and totally at loss of words on how to start again. I had to literally go through last few posts to realize where were we and what were we discussing to bring myself up to the speed again. So will try to write something today and my apologies if you find it little off the mark.

Before we proceed, let me wish you all and your loved ones a very happy, prosperous and healthy Vijayadashami... May all the good in your life prevail on everything that is bad... always.

Had planned to write yesterday but then I could not make myself miss the Garba after missing all the fun earlier. It was great and I feel sorry for missing out on most of it. Nevertheless I am so happy to be back among all the festivities and fun and frolic.

Today I cannot make a long post so will just visit the good friend NIFTY to start rolling again and may be I can come back tomorrow with a biggie post. So lets look what have I missed out in last few weeks...

I wish I could remove that freaky line where NIFTY dropped by over 900 points but the software won't allow me. Anyway after breaking the couple of years long down channel, NIFTY appears to be in very stiff upward channel and seems to be going strong barring in between visit to lower line of channel. There are some indicators showing pause in the current rally but I believe quarterly results will set the tone as of now and we may see daily mood swings depending on results from heavyweights.

US Markets are very interestingly poised and their movement in next few sessions is very critical. That means that in all likelihood the next post can be 'America and India'. Hope that I am able to cover for lack of writing in last few weeks by bringing in few interesting reads for you guys. I felt really bad for this absence and I am sure I will have understanding from all of you.

Do let me know what is happening at your end and what would you like to see here. Happy Trading.

Is this Rally for real?

(Caution: Time reference of this post is Friday 22nd September 2012)

Whoa... NIFTY made a 52 week high today. What a rally. Honestly speaking, how many of us were expecting it? We were around 4770 in June with all gloom and doom. We usually have these extremes moodswings before any turnaround. In Jan 2008 there was this height of optimism where one could easily hear all our everyday friends like Chaiwale Bhaisaab, Doodhwale Bhaisaab, Autowale Bhaisaab talking about Sensex and all rag to riches stories that they had to share. And just at the start of this month there was so much pessimism regarding Government, Policy Logjam, Coal-Gate, Parliament Adjournment and what not. Then this massive move today made my last post expecting some fight between bulls ans bears look like a silly joke... so much for news based Markets. So are we out of the woods really... is this rally real and is actually start of a massive Bull Market?

Obviously I do not know. Definitely not yet.

But let us see some facts. That's what we can do and try and decipher some signals from those facts. Today along with NIFTY, there are not one or two but 20 stocks which are close (within 7%) to their 52 weeks highs. Many of them are real close within 2% and some 5% while 4 of them have actually made these highs today itself. These 4 are; Grasim, ICICI Bank, Kotak Bank and HDFC Bank and real close are L&T, HDFC and Ambuja Cement. No wonder most of them are Banking stocks (that actually worries me as well) with all reforms, CRR cut and all that. It may take me few months to write everything about these stock from fundamental analysis point of view and by that time data might have changed already... ruining all my efforts. So I will do what I can do in lifetime of this post... post charts. I will post only one bank stock so that we also cover many sector's stocks in the process (note that stocks here may not be true indication of their respective sectors).

1. Grasim

Found really nothing remarkable about the chart. Just that it is following up NIFTY movement. RSI is in overbought zone but it can stay there at higher levels for longer time. Just look at RSI in August.

2. HDFC Bank

Nothing special again. This script has been taking good support and resistance levels from Moving Average lines. Multiple occasions can be seen above. Right now however, it is comfortably placed above MA lines.

3. Larsen and Toubro

Move from 1300 to 1600 in less than 4 weeks. Very impressive. This script is one of my long time favorite for intra-day as well as long term investments. Its been a laggard for some time in tracking NIFTY but surely trying to play catch up.

4. Ambuja Cement

4 out of 4 charts are showing a Golden Cross where 50 MA has crossed 200 MA from below.
4 out of 4 charts are showing no serious overbought condition.
4 out of 4 charts are showing good moves with above average volumes.
4 out of 4 charts are showing values stretched above their MAs

I am trying to see some sign of exhaustion in the rally and unable to see anything wanting serious caution on NIFTY or its components as of now. What this entails is enjoy the rally while it is in play but keep strict profit targets and stop losses. It is very easy to make notional money in the present market, difficult is to keep it.

Wanted to do this post on Friday itself but was unable for one or the other reasons.... very sorry. I will make another post on similar lines where I will examine major World markets in details to see if they help us in understanding the trend and timelines for this rally.

I should be able to do that tomorrow. Happy Trading till then.

Interesting times as usual...

Happy Ganesh Chaturthi to all my readers. May the Lord Ganesh bring happiness, health and prosperity to all of you and your families.

Well, coming back to Blog, I hate to boast but NIFTY just touched 5650 and turned back. It made a high of 5652.2 briefly on Monday and settled to 5600.05 yesterday. If you recall last post, I had hoped a return from the very same level based on plotted Fibonacci levels on the chart. Now I know the next question to your mind is how deep this correction will be? Well, the answer is not simple. Let us try to see both sides of the coin here.

First of all, I am not saying that this is correction at all. I just thought that markets will feel exhausted and run out of steam and will take a pause and it was true for markets around the World. I surely expect some more downward bias courtesy Mamata Didi. She did what she does best and put a spoke in the reform cycle. She would surely have her arguments and (misinformed) advisers to think that FDI is against farmers and 24 cylinders a year is the right amount for a poor household. Her withdrawing support to UPA when she had the option the stop FDI and increase no of cylinders in West Bengal on her own is real hypocrite behavior but it also throws up a real opportunity for UPA to get rid of her for good. She has been the main reason for delay and paralysis on reforms in UPA. Hopefully Government will survive and we will have more steps taken to revive the economy.

On the other side, I do not expect the downward move to be very steep or deep. PC has been very active in Finance Ministry since taking charge and has already made statements that more announcements are in the offing. He has virtually said that RBI will cut interest rates on October 30th (almost) as Government will be taking a lot more fiscal consolidation steps between now and then. Markets will be all ears and will be averse to go down too much anticipating some measures.

Let us see if any clue with Technicals on the chart;

On the chart front, there is hardly any movement since I last posted expect that RSI has turned down a little on daily basis (not shown here). The trendline shown above and also the 50% retracement from Fibonacci levels in last post, both indicate a support at aroud 5430. Now that is pretty deep cut from current level of 5600 but that is a very strong support I would say for the short to medium term (till next week). I will not rule out its possibility completely as a lot will depend on not economic but political news in next few days. I will not underestimate capacity of our polity to spring few surprises. Also we will have some F5 (refresh) movement about problems in Europe and QE3 euphoria will likely take a back seat for some time at least.

Just to summarize, expect a tug of war between Bulls and Bears for some time. Expect good moves on either side and sideways movements, some consolidation (all that) till we get some more clarity about World economy and situation close home. Undoubtedly, we live in interesting times.

All in all, a very uncertain time ahead for next week and half. May Lord Ganesha, Lord of Wisdom give much needed wisdom to the people who matter and they take all the right steps. May everyone is this country and in this World benefit from these steps and lives of all the people get better and better.

Happy Trading.

Forget Fed... its all happening in India

Friday evening, Government of India made some bold announcements. There was nothing new or radical but these announcements came at a totally unexpected time and pace. Following up the Diesel hike and subsidized LPG cap, GoI cleared FDI in Retail, Aviation and Cable. Government also cleared divestment in four companies. PM statement that, 'If we have to go down, we will go down fighting' makes one think that GoI may be serious this time in pushing these steps through. Mamata tried (as usual) to play the spoil-sport by giving 72 hour ultimatum for rollback which will be ending tomorrow evening. There will be a meeting of TMC on Tuesday to decide further course of action. Been tweeting about it and I hope you guys are reading those tweets on the blog.

But focusing on the positive part as of now; what these announcements did is more than the symbolic value of their benefits (which is huge). Suddenly there is a sense of hope and a sense of purpose or direction within the UPA Government. These moves may well serve two big purpose in the immediate term. First, it may just save us from the shame of becoming the first BRIC economy to loose investment grade rating. Now this again may or may not be a big deal for India but it would have badly affected the already in trouble Private Sector. Maintenance of the rating will help Indian companies to keep cost of overseas borrowing in check (though it is already bad due to change in INR/$ equation)

Secondly, it may just give RBI some room on Monday to start thinking about cutting rates. There is more than just whispers by Pundits that RBI may continue what GoI has started. There is widespread belief that RBI may join the party and cut the rates today. If you remember the last policy statement by RBI it was clear that RBI wanted some policy actions from Government before any rate cuts. Though the Inflation (around 7.55%) is hardly anywhere near the comfort zone of RBI but slippage in growth may just prompt them to take some risk,

Till Friday, I was thinking that 'QE Unlimited' would be a big thing but all these developments have pushed it in the background at least for India. Make no bones that QE3 will have far reaching and good/bad consequences not only for India but for the entire World in the long run but in the immediate term, I think events unfolding back home will have a much larger impact on NIFTY. I did not want to post any chart as there is hardly any change from when I last posted one but still here it is. Looking better and better.

I have given some Fibonacci levels for the correction from 6300+ levels to around 4500 level on NIFTY. We have 61.8% of this fall (which is pretty important) at around 5650 and we are about 75 points from that level. I am very much sure that this level is pretty much in sight and reach.

However, I think the Euphoria on QE3 as well as all these positive steps will take Markets up to a level which may be more than it deserves. Also we have seen some pretty impressive moves and profit taking is due and also as a consequence of rubber band effect, I expect correction in second half of the week (it may happen as early as Tuesday). I probably (if I get time) will take a contrarian view and open a small PUT position for NIFTY tomorrow at around 5645-5650 with strict stop loss of 30-40 points. Beware, sometimes I trade only on hunch.

I am back in Pune just today and was catching up on many things hence cannot write more. Have to take your leave as another week starts now and have to prepare for it. This will be a wonderful week with Ganeshotsav starting on Wednesday. I pray and hope that Lord Ganesh will bring best of health, wealth, wisdom, peace and prosperity in the lives of all readers. Happy Trading.

Fed says no QE3... Really?

I am sorry for this abstract post in between. Actually idea of this post appealed to me so much that I postponed the idea of technical tutorial post for the time being.

Last week I was listening to recent speech of Federal Reserve's Bernanke where in he was saying that he is ready to start next round of Quantitative Easing (QE) if economic conditions need it. Now as readers will recall that we have had two rounds of these QEs already where Fed has printed (not literally) more than $1.5 Trillion to infuse liquidity and stabilize the markets. Europe followed it with a fancy name of LTRO and even China also played on with some heavy infrastructure investments. (If you really want to know how much is $1 Trillion, I really recommend looking at this) This money cannot be really printed and it stays in existence only in the form of Treasury Bills which the Fed buys. One common thing about QEs in the past has been increase in price of commodities and equities that they result into. We have seen rallies in almost all asset classes every time QE has been announced with the periods of higher inflation in developing markets.

Anyways, that is not what we want to discuss here. What prompted me to write this post is my doubt about the validity of Bernanke's statement that he WILL start QE3 if needed. Now we all know that Fed is not an institute who has taken an oath of speaking truth all the time. All the data they publish has to be taken with a pinch of salt and many time their data have been published selectively, with a lag or not at all (caution: these are unsubstantiated statements... obviously). So I have my own doubts that QE3 is already in play.

Why do I say that? Just look all around us... every asset class is suddenly on fire.

1. Gold

Gold has broken out of its long consolidation and gone up by more $100 in a very short time. This is when very few analyst were expecting it. Also see the improved volume.

2. S&P 500

S&P has recently made 4 year high. Care to tell me some fundamentals reasons that may have prompted this?

3. Crude

I am posting Brent Crude chart as it is more relevant to India. In spite of all issues in Europe, slowdown in China, Crude has seen some handsome rally.

Not all asset classes see positive movement with QE. Obviously if you print more dollars you will see its value going down. Let us see the Dollar Index.

4. US Dollar

Dollar which was inching up nicely till June and even in July and August suddenly lost all the steam and is now below its 200MA also.

If all this was happening in expectation of QE3, we should have seen a sharp reversal after Bernanke's statement. All these assets would have shown the shock over Feds decision not to start QE3 immediately. Did not happen...

Apart from above, just look at the interest rates, bond yields and everything seems to be supporting this hypothesis. This post is also not about discussing whether QE is a good thing or bad thing in the long term (we can have that some other time in a separate post) but what is more important is what does it mean for our markets and our trade strategies. As I had said in last few posts that I would have expected markets to go down in this week and start (slow) recovery sometime next week or so... BUT if QE3 is in play, then all our prediction go out the window.

We do not know if QE3 is actually in progress and it is just a guess. If our guess is right, then we do not know how much money is being printed, how it will be spent and how and when exactly it will be deployed. There are too many ifs and buts and in such case I advice weak hearts to stay away or bite only what you can chew. It is very difficult to predict how long and how far this rally can and will go. At most we can wait for some indecision or reversal signal. I will be on a lookout for same (not 24 hours) and will let you guys know if I find something.

I am happy to be finally able to complete this post and I can now actually look to pick up the technical tutorial post from where I left it. Hope to complete it and make it available to you guys during the weekend itself if possible. Please let me know what do you think of this abstract post and whether you will like more such posts in between.

One more thing, I just realized that this post happens to be our 100th published post. Now that is some milestone to feel good about. Honestly, I never thought that I will be able to continue to write for so long (its over a year) and will reach 100 posts someday. This is your comments that have prodded me into writing more without any doubt. Keep them coming and I will keep writing. Happy Trading.

Special Trading Session tomorrow

Hello guys, we are having a special trading session tomorrow between 11:15 to 12:45 on both NSE and BSE. Hope you are already aware of it.

As for the NIFTY, it has been brilliant week so far. However the sharp pullback by markets make me think that my in-work QE3 post is much more relevant now. Today's Gap Up opening also reminded me that I have not written about the Gap Chart Pattern still. There are so many things to write and so little time. I am trying to finish the QE3 post first but not able to sit down with the right frame of mind. Have involved myself in too many activities and stretched wide and thin.

More than than, I think I am facing some mild kind of Writers Block (did not know there was a word for it till yesterday). Anyway, bottom line is I am hoping to overcome it soon and will definitely write during the weekend. Keen an eye on my tweets for updates in between. Happy trading till then.

Follow @Ethical_Trader

Market Outlook

I am here again and wanted to write a tutorial before this post. Have started writing it and it should be online for you tomorrow or day after. In the meantime, in this post, I thought of taking stock of our Market and see if any trade exist for coming week. Hope you will like it.

So without wasting any time, let us see the NIFTY chart.

As you can see in the weekly chart above, NIFTY has erased the gains of previous three weeks in the past week alone. It is very frustrating for investors who see values of their picks going up inch by inch and then all of a sudden everything comes crashing down. But it was always on the cards. Right now also as you can see for NIFTY to maintain its bullish momentum the critical level is 5100 as depicted by horizontal line of low of July second week. So we may not be completely out of woods as yet.

This same support is around 5050 on daily level. See below;

RSI is not indicating any oversold condition at all and even MACD (which you will see soon in a tutorial post) is not indicating any reversal. We may not have any respite from downtrend immediately.

I was thinking of making a Straddle or Strangle or Spread trade suggestion but am seriously short of time to work it out. Have to seriously make an automatic excel based worksheet to do the calculations based on the NSE quotes exported or updated directly into it. Will take some doing but it will be a wonderful tool to help us decide things much faster. I had something similar before but it was too crude. Have to make a professional version of it. Will let you know as and when it is done and will also share it with you guys.

Right now, for trade, my thinking is like this. I expect some kind of (at least temporary) up-move on daily or intra-day basis and if I want to trade for a week, I will short the markets tomorrow (if) after they go up. Am expecting markets to maintain downtrend on weekly basis and hence expecting to square off this trade during the week sometimes.

However if I want to keep the trade till end of the series then I would like to think of markets getting back to positive territory after falling for a week or two. This is with the assumption that markets will not violate earlier low as seen above. So I would like to go long sometimes during this week or next for a trade which I want to keep till end or close to end of current series. I hope to get in around 5100 or 5050 level but I will keep position short with some serious stop-loss.

Once again, I will remind you that this blog is not intended as an investment advice for you. It is just my loud thinking about what I expect in the markets. Follow it at your own peril.

Then there is a dearth of comments from you guys. Please let me know what you think of the posts and what would you like to see my writing. It helps surely. Will be back soon with MACD. Happy Trading.

Off the Track...

I thought of making a trading post but then I realised that this is the expiry week so trading post can wait for some time. We can do that for next (September) series in a couple days and we will still have ample time for trading.

As I said in last post, I have been feeling like making a philosophical post for some time now. Have so many things which create lot of thoughts in my mind like situation which is (still) unfolding in Europe, Anna's failed campaign, Blast in Pune, Coal-Gate, Maruti Violence, Apple vs Samsung, North East issues and ban on social media and so many other issues. It is commendable that an average Indian still goes about his life in usual way and does not loose sanity with so many mediocre things around us.

But before I go about my ranting, NIFTY weekly chart gave as clear a 'Shooting Star' as possible.

This is as clear as it gets. Though not as strong as Gravestone Doji but Shooting Star is also a trustworthy pattern in its own right. Moreover there are too many things pointing southward journey for equities in the short to medium term. If I am forced to, I am trading short. (Ignore the last candle which is for current week and it may change by Friday).

Also I wanted to write about few specific stocks if you remember. And when you talk about NIFTY you cannot escape talking about RELIANCE.

Reliance price has broken from its very long channel and is decisively above it. It has also broken its long term moving averages from below and right now comfortably above all of them. More interestingly it is all set for a Golden Cross in coming few days which may also coincide with price taking support either at 200 MA or upper line of the channel. It can see a bounce back from there. I will wait for confirmation from few more indicators and trade long if I have to without hurrying into it.

If NIFTY has to get to new highs; change in trend for Reliance is (almost) must. It has lot of weight in NIFTY and will have to turn around for NIFTY to have a reasonable chance to go up.

It took me some time between writing that first para and then posting these charts (a day in between actually, started writing this post yesterday and had to leave in between) and writing about them. Lost the steam to rant about issues mentioned. May be some other time. Hope you will like what has become of this post. Do let me know. Happy Trading.

Hat-trick Post

Wow, this time around I could actually do it and I am back with my third post in three days. This goes to show that nothing is i-m-possible.

After thinking about what to write, I decided to let it flow freely without any particular agenda. So even I do not know what will come out of this but before that let us have a look at the NIFTY Chart below;

Of particular interest is the last candle on the right (candle of today). I do not know if you also see it but it appears a close 'Shooting Star' candle to me and if you have forgotten what it means, you can read it here. If true, it simply indicates that the uptrend is near an end for the time being and we may see some correction. Also, if you will notice you will also see an 'Inverted Hammer' around 25th July followed by bearish 'Marubozu' and subsequent change in trend in next couple days. Candlesticks continue to amaze me.

Usually whenever I come across something like this, I like to test my hypothesis on a larger data set. NIFTY and SENSEX with all the data in them have the limitation that they represent 50 and 30 from thousands of stocks in them. This sometimes limits the universality of our analysis. Just to weed out this factor I had a look at the NIFTY 500 chart; and behold the Shooting Star in all its glory.

Shooting Star is much more clear in case of 500 NIFTY stocks. Now this also coincides with an (over)due correction in S&P 500 of US which has defied all odds to go past 1400. It surely needs a breather. Have a look and notice that the last up move has lasted without correction a lot longer than earlier 4 cycles since June.

Almost every chart I see is calling for some correction (or at least a halt in the uptrend) but will it happen? I cannot say but all the needed signs are in place. (Cannot help but mention that; Look at the S&P500 chart and series of higher highs and higher lows since June.. classical) One more thing to note is how much the price has stretched above 50 and 200 Moving Averages. Usually prices tend to come back to MAs and larger the stretch, more violent is the retraction.

In all probability we are in for a small correction. It may be a small counter trend move as usual and may not mean much in the larger scheme of things but nevertheless it may give us some opportunity to initiate a trade.

Then, its been long since I made any philosophical post and I am feeling like giving it a shot. Stay tuned, it may be just around the corner. Right now, this post has stretched a lot so will stop now. Will be back, who knows, by tomorrow. Happy trading till then.

RSI Scare

First of all, my most sincere apologies to all of you. Though I wish to... but there is no gain if I spend more time in explaining my absence. I know you are not interested in knowing those reasons behind my absence and would simply want me to get back to writing trading and tutorial posts. So will not bother you more and  get to that straight away.

I had explained some of the scenarios and their meaning in my last post which was two weeks back. Since then we have had two positive weeks and things are extremely interesting now.

We have created a new peak in last two weeks. Also we have managed three higher lows now on weekly basis. To be honest, I was not expecting the rise in last two weeks. I would have settled for rise of the first week and would have bet against the second week but then such are the markets. This week, I am definitely betting against the similar rise though we may not fall much.

MACD is flat but RSI is nearing the overbought zone as seen above. RSI is much more overbought in daily chart. Have a look below on daily chart. Also worth noting is that RSI in overbought or oversold zone has been very reliable in last two years or so and I have marked instances of RSI overshooting the upper band and subsequent market reaction.

Presently also, as seen above, RSI is in stratosphere and that certainly is not a good sign in short term. Expect some weakness in the NIFTY this week but do not short heavily. Things often get irrational in a strongly trending market in either direction. Otherwise how would you explain last two weeks with virtually no change in fundamentals of companies, Country or World.

Then I cannot help but share good news that I have been promoted after successful completion of my last project. This development in partially responsible for my absence. However after thinking a lot about best way to apologize and make amends with all my readers, I have decided to write three posts on the trot in three days. That was the only thing which came to my mind and hope you would like it too. So I am going to go all out of my way to make sure that you have two more posts in next two days. Will also be back on Twitter in case you want those supports and resistance levels.

Needless to say, will love to hear your comments. Happy Trading.

Watta Week

A lot has happened since I made last post a week back.

There was power outages which crippled almost 600 Million people in a rising superpower country. There were blasts in my home town, Pune, in an area which can be very crowded on the eve of Rakshabandhan. There has been RBI meet in last week with only symbolic action coming through. There was a Fed meeting too not very different from RBI. Then we now officially have a drought which further threatens our already paralyzed economy. We have managed a few medals (way less than whats Phelps alone have won) in Olympics.

Let us hope this week brings us some real good news.

I have been trying to write a post every 2-3 days but things have been not working out as well so I will have to manage with what best I can do. Let us see what charts tell us for coming week.

See the weekly chart for NIFTY above. The upward pointing arrows indicate higher highs that we are getting from Jan. If we had got higher highs also, that would have meant some thing but the high of June last week was lower than the Feb and that is where this theory is weakened. Right now also, the coming week is very important and a positive week will give us at least some hope that uptrend is not ruled out completely. However a negative week will leave open the possibility that low of 2 weeks back was not the final low and we may go on to make a low which is lower than the low of June first week. This will almost completely negate the possibility of uptrend.

My reading; we are not out of the woods as yet. At the same time I am also getting a 'feeling' that we may be at the end of this long term bear correction. Usually such long term trends end in high power euphoria (bull) or high despair carnage (bears) which is yet to be seen. That is the reason I don't think we have seen the end of this downtrend. What are we waiting for? May be some kind of shock after all.

Europe, US or even China can bring about that kind of shock which can kill the sentiments and make everyone lose hope. That precisely will be the point to start investing and make merry. If we don't get such bad news from outside, may be we can make Pranab Da FM again. That will certainly qualify.

Will have to make another post soon. It is already half made and won't be long.

Happy Trading. Don't forget the comments.

I still hate IT Returns

And I will continue to hate IT Returns. But that is for next year, at least for this year I am through with them. It is a relief and I can say that next year it will be a cake walk unless new FM changes something and brings up new so called 'Saral' form to make returns 'Simpler'.

Then in a related development my usual charting software has gone bonkers and I was trying to get it back up online through today. Failed; so you will see a different chart today.

The chart is slightly different than usual but I am sure you will not find it difficult to read. It lacks few functionality but will make do for some time. The interesting thing to see on the chart is the close proximity of 50DMA and 200 DMA. We are inching towards a Death Cross and it can be confirmed only after it lasts for a few sessions.

I will reiterate that in my opinion we are still in a bear market which is seeing counter trend rallies in between. Out trading horizon is usually less than 4 weeks and hence we have to mind the short as well as medium term trends and factor them in our trading decisions. It may be little difficult to believe we are in long term bear market looking at the chart above so may be our perspective will be clear if we see the chart of long term.

If you see this chart on a weekly or monthly basis things become a lot more clear. I expect some weakness in the market even in next four weeks but I am not sure about the magnitude of the move. It may not be as violent as in the last series. We may see some downward move followed by a rally and then some consolidation in the new trading range before a break out. That will be a good point for us to make some investment (not trading) decisions.

Have to study few more things in details before I can make a sound trading call. It may be simply buy/sell trade or I may work out some 'Spread' kind of trade to reduce the risk. Will try to make that post very soon but have to get some idea or some news from Europe/US to make it worthwhile.

Finally I have made up my mind regarding tutorials also so will be back with that as well. Will try to start that tomorrow itself if trading scenario is not clear. Lets hope for best. Happy trading till then.

I hate IT Returns

No kidding... the whole system of filing your IT Returns is so cumbersome that I really hate it. Primary reason for that is I have vowed not to take help of my family CA this time and decided to file it online. In the whole value chain everyone is hell bent on making your life terrible. Right from the company giving you Form 16, Banks giving you Form 16A, Broker giving you Trading Statement and P&L account... everything is so full of jargon that by the time you read them completely you have a splitting headache. It would have been so much easy to just know the amount you need to pay... pay it and sleep well. But Alas. The whole system with all (earstwhile) Saral and now ITRs is so unfriendly that you wonder whether it is made for helping residents pay tax or otherwise. The CAs are a happy lot in any case.

Ok, after this ranting, I am feeling a lot better and lighter. Now we can come back to our Blog. My apologies for taking off without any prior notice. Went to my native in Konkan for chilling out and got entangled in IT Returns after coming back. Still not over but should be done with it by tomorrow I guess.

I went through your comments and mails and can conclude that you guys want to know about RSI/MACD and Futures. I also have my own ideas but I will keep them aside for the time being and see how I can attend to your wish. I will have to make it a lot more structured this time though so it may be a couple days before I start on with tutorials again.

Meanwhile, I hope those of you who got in to 5300 PUT and some of you who preferred 5200 PUT are not disappointed. I guess you must have got good returns for your investment. This is an expiry week and though one may tend to expect volatility, the experience of last expiry was totally different. Even now, Volatility Index, VIX is at a record low and hence Option Premiums are not very high. You can have a look at it here. It is right now lower than 19 from highs of 30+. No place of high Beta stocks at the moment. Will explain this later.

At the moment, will post the NIFTY Chart before signing off. I am posting a weekly chart this time as it will help me make my point better.

As I have mentioned in earlier post that higher highs and higher lows is the first sign of Bull Market. On a weekly level we have one higher high and one higher low already. However it was in any case foolish to think that Markets are in an uptrend with all the macro-economic factors in mess, turmoil in West and a plethora of negative news from everywhere. Rightly so, we have seen Lower High and the high of June is lower than the high of Feb. Now if the Market breaches Low made in April then the picture becomes very clear. We already have all EMAs taken out by the market convincingly and MACD/ RSI are also not offering any hopes. I would bet on Markets breaching 4800 soon but you guys, hold your horses and do not rush in to trades as I need to be back this hypothesis with a better reasoning.

I will write more about it when I write the trading post for August series. Have a Happy IT Return filing till then. Have tweeted about Supports and Resistance too.