Nifty Trend Indicator with multi timeframe update

Nifty Trend indicator with 4 Hour timeframe


There are times when there is no clear trend in the index. This generally happens when the short term and longer time frame trades are not on the same page or the traders and investors are thinking differently about the markets.

The ongoing week is one such period in the market. The above conditions can be detected very easily with a trend indicator and using it on higher timeframe.

For example: The following chart shows the Trend for both 1 Hour and  4 Hour time frames.

The hourly trend shows traders activity while the half day (4 Hour) timeframe shows large investors take on the markets.

Right now the 1 Hour Trend is in Buy mode while the 4 Hour is in still Sell mode.
Perfect recipe for confusion and that's pretty much evident also as the Index is seeing buy form lows while the rallies are being faded out.

Related Post:  Trend indicator with multi time frame

Nifty Two trendlines will define the move

Nifty index has been trading in a range for quite some time.

The index tested the trendline resistance from Nov and Dec highs but failed to cross it. The second test within a week again failed to move above it.
While on the downside the 200 SMA has been strong support for some time.

The daily charts also show another support zone at 5700 levels where the volume profile shows good buying action in the past.

The worrisome part is that the rise from 5700 levels has getting smaller and smaller and in April we had the third bounce which was half of last time and did not last for even 3 days.  This does paint a bearish picture.

Worth noting is the near stagnation at 200 SMA levels without taking out the peak of first test after the breakout from 200 SMA.

Any direction breakout from the above two trendlines will set the direction for future.

Attached is the chart.

Well its not all bearish for Nifty, there is a bullishness also in form of invested Head and Shoulder.  This particular pattern is in formation so have a watch on this.

The bullishness will come only on break above the neckline at 5950 levels.

The volumes which has been lower as per the textbook pattern. Need to watch the volumes on upside breakout here.

Trend stalling: Perfect range play

Nifty's upmove looks to be stalled at 5900 levels.
The two consecutive doji with now index below their lows shows that the trend is still of range.

With first test of 200 sma already done the index flattered in 4 days which is not a too bullish sign.

The index has also come inside the flag formation. This itself is not bearish bearish if the index takes support at 5800 and resumes upmove.

Worth noticing is the rsi play for nifty futures. The indicator has been between 70 and 30 levels for last 7 trading days.

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.

Trend indicator with multi time frame

For quite some time I was working on a trend indicator. The trend is derived from high and lows with stop loss based on ATR. This is quite common and I just combined these two techniques.

Using highs and lows price as trend is reduces lag and the stop loss gets adjusted as per the volatility. The ATR is the one of the best indicator for gauging the volatility.

Now the major change I did was to use multi time frame indicator with base time frame. For example with 1 hour trend I use the 4 hour vales and then look for confirmation. When confirmation then its one side otherwise trade less.

A simple screenshot. The Blue line is 4 Hour indicator while the green and red is of 1 hour.

Trading based on multiple time frames is a good technique and can be quite useful in choppy markets.
The best use is to detect what is larger trend is and then position the trades based on that. The smaller timeframe then gives the entry point.

In the above chart the the profit booking sign came at 5850 and has been in sell mode based on 1 Hour time frame. The 4 Hour time frame indicator is still bullish with stop at 5750.

The strategy for traders would be to go short 50% at 5850 and then book profits at 5750. That is for short time frame traders and for institutional traders would be to go short on break of 5750 levels.

The same kind of strategy can be applied for any indicator. More on this particular indicator later.

Related Post:  Nifty Trend Indicator with multi timeframe update

Nifty Hidden Bullish Divergence: Trend line breakout.

Here is a setup I was waiting for many days. Today it was triggered when the index moved above 5600 levels.

The setup is Hidden Bullish Divergence in RSI when RSI makes lower low and Prices do not make lower lows.
Since this setup is on weekly charts the move can be sharp also.


The last setup occurred at May lows and ultimately resulted in Sep breakout finally. Attached is the chart.

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 Color changed

The daily color of Nifty has changed to Neutral if it holds the 5450 levels and the Bank Nifty has been in Buy color from 10700 levels.

Worth noting is the mean reversion of Nifty to mid band from the lower band. This is an important level as the previous trend gets negated and the Index has got a fresh new start if the mid band holds. The bullish trend usually stops here if the bulls have less power.

Another formation to keep an eye would be falling ADX. See ADX related posts here.

This also indicates that if the 5400 level holds then we can expect some range to slightly bullish movement ahead.

India futures update 9 Feb

Nifty has finally moved below 5300 levels and Bank Nifty near to 10000 levels.
All this looks really bad as markets are breaking all the supports and showing no signs of strength at any levels.

Well one should not fight rising ADX especially when it is above 30 levels. Two days back only I posted (link here) that the ADX is rising from below 20 levels and the trend is bearish. It was the same trade setup which occurred in Sep rally for markets.

For Bank Nifty the 10000 levels will be psychological and action at this level will be worth watching.

The Fibonacci projections for the current wave stands at 5220 levels and for Bank Nifty at 10000 and 9700 levels.

India futures: Rising ADX not good

Nifty has rising ADX at 33 levels with bearish DMI. This has never been a good sign as the indicator has high success rate given that it is rising from below 20 levels.

The index has closed below the lower bollinger band thrice in 2011 with last friday the latest. Also there is crossover of 20 and 200 SMA on daily charts.

The futures are still in bearish zone after the shorts added at 5490 levels and 10600 levels. Daily and weekly for both Nifty and Bank Nifty are in Lev sell mode.