Thursday, April 23, 2009

International markets analysis


A little bit of analysis of charts of intl markets too.. cause they seem to strengthen and augment my view on Nifty presented in the post below. Here goes...

First look at Hang Seng’s hourly chart – the market which we most closely follow

hang seng hourly 22.04_thumb[9]

Today the Hang seng too broke below its major support line which was guiding its move from the early March lows.

Dow Jones Daily (Futures Chart)

dow jones daily2 22.04

Note this is Dow Jones Futures chart – which is why there are no gaps etc. Comments marked on chart itself.

Nasdaq has already broken below support line couple of days back, but  importantly S & P 500 still inside a parallel channel.We’ll see whether we get a break or not.  Across the forex market most pairs have broken below support levels and suggest that the trend has changed. You can read more about fx analysis on my other blog on forex technical analysis.

Wednesday, April 22, 2009

Break below support, possible change of trend

nifty hourly 22.04

So we finally have a confirmation that the trend has changed. Let me take you step by step as why I think so.

a. Double top at 3500 (marked on chart above)

b. Break below support on hourly charts – the level of 3300-3320 has held many times during last 10 days. Finally broken today with momentum.

c. Hourly MACD turns negative (actually this happened yesterday morning itself,  but we dont depend solely on indicators to take trades.

d. Divergence on RSI chart – multiple times actually, which is fine & expected on an hourly chart

e. Short term falling resistance line was respected today near 3390 from where we started sliding

f. Its broken through a support line (below)

nifty hourly2 22.04

Now for the daily charts – have a look below

nifty daily 22.04

The biggest sign here – presence of lower highs and lower lows – very very clear on this chart.

So this is the analysis as of now.. we should see prices move lower from here.

Tuesday, March 31, 2009

Short term trend turns down, markets to slowly head lower


nifty daily1 31.03.09


nifty daily 2

Since the 2250 intraday bottom in October 2008, Nifty has been moving in a very broad range with the lower end being 2500-2550 where support has come in for Nifty and market has bounced up strongly from there thrice now. It could also be probable that the market has formed a bottom in October and hence moved up from there. If its able to move up conclusively beyond 3100, it would mean we would have seen a triple bottom technical pattern formation in place. Such a formation happens when price bounce off a support area and then are able to move above the intermediate highs between the two/three lows conclusively.

Anyways, that is the intermediate trend. But currently we are talking about the short term trend. The trend has turned negative after yesterday’s down move.  Short positions can now be attempted.

Why is this place a good time to take shorts? Because we’ve seen a very strong up move in the last two three weeks, with global markets having rallied more than 20% in such a short span of time. Markets don’t move up forever, and it is time to give back some of those gains. After such strong moves, when price meets strong resistance, it will not be able to overcome it easily. We wait for price action to confirm the resistance. We got that yesterday. The message was clear, index faced selling at key resistance area and moved sharply lower.

Today it has rallied a bit and is near 3030, and we can take short positions here because

a. We have resistance area defined & price action confirms the same

b. We have good risk reward. Our stops have been defined by the resistance line. We would close the trade if price closed above the resistance line. Our targets similarly are also sort of defined. Could be any of the following -

1. Fibonacci retracement level of .382 come in at 2910-15

2. 100 day moving average at around 2850

Thus for a potential loss of around 100 points we have potential gains of 120-180 points. Not very great, but decent. It could also be the case that this whole up move itself  has ended at 3100, with the kind of bullish sentiment that has suddenly emerged in the past week. Suddenly you have analysts talking of 3500-3600 which couldn't have been imagined even a week back.

That tells you that there is much more scope to the downside. There are many longs and correction will trigger many stops and force people to exit. My view would still be that the we have a pretty good chance that we will eventually see a break above 3100 which will lead us all the way to 3500-3600. But that’s for later. For now, we take shorts & wait patiently for market to give up some of the large gains of last few weeks.