Qunatifying Nifty Bollinger Bands : First down side breakout

Nifty futures has given two consecutive close below the lower band and today again opened below the lower band.

The bandwidth also increased after hovering near 52 week lows for some time. The breakout from such a complacency was quite sudden.

The index gave first sign when the bounce from the mid band failed to touch the upper band signifying weakness ahead.  Such a formation when the top remains inside bollinger band has been very bearish for Nifty index. On  break of mid band additional confirmation came from the color system on 28th.

This shows how multiple confirmations can lead to good trade.

The index is now at the trendline support from last 3 lows made in Feb and March. As of now we are trading at the trendline. Any close below this line will be quite bearish for the index.

Related Post:Qunatifying Nifty Bollinger Bands Breakout

Nifty multi time frame Bollinger - Coinciding levels

The Nifty Multiple time frame Bollinger tells same story. The Weekly, Daily and Hourly all are near to mid band i.e. 20 SMA. What a coincidence.

Worth noting are the contracting or flat bands. This when there was a Bollinger Band breakout on daily charts.

I consider the  20 MA levels generally as the mean reversion where the market is near to neutral levels. And Markets do not like to stay such for long times.

Since the index has come to mid band (20 MA) from the upper band shows that undercurrents is still bullish though we may be in range for some time.

Qunatifying Nifty Bollinger Bands Breakout

The recent upmove in Nifty is definitely a good study case for Bollinger Band breakout study.

The index has broken out of the upper band and has been staying above the upper band for last 3 days.

In the last post I mentioned some of points which came into play in this move. Do read this post link here.

Since the main trend before this breakout was of range trading we needed two consecutive close above upper or lower band for any breakout to succeed. See Point # 2.

This time it happened. Also the index had one of the biggest move on first breakout  (> +2%) which was followed on the next day with ~ +1% close. The volume action was all out in favor of bulls on breakout.

This was one of the best breakout which we quantified earlier.

One thing to notice in such breakout was rise from range. So the bollinger band expansion should happen.
Well that's quite evident as the uptick in the Bollinger bandwidth. See chart attached.

Related Posts:
Qunatifying Nifty Bollinger Bands : First down side breakout
  
Nifty and Bollinger Bands: Range trading indications
  
Quantifying: Nifty and Bollinger Bands Strategy

Nifty and Bollinger Bands: Range trading indications

Nifty has been in the sideways mode for last 4 weeks. Lets check the bollinger bands. What are they telling us?

There are two main noteworthy points about the charts:

1. The first is that the Index has made the last bottom (on 25th Feb 2011 without breaching the lower band.) The low was 5230 on Nifty cash.

2. The second point is that the Index reverted back on touch of the upper band on 4th Mar 2011. The high was 5520 on cash Nifty index.

What this indicates is that we are in a perfect range trend as of now till the upper or lower bands at 5615 or 5295 is broken. This is very much consistent with earlier view of range trading.

Going further lets check the ADX.
It is at 13 levels with bearish DMI at 26 levels. The ADX below 20 levels is range indicator and that the setup as of now.

Looking at the timeframe we have 6 weeks of range trading already in place. Though there is no set rules for the timeframe in range but there is for sure a titbit that the longer the range trading the bigger the breakout from it will be. Example: the 3 month range trading of Jan - Mar 2009.

India Futures: 5600 is the bulls barrier

Nifty is not crossing the 5600 levels. The close below opening levels on Friday indicated that sellers are looking for higher levels for sell.
The fall came near the 200 DMA (exponential.) Now bullishness will come on close at 5600 above levels.

The sell came at today's open below 5500 levels.

The Nifty bollinger bands are flat and Nifty reversing direction on touching the lower and upper band. The upper is at 36.8% retracement adds more to the resistance at those levels.

All this indicates that the market will be in range mode for some time. Can look at options trading for range behavior now.

Indices color change, Range breakout

The color of Nifty and Bank Nifty is now in Lev sell mode after break of 5400 and 10600 levels. The color change was expected y'day itself. Read here.

The weekly was already in Lev Sell mode and the index reversing from mid band is a continuation of bearish signal.

Watch the bollinger bands now. Will the lower band at 5220 will be broken? What are the implications if the lower band is not broken? Will post that later.

Here is the action in the hourly charts. See what happens when the breakout from range happens.

Quantifying: Nifty and Bollinger Bands Strategy

Quantifying: Nifty and Bollinger Bands

Bollinger bands are one of the most popular indicators for the traders.

The bands serve as volatility indicator and can be used for breakouts and in option trading for predicting volatility expansion and contraction.

I assume everyone here would know the theory part so let me skip it.

One of the use of Bollinger bands is to long on close above the upper bands and short on close below the lower band. That’s the easiest trade suggested by John Bollinger also who is the founder of the bands.

Let’s see how that strategy worked for the Nifty.

Seeing the chart above the best way to trade was to short on close above the bands. Totally reverse of above strategy. That’s quite mind boggling.

Now I will try to quantify why such a thing has happened and when the simple strategy works and when not.

Since I am not well with excel can some one please help me with some of the number crunching, backtesting and building a macro so that it can be used for other indices/stocks also.

Anyway the initial test suggests the following observations:

1.       Buying on close above the upper band has a real good success rate in Bull phase but the bullish candles at the lower band has even much higher success rate.But with some additional filter it improves a lot.

2.       Two successive closes is the best indicator to buy. But there is a big catch here.

3.       If the strategy fails twice then it is a bearish indicator suggesting change in trend. Best example is the recent fall. But I feel that there was a warning signal even in December suggesting a fall.

The above points I feel is just only a few. If anyone knows excel coding well we can probe further and then unravel the mystery to make the above strategy one of good strategy to trade with.

Part 2: Qunatifying Nifty Bollinger Bands Breakout

Qunatifying Nifty Bollinger Bands : First down side breakout