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.