Start of 2017 could be eventful

Disclaimer - The views here expressed and the charts shared are strictly for educational purpose and not a guideline for buy or sell. The author will not be responsible for any loss, that may occur.

Crude Oil: Verge of a BREAKOUT

It is classical formation and worth trading. At least students of Technical Analysis should follow the movements.

Disclaimer - The views here expressed and the charts shared are strictly for educational purpose and not a guideline for buy or sell. The author will not be responsible for any loss, that may occur.

It cannot be coincidence!

Nifty, Bank Nifty, HDFC Bank, LT, SBI all formed head and shoulder pattern. This is distribution pattern and marks bearish reversal. Charts are given below.

Nifty: Note of caution

Current technical evidences in Nifty Future deserve some attention. We have seen a huge rally in last six months. It all started with a 'W' formation, which is considered as strong bullish reversal pattern. The zone is marked as 'a' in the chart. It happened in February' 2016.

Price started advancing thereafter in a decent manner and was well supported by volume. We marked the zone as 'b'. This strong up-move happened between March'16 to third week of May'16. Price travelled to little less than 8000 from low of 6850 in this period. 17% rise in 11 weeks. This move of an Index is remarkable at any standard.

Rally did not fizzle out at that point. Nifty Future continued to move northwards by another 750 points to hit a high around 8750 in this month. Pricewise, there is nothing to complain about this 9.5% upmove, though volume remained low in this period. We have marked this period as 'c' in the attached chart.

Tiredness is clearly visible in chart of Nifty Future for last 2-3 weeks. Looking at the weekly highs of past two week, fatigue is further confirmed. High was around 8750 in last two weeks and this week also we have seen a similar high.

The chart also reveals a notorious pattern referred as 'rising wedge'. The pattern consists of two upward sloping converging trend line. This happens because of different angles of the trendline. Resistance line has lower angle than the support line and that happens when price becomes tired.

In this phase longs are not that rewarding. However, shorts are not beneficial but bears are not losing huge money. In fact, short sellers are in no profit, no loss scenario in last couple of weeks. Then is it an indication of sell off? No body knows the answer but, it should be wise to remain cautious during a rising wedge formation.

In a different angle, we have a potential double top around 8750 with confirmation level being 8550. Break below 8550 may have a target of 8350 but 8480-8500 is strong support.

Coming back to the rising wedge formation, decisive break below 8550 may prove fatal for bulls. 8500 is also a strong level to watch as there lies a moving average, which has guarded this rally three times on lower side.

Break and stay above 8750 will nullify there bearish consideration. Nifty may challenge all time high of 9100-9200 on decisive crossover above 8750. But we feel that as an remote possibility.

One thing to remember, Nifty cannot move southwards when global markets are strong. So the fall of Nifty, if at all, will come along with weakness in global markets. We are witnessing same tiredness in the chart of Dow Jones Industrial Average. Coincidence or connection! Only time will tell.

Aug 8500 Put closed at 56 on 10.08.16. Can we consider this option?

Disclaimer - The views here expressed and the charts shared are strictly for educational purpose and not a guideline for buy or sell. The author will not be responsible for any loss, that may occur.

Bank Nifty: Little to bank upon

An interesting formation is visible on Bank Nifty chart on the eve of GST bill presentation in the parliament. The index had a phenomenal run from a low of 13407 on budget day, 2016. It soon entered in an upward channel and travelled to 19158 on 18/07/2016. Bank Nifty gained 5751 points or 43% in less than six months. What a move!

Currently Bank Nifty is looking weaker than Nifty (for a change). It is moving in a range for last couple of weeks. It may have formed a double top around 19150 with a low of 18551 in between. Break below this level will confirm double top with pattern target below 18000. If that happens, the chart will witness some major developments like breaking the lower side of the channel, which currently stands around 18300.

A crucial support by means of moving average comes at 18425. A lot of things may happen on 

meeting double top target of 17950. The long awaited correction may start thereafter.

Last, but not the least, this is the level from where Bank Nifty started descending last year.
It was July 2015. 

However it gives us immense pleasure to find that the pattern has been the same since our post dated July 13, 2016. Trendlines are the most amazing study as far as Technical Analysis is concerned.

In a nutshell, currently Bank Nifty is in corrective mode. Short term trend may turn bearish below 17900. Can we buy Put here? If yes, then what could be the stop level?  

Sorry! We cannot discuss these points here. This site is dedicated to education, especially on Technical Analysis. Strategy formulation, implementation and trade management are different things altogether. But without the later, study of charts is of little or no value.  

Best of luck!!!

Disclaimer - The views here expressed and the charts shared are strictly for educational purpose and not a guideline for buy or sell. The author will not be responsible for any loss, that may occur.

Axis Bank - Advance Indicator

Axis Bank is a high beta stock. The stock has been outperforming the market for last 2-3 years. It is one of the favourite stocks of the institutional investors and provides good trading opportunity for traders also. The stock witnessed a spectacular run in last four and half months. Price increased 53% in this period, which is fabulous in any parameter.   

The scenario is quite different in last 3-4 trading sessions. Axis Bank fell almost 7% in this period comparing to fall of 2.6% and 1% in Bank Nifty and Nifty respectively. Whether this weakness is stock specific or warning sign for the overall market, we do not know. Only time has that answer BUT the chart of Axis Bank deserves a closer look on both academic and trading perspective. The chart is given below.

It is evident from the chart that today’s low of 535 is a crucial sp for Axis Bank. Price may bounce back from here but need to cross 550-552 for strength. Decisive break below 535 will signal further weakness and retesting of earlier low 492 cannot be ruled out in that case.

As of now it seems that we have the following probabilities.

1. This is a shallow correction. Price will eventually cross the earlier high 577.
2. There could be a mild bounce back till 550-552 zone and then price breaks 535 to test 492.
3. Price does not bounce back, breaks 535 and heads towards 492.
4. None of the above.

The last option is given to make this article ‘politically correct’. In our opinion, it has to be among the first three scenarios with more chance of a downward breakdown. In any case, 535 is the key level for Axis Bank. We will keep close eye on this stock.

Disclaimer - The views here expressed and the charts shared are strictly for educational purpose and not a guideline for buy or sell. The author will not be responsible for any loss, that may occur.

Converting analysis into a profitable trade

Please read the entire document patiently. It is not an analysis but much more important than that.

On 15th June, 2016 Infosys came out with disappointing results, the stock closed at 1072, 100 points down from the previous close. We did post a near term bearish outlook of this stock two weeks ago. The article was named Infosys.....downward journey. BUT could we convert the analysis into a profitable trade?

If the answer is yes, then we have learnt the art of trading. If not, then what went wrong?

We will discuss what could be the thought process for converting this into a profitable trade.

Technical Analysis is only the first step towards successful trading. There are lots of extraordinary chartists around us, where as good traders are hard to find. Designing a strategy with proper risk management is the key. Because at end of the day "It's not whether you're right or wrong that's important, but how much money you make when you're right and how much you lose when you're wrong." This is probably the most important consideration in trading as said by George Soros, one of the greatest traders of all time.

We will take this example of Infosys and discuss what could be the thought process for converting this into a profitable trade.

We found a bearish head and shoulder formation in daily line chart of Infosys. After completing the formation the stock climbed above the neckline to raise question about this pattern. Stops were triggered 2-3 times. This gave some issues to the people those are sceptical about Technical Analysis.

But a quintessential technical analyst knows that there was a distribution in Infosys, which led to form this bearish pattern. They also know that unless price crosses right shoulder with expanding volume, risk of falling persists.

Moreover, when your own money is at risk, the theory is not sufficient. Professional traders do not rely on Technical Analysis alone. They know a stock like Infosys cannot fall by 8-10%, only because it has formed a head and shoulder. This may sound like a challenge to the theory of Technical Analysis, which assumes everything is reflected in price but things do not happen that way.

Technical Analysis is a subject of probability. Pattern failure is part of the theory. Most of the time, a news triggers the expected movement after completing a pattern.

In this case of Infosys, professional traders were looking for news that may trigger the fall. This was important because Nifty did not show any sign of weakness, though it was rising with diminishing volume. Looking for news in a bearish looking stock was not that necessary in a bear market. But this was the other way around.

So this head and shoulder can meet its target on back of stock specific news. What could be that news in this earning session? Answer was easy; it has to be the quarterly result of Infosys.  

On 15th July 2016, professionals were ready to short Infosys below 1175. The stock was hovering around 1180-1185 just before the results. Immediately after the result, it broke 1175 and fell 100 points within a very short span. Please find below price of Infosys on that particular day.  

	Open	High	Low	Close	Change
Infosys...Cash	1189.50	1189.90	1052	1072.55	-9.67%
Infosys…Future	1190	1193.90	1062.20	1076.85	-9.6%
1140 Put	18.90	83	12.95	66.80	205%
1120 Put	13.90	66.05	9.25	50.05	209%

Lot of money could be made. Unfortunately people focus on Analysis and ignore strategy formulation. In our opinion 80% importance should be given on the strategy formulation and risk management. 20% focus should be paid on Analysis. To be precise without strategy formulation and risk management, it is impossible to be a professional trader.

So now onward, please pay attention towards strategy formulation and risk management. 

Disclaimer - The views here expressed and the charts shared are strictly for educational purpose and not a guideline for buy or sell. The author will not be responsible for any loss, that may occur.

Nifty and Bank Nifty Future - In singing mood

In 1991, a British rock band Queen released an album Innuendo which featured a song 'The show must go on'. Later in 2016, this number was sung by Celine Dion. The song was a huge hit and ruled charts for several days. Indian and US market seems to have taken cue from this song and keeps on singing 'The rally must go on'.

Both the markets are well above the pre-Brexit levels and still no sign of weakness. To us, the traders, price is supreme. One may or may not participate in this rally but cannot deny the fact.

In India, Nifty Future and Bank Nifty Future has been moving in an upward channel for quite some time. Both the indices broke lower trendline of the channel on Brexit day panic only to recover same day to close within the channel.Thereafter, rally keeps on continuing and now we are near the higher end of the channel. Volume was throughout on the lower side excepting 1-2 days.

Formations are now looking interesting to us, those who study charts. Please find below the charts of Nifty Future and Bank Nifty Future.

Technical setup indicates interesting time ahead

Bank Nifty is much more volatile than Nifty 

Disclaimer - The views here expressed and the charts shared are strictly for educational purpose and not guideline for buy or sell. The author will not be responsible for any loss, that may occur.  




       

Nifty - is it a trap!

On 24,06,16, Indian market opened big gap down following the news that Britain has decided to leave EU. Sell-off continued further and withing two hours of trading Nifty was down by about 350 points supported by excessive volume. However, surprising almost everyone, market started rising thereafter and recovered more than 150 points to close at 8087 comparing to previous day's close of 8282 and thus registering a fall of  195 points or 2.3%.

Rise in Nifty continued next Monday and Tuesday and Wednesday and in next three trading sessions. We will analyse the chart of Nifty Future. Trading pattern were same in last four trading sessions. Nifty opens higher and trades in a small range to close higher than the opening price. Volume continues to shrink. Only on 30th June expanding volume was registered.

Nifty has been moving in an upward channel from first week on March'16. We would study price volume relationship in three different phases of this channel. The phases are marked by 'a', 'b' and 'c'.
Let us discuss three phases.

Phase 'a'

In this phase Nifty Future started rising after hitting a low of 7722 on 24th May'16 and recorded a high of 8299 on 8th June'16, a rise of 577 points or 7.5% in 12 trading sessions. Out of this 577 points, price advanced 460 points in first four trading sessions and thereafter price started moving sideways only to register 117 points advancement in Nifty in next eight trading sessions. Volume dried up in these eight days. And in first four days, volume was average in two days and another two days saw high volume. We were satisfied with the volume characteristics in phase 'a'.

Dried up volume in last eight days in this phase told us to be cautious on higher levels and suggested that there could be price correction shortly. Exactly that happened and we mark the next phase as phase 'b'.


Phase 'b'

Phase 'b' price came to to 8282 from 8291. Nifty was sideways in this eleven trading sessions i.e. from 9th June'16 to 23rd June'16. On 14th June price fell to 8076, which was the lowest point in this phase. Among these eleven trading sessions price fell, rise and remain sideways for four, three and four trading sessions respectively, We notice that volume were higher in down days and much lower in up days. This was a warning of a probable correction.

The correction came in a form of panic after Brexit vote. We have mentioned how price moved on 24th June'16 in the first para of this report. Then we move to phase 'c', which is the current market scenario.

Phase 'c'

We are in this phase now. Price moved up for six consecutive days. Volume keeps on shrinking except for one day. This has been already mentioned in earlier part of this report.



This ongoing rally was unexpected, especially when one reads the opinion of the legendary trader George Soros. Then is this rally may turn to be to be a trap.  

Technically speaking. we have to be cautious on higher levels and will avoid taking long positions as long as Nifty rises with lesser volume.

NO...we cannot initiate short until price confirmation comes on down side. Currently wait and watch policy should be adopted with an negative bias in mind.
 
In a nutshell, we are not comfortable with this rally. Only rise with expanding volume can give us comfort and nothing else. Meanwhile, as mentioned earlier, we are waiting for price confirmation on lower side.

To conclude, we would like to remind our readers a famous quote by the prominent economist John Maynard Keynes - “The market can stay irrational longer than you can stay solvent.”



Disclaimer - The views here expressed and the charts shared are strictly for educational purpose and not guideline for buy or sell. The author will not be responsible for any loss, that may occur.  

    

Yes Bank- gauging FII confidence

Post Brexit, our main concern is that whether FII will shed their exposure in Indian markets. Yes Bank may give us some clue. Foreigners are holding 41.25% as per latest shareholding pattern on March' 2016. This is one among the highest foreign exposure in an individual stock. So, if we follow the price movement of Yes Bank, we may get an idea of what is going to happen. In a nutshell bullishness in Yes Bank will signal good health of the overall market and vice-versa.

According to charts, Yes Bank is moving in an easy identifiable upward channel. It is amazing to notice such a strong upward movement bordered by two imaginary parallel lines.Current value of lower end of the channel is 1075. Stay and close below 1070 may signal weakness but not necessarily downtrend. Break below 1035 will be bearish for Yes Bank with an important level of 1060 in between.. As per our earlier discussions, the overall market may turn bearish. Obviously, there are levels for Nifty and Bank Nifty to watch, but wee need to be cautious in the mentioned scenario.

On the other hand as long as Yes Bank keeps maintaining above 1035, we may conclude that FII confidence in India remains positive.

       

Disclaimer - The views here expressed and the charts shared are strictly for educational purpose and not guideline for buy or sell. The author will not be responsible for any loss, that may occur.  

Infosys.....downward journey

Infosys now has 8.36 weightage in Nifty, which is highest among Nifty stocks. The stock possesses beta value of 0.83. Thus movement of Infosys have substantial contribution to Nifty.

The stock has formed a bearish head and shoulder with neckline around 1180. It has satisfied the volume consideration during the pattern.The stock yesterday closed at 1169, almost 1% below the neckline. Unless Infosys trades and closes above 1180, the stock may come down to the head and shoulder target of 1185.

Needless to say that the stock is in a short term downtrend with last top around 1215. Crossover and stay above this level will turn short term trend positive. 200 EMA is at 1150, that is a level to watch.

Please take a look at the chart. It has formed a classical bearish head and shoulder pattern.

Disclaimer - The views here expressed and the charts shared are strictly for educational purpose and not guideline for buy or sell. The author will not be responsible for any loss, that may occur. 

Life after Brexit....We are at make or break level

Three days after Brexit, we take a look at major European indices like DAX of Germany and CAC of France. We are focusing on these two indices because currently these two countries are most strong and influential in existing European Union. Suppose, if these two countries choose to exit, then the Global Economy will enter in a recession.

We are trying to develop a long term-view. Monthly chart has been taken into account. Both the indices are in verge of breakdown. If that happens, there could be panic in these markets.

Dow Jones of USA is not that bad at this point of time. Daily chart reveals that the index is about to complete a distribution formation. Break below the crucial level may trigger substantial correction.

Indian market is a bright exception. This is well reflected in the table given below.

Country	Index	Closing on 29/06/2016	200 EMA	Difference
Germany	DAX	9268	10190	- 9.0%
France	CAC	3984	4515	-11.8%
Britain	FTSE	5982	6250	-4.3 %
USA	Dow Jones	17162	17410	-1.4%
India	Nifty	8094	7910	2.3%

*** data taken from www.investing.com

Among these five major countries, only Indian index is trading above 200 EMA. We choose to compare current price with 200 EMA, which is considered as a long term health pointer.

Will Indian market continue to outperform as opined by most of the Indian fund managers and analysts. We cease to comment on this Indian growth story intact theme. all we want to say is that sentiment, especially weak sentiment,  is greatest driving force on stock market.

Nobody knows how the global economy will shape up post Brexit. It is uncertain. Stock market, as a matter of fact, fears uncertainty. You are free to take positive view on Indian stock market but please be aware of the fact that Indian stock market cannot move in isolation with the major developed economies of the world. Hope for the best and prepare for the worst is the motto in stock market as well as every aspects of life.

In a nutshell, we believe that Nifty may come down to 7500-7700 level initially as long as 8300 remains unconquered.  

Now let us look at the charts. All the charts are in make or break mode.

Things are not looking good for DAX....Make or break

CAC exhibiting same formation as DAX...here also Make or break scenario

Our own market is looking lot better than global counterpart. Is this weakness beginning of an end.

Disclaimer - The views here expressed and the charts shared are strictly for educational purpose and not a guideline for buy or sell. The author will not be responsible for any loss, that may occur.