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.
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.
2 comments:
Congratulation for your analysis
My question is what is the confirmation level of price?
Creation of lower bottom (close below 8080) or if close below 22 EMA (-1 vertical shift) or may be above those level but if falling with huge volume.
If we wait till close below 8080 we will miss around 300 points.
One more point to add, today till now CAC & DAX are trading around 2% below and Dow around 1% below.
- Jayanta Chatterjee, Burdwan
Dow is retracing from res level of 18000. May use short term MAs for price confirmation.
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