Nifty ADX Trade

Nifty is more or less in range of 5100-4900. But when one see that this consolidation can lead to next big trade.

Well, the next trade can be based on ADX, it is at 12, below crucial 20 for nearly 1 month now.
Now it has started to turn up from levels of 10 and DMI - ive is moving up.

The theory is that once ADX moves up from below 15/20 levels after some time then the trend is in direction of DMI. No logic works then. Thats what the ADX trade is.
This is dangerous for the Nifty bulls.

I am attaching the current setup of the trade on weekly charts.

After a break

Back after a break, will update really soon.

Just for a thot: Nifty made a new high by just 1 point and then closes down for the next  few days.... This is surely a correction.....what say.....

Nifty direction

Nifty has top formation kind of candles in last 3 sessions.

On 16th the index opened with a gap up but ultimately it was kind of shooting star formation. Next day it gave dragon fly doji and today the formation is again shooting star.

The index also closed the gap it had on 16th and the high on that day is still to be crossed in futures. The band has been too narrow as the index is trading within 60 to 70 points intraday.


In pivots also the Nifty has closed touched the second support (S2) and is closing below the R1 from last two days.

Is it pause in the move or change in direction going forward? Well right now time has the answers.
There are some times in trading when it is better to let time resolve the formations and then trade those formations. I feel it is one such time right now.

Entry point for a trade

There is a well known saying that in investing you shoul buy when others are selling and sell when others are buying. I feel it is true in some sense for trading the bottoms or when looking for entry for a trade.

Nifty got sold off aggresively on 12th Nov and it tested the 20 hourly MA on 60 min charts. The index was down by more than 1% in one hour. The breadth was totally skewed to declines. It seemed that the market will move down from here.

But well Nifty is now above more than 2% from those levels. So what seemed like selling/shorting point was in fact the buying point for the next rally.

There were many indications for the same. Major one was holding of the 20 hour MA on intraday charts and the quick reversal form the down candle. Second one was that the Nifty never broke down form the first Support pivot on that day. Moreover there was a perfect hammer candle on 15 min charts.

Altough I do not usually see charts below the 60 min but some times the action in 15/30 mins do provide a real good view when the market is at crucial support levels as Nifty was at 20 MA support on that day.

This shows the convergence of multiple signals which become powerful to trade.

SPX recent shorts

S&P 500 rallies seems to be driven entirely by the short coverings. Every time there is a fall the SPX reverses and makes a new high.

Also there is remarkable similarity in the way the fall comes and the %age of the fall.
Like the average fall for last 4 times has been 5.5%age form the top and then there is new top formation of about 2-5% from previous top.

The same pattern was in play during the recent downtrend and then rally. Also SPX has made a new high at 1105 worth noting is how much further the rally can go now.

Nifty Fibonacci levels

Sometimes indices respect fibonacci levels to the point. The recent rally in Nifty is one such case.

The rally from 4550 had first major support at 4775 (38.2% retracement levels) then the next levels of 50% at 4860 proved support for the next leg up.

And from last two days Nifty is facing resistance at 76.4% levels of 5024 and the sell off from there took support at 61.8% levels of 4930.

The entire fall in retraced 76.4% times which is a major recovery. Needs to be seen if the current wave is impulse or still a correction.

Weekly Indices review 10 Nov 09

Auto Sector

CMP: 6621 The index took support at 50 DMA of 6250. Weekly candles are bullish with good base formation.

Resistance level is 6750 which is old top. Support at 6400.



Market Perform Can be brought on cross of 6700. Break of support of 6400 is bearish.





Cap Goods

CMP: 13140 Index is below the Daily 50 MA of 13400. Also weekly charst have bearish RSI divergence.

The levels of 13500 is 50% retracement which is resistance now.



Under Perform Any bounce to 13000 above levels can be shorted as fibonacci breakout has failed.





CNXBank Index

CMP: 9125 The weekly charts still show more upside momentum as is it still above the 21 WMA of 7950.

Strong weekly candles suggests 9500 top can be crossed.



Market OutPerfrom Support of 8950 and resistance of 9600.



FMCG Index

CMP: 2825 Weekly charts have bearish RSI divergence although the upside momentum is still strong.

Support at 2650 levels. Resistance is at 2900.



Market Perfom Short term weakness can be brought.





Healtcare Index

CMP: 4578 Weekly breakout on charts. Strong upside momentum.

Daily prices at support of 21 MA of 4400.



Market OutPerform Dips to be brought.





IT Index

CMP: 4492 Short term weakness is there on weekly charts

Support at previous bottom of 4260. Resistance at 4600.



Market Perform Range bound movemnet within 4800 to 4200.





Metal Index

CMP: 14850 Weekly rebound from 21 MA of 1300 levels.

Shorting can be done at top of 15500 as RSI divergence is there.





Market Perform Resisatnce is at 15000 levels.



Oil & Gas Index

CMP: 9861 Weekly charts are rebounding from lows. Bearish formation as RSI divergence is there.

Daily charts have resistance at 10000 levels.



Market Underpeform The index has resistace at 10000 levels.





Power Index

CMP: 2990 Index holding support at 21 WMA of 2950.

Daily resistance is at 3050 levels.



Market UnderPeform Shorts can be added at 3100 levels.





Realty Index

CMP: 3827 Index has not broken out of 23.6% retracemnet levels.

Daily resistance levels are 4300 levels.



Market UnderPerform Weakest sector among all. Major support is at 3000 levels.

Nifty buy in Point & Figure

Nifty futures have reversed and now in buy mode. The rebound was from the trendline support area.
The previous high of 5100 is still the resistance zone.

SHCOMP Trendline action

SHComp index has an interesting trendline formation on weekly/monthly charts.

The index has taken support at the Mar 09 and Oct09 trendline till now while at the same time it is now at resistance of trendline from 2008 highs and Aug'09 highs.

This does not qualifies as a triangle technically. The volumes have been higher on upmoves  which shows a possibility of a break on upside. The elliot count also in corrective wave.

What is interesting is that the break out direction will set the stage for the world indices as shcomp has been leading index till now.

Nifty 4800 Battlezone

There are some price levels in Index's where there is no direction for days. It is at these levels that the index spends good amount of time as the battle drags on between bulls and bears.

In last few months the levels of 4800 and 5000 has been the major battle zones.

Nifty spend 6 days at 4800 levels in Oct, then 2 days in Nov while going down and now today it again closed at 4800 levels bouncing of from lows.

Same ways Nifty spend 11 days at 5000 levels in Sep/Oct and 3 days in Oct while moving down.

These battlezone levels acts as magnets where the index gets pulled back there again and again.  The breakouts are generally large directional candles.

Worth noting is the time spend at these levels.

Lets see how much time nifty spends at 4800 levels this time.

Nifty Elliot Count Update

The 5 th wave up in Nifty Index seems to be over after the sharp fall in the indices.

The next wave down now is wave (ii) of larger wave 3 up.

The first part of the corrective wave is an impulse whose count is shown in the chart.

Wave	Start	End	Move
1	5182	4968	214
2	4968	5034	66
3	5034	4755	279
4	4755	4853	98	~=1.5* wave 2
5	4853	4538	315	~=1.5* wave 1

The rebound can be expected to 4750/4820 range .

China SHCOMP Update

In my earlier post I pointed that SHCOMP and SPX are at trendline support lines. while SPX has broken the trendline, China's SHCOMP moved up from those levels.

The candle formation is not bullish as of now till 3150 is crossed.

The Shanghai index is now at minor resistance line of 3130 which also looks like a triangle in formation. This also supports my elliot view that next upper wave is pending.  Since China has been leading the world indices, we can see some upside worldwide. The main question is if the old top in China at 3400 is crossed.

Will update some time later on this index's elliot count.

Nifty & SPX Point & Figure

Nifty has given the sell signal in Point & Figure format. The index is below the support levels of 4800 which was high of last X columns.

Worth noting is that the recent up trendline is still maintained and the last horizontal support at 4400 is crucial.
Any break below the previous X column lows of 4400 can change the bullish view of Indian Markets.

Also the Index sell off came exactly from the top of the upside resistance line in Nifty. Will Nifty be in the upside channel is worth watching.

Point & Figure charts are best in terms of intermediate term view and tension free trading.
Like after the recent sell signal the Nifty has moved down by 150 points. Only worry is when the reversal occurs.

SPX Point & Figure charts

The SPX has also triggered the sell signal in point & figure. Crucial support level is at 1010.

Weakness in Energy stocks

Crude has broken out of zone and touched new 52 Week highs of $80. The same strength should reflect in the oil stocks for the oil to trade at new highs.

The normalising graph of CL1 and Exxon shows that the oil stocks in US are lagging the oil movement.
Exxon (XOM) after breaking out quickly gave up all the gains and is back to zone range again.

If this divergence persists than the oil rally will be in danger.

Also note the continuous underperfomance of Exxon to Oil from March lows. The same kind of divergence was there when oil touched the $145 mark.

Disclaimer

All the posts here are for informational use only. Please do not use the buy, sell or hold as any recommendation. They are my own personal view. Before acting on any of the view please use discretion and take advice of yoyr financial advisor.

India Sectoral Indices View

Auto Sector

CMP: 6307 The candles on weekly charts shows weakness. Though daily charts are still strong.

The index is able to hold the 50 Day MA.



Market Perform Major support at 6000 levels which is the old top.





Cap Goods

CMP: 12875 The index is at weekly support of 21 WMA of 12900. The index is below the 50 DMA.

Daily support is at 12000 where the base formation is.



Under Perform Any bounce to 13000 above levels can be shorted as fibonacci breakout has failed.





CNXBank Index

CMP: 8410 The index turned down from the old congestion of 9500. Support is at 8000 levels.

Strength is daily as it is above 50 DMA at 8250.



Market Perfrom Can be brought at 8000 levels as major support is there.



FMCG Index

CMP: 2808 Weekly candles suggest some consolidation at these levels.

Weekly support at 2700. Strongest index among all the sectoral indices.



Market OutPerfom Short term weakness can be brought.





Healtcare Index

CMP: 4377 Weekly candles condolidating. Last high of 4600 is resistance.

Daily prices at support of 21 MA of 4400. Support at 4200.



Market Perform Short term weakness to 4200 can be brought.





IT Index

CMP: 4425 There is clear top formation at 4600 for some time on weekly charts.

Daily 50 MA at 4350 is pivot support now. Break of it support is at 4000 levels.



Market Perform Can be brought at dips to 4000 levels.





Metal Index

CMP: 13940 Weekly support at 13000 levels. Daily charts also at support levels of 50 MA of 13800.

Any short term bounce can be shorted as RSI divergence is there.





Market Perform Daily support is at 13500 levels where buying can be done.



Oil & Gas Index

CMP: 9434 The index is has turned down from 61.8% retracement levels two times.

Weekly major support is at 8500 levels. Daily prices below 50 DMA.



Market Underpeform The index can be brought only at 8500 levels.





Power Index

CMP: 2915 Weekly breakout has failed. Index has not crossed the 50% fibonacci levels.

Support is at 2600 levels.



Market UnderPeform Expect major support at 2650 levels.





Realty Index

CMP: 3827 Breakout on weekly resistance has failed. Weekly support is at 3500.

Weekly 50 MA is at 2850 levels which can be support for the fall.



Market UnderPerform Weakest sector among all. Major support is at 3000 levels.

Dow Theory

The Dow transports have broken their last lows while Industrials are way above.
The Transports Index has broken the lows of 3660 on closing basis while Industrials are still above the last lows of 9450.

Now need o watch if Industrials makes a new low or Transports make a new high. In both the cases the Dow Theory validates.

Nifty Pivot Trading

I use pivots for swing trading. One of the good startegy is like break of lower support or higher resistance gives the direction for next few trading days.

A real good example is last wek's break down from the second support pivot on 22 Oct. It is from this day that one can have a bearish bias going forward. The confirmation is to watch if Index can cross the first resistance line. If it gets sells off from the first resistance then we can sell the index.

In this case the pivots form a lower step patterns which shows lower prices bias.

The nifty break of lowest pivot on 22 Oct and then on 23 Oct it got sold off from the first resistance.

Attached is the chart of Nifty with pivots.

Next comes when to close the position. Well there are many signals one can use for closing the position. One easy way can be to look when Index takes support at mid pivot with getting sell of.
Will write in detail about this strategy later.

World Indices at Trendline Support

Shcomp Index is forming a wedge kind of pattern and right now at critical trendline support at 2990.

The Korean Index is at support from the Oct lows and has trendline resistance also from the highs. Noticeable is the top formation in KM1 was with hanging man and then long legged doji’s signifying that pressure is there at top.

SPX index is also taking support at the trendline although I feel a bit more downside is there as the %age down movement this time is less than the average of last ¾ declines. Also worth analyzing the SPX candles at the 200 DMA (yellow line.) There are evening star, doji kind of patterns. Also the rebound has a gap up right at 50 DMA.

Bar reversal pattern

Bar reversal is a classic pattern in western chart analysis. Although I mainly use the japanse candlesticks but sometimes the bar patterns are more useful. The recent price action shows the difference between these two display techniques.

The SPX index which has two bar reversal candles on Sep 23 and 21 Oct. On both days the index opened at the higher and then made a new top but closed below the previous lows. Thats what a classic bar reversal is.

Same pattern can be seen in Nifty on Oct 1 and Oct 10 whcih are bar reversals.

Now we will analyse the same dates with candlesticks.

First SPX on 23 Sep made a bearish engulfing pattern. This kind of pattern is a bearish pattern and its intensity increases if it occurs at top. The second candles stick on 21 Oct can be said kind of shooting star which again is a bearish pattern signifying the top formation.

Second in Nifty the respective candles are evening star and shooting star.

The conclusion we can draw form all this is that

1. The bar reversal pattern has occured right at top and predicted the reversal while the candles do have bearish implications but the power of prediction was not that strong (leaving the evening star formation in Nifty on 23 Sep.)

2. In candles the shadows (i.e. the wicks) play less important role than they in bars.  In candles the real body is more important.

3. Both the bar reversal patterns have occured at the end of wave.

The occurence of two bar reversals within span of 1month is a major -ive events for the markets. Although I did not pointed the same as early as possible, I will try to point out such patterns as soon as possible going forward.

Sensex Advance Decline Divergence

The following chart shows the divergence between the Sensex and Advance/Decline ratio.

There are few things to notice:

1. Sensex has been moving upside from June onwards but the AD ratio is on continuous decline. The hike in AD ratio is caused by the Indian election results. This is the divergence which shows building up weakness in indices.

2. The sharp fall in the ratio in last 2 weeks. This kind of sharp fall generally comes in the last phase of the move.

3. As per Elliot this kind of divergences are generally seen in the 5th wave which is the elliot count of Indian indices.

4. The AD ratio is right at support area. Any further weakness can mean more downside weakness in Indices.

Also, seen on the daily charts, there is also divergence and the AD ratio is in -ive tertiary.

Time of caution.

Nifty Weekly Update

Time to talk about long term outlook for Nifty.

I am using a very simple principle of prices that is "Mean Reversion". The prices tend to revert to their mean after diverging from it.

This can be perfectly done for any indices by using the ratio of Price vs the Moving Avergae's. I am using the same for Nifty with two MA one longer term and another ome intermediate term.

The chart shows that the Nifty on longer term MA ratio is at the top of the range and is showing the toppish kind of pattern. While the short term MA is having diveregnce with respect to Nifty.

To further improve the indicator I used the stochastics principle on these ratios. The improvement will give the buy and sell signals like the stochastics.

The Longer term MA stochastics is still to come in sell while intermediate term MA stochastics is showing the sell signal.

Now the big question: How to trade it?

Well the only way to play is through the LEAPS i.e. the long term options on Nifty as position building through the Futures can be too risky.

Thenext part is when to trade it. Well I will answer that question some time later.

Nifty Pivot Trading

Pivots are used by many traders as intraday points of buying and selling.
Today Nifty got sold off right from the first pivot resistance and the support was mid pivot. Since the pivots were quite wide today (difference of 40 points between the bands) the touch of first support pivot should not be expected. One more reason was that the Nifty is giving down day from last 3 days, so some bounce back can be expected.

Now when any index falls from pivot resistance levels then it portends weakness in future and vice versa.


The other major thing was ORB trade i.e. Opening range breakout trade which is profitable form last two days.

Nifty Trendlines

Trendlines matter a lot in Technical Analysis. They are both source of power and weakness.

Power in the sense that they will bring buying at those support prices. Weakness is the respect that they will induce selling at the resistance.

Nifty has broken one long term trendline while supporting a short term trendline. The break of long term trendline which was in action from March lows. This trendline is very significant as it forms the lower channel of the elliot count. This break of lower channel in up trend is deemed as dangerous. Earlier brreaks used to bounce back in a day but this time it seems that Nifty will close below the trendline which stands right now at 5100 levels.

The second trendline where Nifty got support was the lows of last two days. It perfectly bounced from that line.

Indian F&O Stocks view

Stock Sector Mode Support Resistance Target Comments
Aban Oil Services Neutral 1525 1675 Looks more for sell.
ABB Cap Goods Neutral 775 825 Turning down from resistance. Watch only above 825.
ACC Cement Sell mode 750 802 If support of 750 broken major downside.
AB Nuvo Fin Services Neutral 920 1025 At Support levels. Need to see if bounce is there.
Adlabs Diversified Neutral 335 375 Focus elsewhere till 375.
Alb Bank Bank Buy mode. 115 122 Today took support. Watch out.
Alstom Cap Goods New Buy 548 580 Breakout failed.
Ambuja Cement Sell mode 90 101 Sell on bounces. New lows
Andhra Bank Bank Buy mode. 101 -- Retracing. Candles showing top in place.
Ashok Leyland Auto MoB 41 45 At MoB. Watch for resistance.
Aurp Pharma Pharma Watchlist 760 Retracing. Watch for support.
Axis bank Bank Watchlist 955 -- At support levels.
Bajaj Auto Auto Neutral 1430 1600 Looks like entering sell mode.
Bajaj Hind Sugar Buy/Watchlist 200 -- Retraced and took support.
Balram Chini Sugar Buy/Watchlist 129 -- Retraced taking support.
BoB Bank Buy/Watchlist 485 525 Retraced at support levels.
BoI Bank Buy/Watchlist -- Candles not supportive. Looks like it will consolidate
Bhart Forge Auto Watchlist 270 -- Retracing.
Bharti Telecom Sell mode Taking support at 320 levels.
BHEL Cap Goods Buy/Watchlist 2365 -- Look at 2400 levels.
Bhushan Steel Metals Buy/Watchlist 1270 1450 Retracing look for bounce.
Biocon Pharma Buy/Watchlist 270 Strength and support is there.
BPCL Oil Sell 510 540 Looks like entering sell mode.
Cairn Oil Buy/Watchlist 275 290 Retracing. Look for support. Strength still left.
Can Bank Bank Watchlist Retracing
Century Text Diversified Watchlist 485 Retracing. At support levels.
CESC Power Neutral 375 400 Caution: Previous breakouts have failed.
Chambal Fert Fertiliser neutral 51 59 Breakouts failing.
Chennai Petro Oil Neutral 230 Entering sell mode.
Cipla Pharma Neutral Retarcing. Look for support.
CNXBank Bank 9500
CNX IT IT MoB MoB levels. Watchout.
Crompton Greaves Cap Goods Neutral 330 -- Retracing.
Dabur FMCG Watchlist 146 Retracing.
Divis Lab Pharma Watchlist 585 -- Right at support.
DLF Real Estate Watchlist 430 Candles bearish.
Dr Reddy Pharma Neutral 1020 Entering sell moce.
Educomp Diversified Neutral 4600 4850 At support levels.
Essar Oil Oil Watchlist Retracing at support levels.
Gail Oil Neutral 360 390 Retracement happening. Looks weak.
GE Shipping Shipping Watchlist 310 Breakouts failing. MoB levels.
GMR Infra
Grasim Cement Sell mode New lows.
GVK Power Infra Buy/Watchlist 48 Retracing. Watch for support.
HCL IT MoB Watch out.
HDFC Bank Bank Watchlist At Support levels. Watchout.
HDFC Bank Buy/Watchlist 2700 2900 Retracing. Look for support.
HDIL Real Estate Buy/Watchlist 355 Retracing. Watch for support.
Hero Honda Auto Neutral 1600 Suppot broken.
HUL FMCG Buy/Watchlist Bounced from support.
Hind Zinc Metals Buy mode. 860 Buy mode.
Hindalco Metals Buy/Watchlist 130 Candles weak.
HCC Infra Neutral 135 Right at support levels.
Hotel Leela Hotels Neutral 39 Retraced to support.
ICICI Bank Bank Neutral 890 950 1000 Retracing. Look for support.
IDBI Bank Neutral 128 At support levels.
Idea Telecom Sell mode Sell on bounces. New lows
IDFC Fin Services Neutral Retracing.
IFCI Fin Services Neutral Breaking support levels.
India Cements Cement Sell mode
IIFL Fin Services Neutral Right at support levels.
IBREL Real Estate Neutral Retracing. At support levels.
Indian bank Bank Neutral 170 Retracing.
Indian Hotels Hotels New highs can be expected.
Infosys IT Neutral 2300 At support levels. Bounce can come.
ISPAT Metals Neutral 22.5 25
ITC FMCG Watchlist 245 Bounce from support.
IVRCL Infra Neutral At support. Can bounce.
JPA Infra Watchlist 240 260 260 At support. Can bounce.
Jindal SAW Metals Watchlist 770 Candles weak. Retracing.
Jindal Steel Metals Buy Wow.
JSW Steel Metals Watchlist At support.
KMB Bank Bank Neutral 765 830 Watchout. Caution.
Lanco Infra Neutral Breakout failed.
LT Cap Goods Neutral 1750 Support broken. Can come down more.
LICHF Fin Services Buy 840 Bounced from support. Can move up.
MM Auto Buy 925 Bounced form support.
Maruti Auto Neutral Supports broken. Coming is sell mode.
MLL Shipping Watchlist 60 Sideways.

Relative Strength of US ETF's

I did the analysis of the relative strength of the sectors of US from the sectoral ETF.
The ETF’s are Basic Materials, Energy, Financials, Industrials, Technology and Consumer staples.
They were analyzed with SPY as market benchmark.


The graph shows really good observations. Some of them are:

1. XLF (Financials) drove the entire rally in SP500. They have been the strongest sector among all. This was also the same sector which was beaten down in the fall.
2. The Basic Materials ETF is also one of the strongest sector and is has never been in the –ive zone. This can also be seen in the basic materials rally from March lows.
3. The Energy sector which was laggard has suddenly moved up as oil has broken the trading zone and moved to new highs.
4. Both the XLE and XLB move +ively on the dollar deprecation trade.
5. The concern here is the drop in strength of Technology sector which has the highest weight age in SP500. The continuous underperformance by XLK can drag the SP500 down. NDX even after good results of IT companies is lagging the SP500 and Dow.
6. We also need to see the performance of Consumer staples. This sector being defensive will outperform when there is decline in index.

Nifty Elliot wave count update

Here is the updated Nifty elliot wave updated version.
In this post I am using the Nifty spot while earlier I was using the Nifty futures. The Correct way is to use the Nifty Sopot so I will keep following elliot on Nifty Spot.

Well, the count as per me is in wave (iii) of 5th. When breaking this (iii) wave we are in 5th wave. This 5th wave as per me will get over if Nifty does not cross above the 5182 top.
Here are the workings of wave

Wave (iii) of 5 breakdown

Wave Start End Move Comments
1 4375 4744 369
2 4744 4580 164
3 4580 5110 530 Extentsion of wave
4 5110 4935 175 ~= Wave 2
5 4935 5182 247 ~=0.5* wave 3




The break up of the larger wave 5 is as follows

Wave 5 breakdown

Wave Start End Move Comments
(i) 3919 4732 813
(ii) 4732 4375 357
(iii) 4375 5182 807 ~= wave (i)
(iv)
(v)




So there is a possibility of Nifty move getting over at 5182. On the upside if 5182 is crossed then we can look for 5305 where the subwave will equal wave 1.

Lets see what happens next.



Attaching the updated elliot count chart.