NEMA

Net Effective Market Activity

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Parent Category: Featured Articles

Category: Futures

Written by Frank Suler

The Futures Are Here

The desire to learn more about the relationships amid price, volume, and open interest has led to a new concept in evaluating futures contracts. Will it work for you?

Much of the information on futures trading available in the 1980s mentioned the relationship amid price, volume (V), and open interest (OI). Generally speaking, price breakouts from a trading range are more bullish under high volume. Further, an increase in OI with increased price meant that new long position buying must have been the dominant trading activity. Traders have pointed out that if the price increase occurred with a decrease in open interest, then most of the price increase had to be due to short-covering.

To better understand these relationships, refer to the list of meaningful combinations of price, V, and OI changes and the corresponding dominant trading activity in Figure 1.

FIGURE 1: DOMINANT TRADING ACTIVITY VS. DAILY CHANGES IN P, OI, AND V. There are 16 changes documented here.

Significance of changes
There were 16 such change sets found. The changes refer to daily changes — that is, price change today equals close price today minus close price yesterday. The futures contract with the most volume activity and the highest open interest is referred to as the lead contract. For consistency, the price changes and V and OI changes must only be for the lead contract as opposed to the total V and OI for all open contracts.

(Other studies have stated that the total V and OI for all open contracts should be used instead of the lead contract values. Since many consider this an important issue, further clarification is warranted. See sidebar “Using Lead Contract Values Of Volume And Open Interest” on page 22.)

Figure 1 lists the 16 dominant trading activities for the daily changes in price, OI, and V. For the changes, an increase is denoted by a “3,” a decrease by a “1,” and no significant change by a “2.” Increased or decreased buying is indicated by ±B. Increased or decreased selling is indicated by ±S.

Figure 1 represents a summary of available data. Detailed coverage for several of the items can be found in John J. Murphy’s book Technical Analysis Of The Financial Markets, in which variations of price, V, and OI during top and bottom formations can be found. In addition, George Kleinman, among others, covered the significance of price and OI changes. Donald Iglehart discovered a relationship between the day’s volume magnitude and the number of new positions and closed positions that occurred during the day.

…Continued in the October issue of Technical Analysis of Stocks & Commodities

Trend Channels

How to trade using channels Trend channels overcome a glaring flaw of trendlines by giving a clear signal on when to exit and book profits. NARENDRA NATHAN      In the previous part of the technical analysis series, we explained trend lines. These help in trading, indicating a buy when the trend is up and a sell when it’s down. However, one shortcoming of this method is that it doesn’t provide a clear signal on when to exit a trade by booking profit. This can be overcome by using trend channels.      If you look at several trend lines closely, you will observe that in some cases the price that is being bounced from a trend line returns to the line after oscillating the same distance either way (up or down). If you connect these points, that is, the points from where the price starts reverting, you will get another line, popularly known as ‘return line’. Trend channels are formed when the original trend line and return line are almost parallel to each other.      Types of channels: Much like trend lines, trend channels can also be classified as uptrend and downtrend. An uptrend channel will climb up (see Uptrend channel), and is, therefore, considered bullish. The trading rule here is simple—buy when the price comes close to the rising main trend line (with a stop loss arrangement at the trend line value) and book profit when the price comes close to the return line. The active traders who want to make money by participating in the counter trend (one against the main trend) can also consider selling short close to the return lines, with a stop loss in place at the return line value.      A downtrend channel, on the other hand, is bearish and is a falling pattern (see Downtrend channel). The trading rule here is in contrast to that of the uptrend channel, that is, sell short when the price comes close to the falling main trend line (with a stop loss arrangement at the trend line value) and book profit when the price comes close to the return lines. Here again, the active traders who want to make money by participating in the counter trend can consider going long close to the return lines, with a stop loss in place at the return line value.  Trading rules       • While channel analysis helps investors take advantage of price oscillations, they need to be careful about any break in channels. This is because unlike the trend line analysis, a break in a trend channel is more complicated.       • A break (up or down) in the main trend line signifies that the investors’ expectation about the stock has changed and, therefore, it can be used to generate new buy or sell signals. Any decisive break in the downtrend line (see Downtrend channel) is a clear buy signal. Similarly, any decisive break in the uptrend line (see Uptrend channel) is a clear sell signal. In both the cases, the main trend line value should be used as the stop loss.       • A break in the return line, on the other hand, indicates that the trend is becoming stronger. So traders can consider taking a fresh long position if the price goes decisively above the return line of an uptrend channel. Similarly, traders can considertaking a fresh short position if the price goes decisively below the return line of a downtrend channel. However, only seasoned traders should try this because the break may be temporary and the price may get back to the trend channel in a short period.       • The prices that are unable to reach the return line (known as return line failure) also give a hint about a possible trend reversal. In the Coal India chart, the prices failed to reach the return line just before the break in its uptrend channel. Since the return line failure indicates that the channel is weakening, investors need to be cautious with their trades when prices come back to the original trend line.

TILL 12 AUG

SAINT FLOW

THE 30Min FLOW:

METHOD : 30 Min Flow.. always in the market.

TIME FRAME : 30 Min charts

PERSPECTIVE : None….Flow Trades are traded off that particular timeframe with very little dependance on higher and lower time frames.They will be discussed later.

FILTERS :
1) Reversal filter ( F ) : The value wich we take to revese the trade in absence of gap
2) Gap Filter (GF): The value ( a bit bigger than normal filter) we take when we get gap opening against our position
3) Add Filter (AF): The value which we take for our adds ( a bit lesser than normal filter)

ENTRY : Our entry on one side is always accompanied with exits from previous positions.

a.PIVOTS---->Reversals over Visual Pivots alone in NF and other stocks except BANK NIFTY.What constitutes a Visual Pivot will be discussed later.

---SAR is moved from one PL to the next PL in an uptrend,and the SAR is moved only when the previous PH is taken out.Vice versa with a Downtrend.This is the general broader rule.Exceptions to this Rule exists and we will add that to this thread.

EXCEPTION to the above:
1. A Virtual High(When new highs after 2-3 bars sideways is not made,but a new close...we call that a Virtual High.Enough to move up our SAR.So too Virtual Lows.
2. In case of vertical moves without pivots, then SAR moved to visual pivot in 15min TF

B.GAPS:---->

i)AGAINST OUR SAR : Wait for 1st 15 min to form and reverse with high / low ( + / - ) GF… Gap Filter

ii) AGAINST OUR POSITION BUT WITHIN OUR SAR : Original SAR +/- F

iii) IN OUR FAVOUR : We are Long + continuous up move with a few WRBs ...If (First 15 min bar is a bearish bar) then
a.) Reverse on First 15min bar low – Gap filter , SAR at High of 1st 15 min bar H +gap filter

b.) In all other cases stops to be moved to previous day's last bar low...

ADDS :

A) LONGS : In long position/uptrend, we add only on Visual PH....max 3positions(Initial Posn+2 adds)

B) SHORTS : In short position/downtrend, we can add at Visual / Aggressive
PL as well as in following way…
1) We are short today, next day gap down, we add at first bearish bar low –F.
2) WRB low which is just a start of downtrend / move….
3) A WRB on 30 min which is turning an uptrend on daily into downtrend.

---Altogether 4 positions in a downtrend(Initial Posn+add1+add 2+add 3)

The only time we do not do the above.......when present trend is against the daily charts trend....then only Initial Position+1 add

PROFIT BOOKING: Not done.. We are always in flow.. Entry on one side is exit from other side.

EOD-REVERSALS - based on last bar closing value to be in the direction of the trend.More will be discussed after taking abt concepts.

POSITION SIZING:No more than 1.5% risk for Initial Positions and no more than 2% risk at any given time inclusive of adds.
===================================================================================================================================================================================================================================================================================================================================================================================================

Aggressive Pivot

In a Bar level rally, a lower close without a lower low and then high breaks defines an aggressive pvt
In a Bar level decline, a higher close without a higher high and then low breaks defines an aggressive pvt

Basically, a pvt in line chart without being a pvt in candle

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minor Pivot

In a bar level rally, a lower low defines the high as an mpH
In a bar level decline, a higher high defines the low as an mpL

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(only for UT) a minor pvt below d line makes it a VPL, no new high required here....ex: diagram 2

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__________________

Gartley ---Final word

Axis Bank has formed a very nice Gartley Pattern since past 7 days.

X to A = 99
A to B = 61
B to C = 38
C to D = 61
A to D = 85

Here, AB = CD
AB/XA = 61.61%
BC/AB = 62.29%
CD/BC = 62.29%

First Target will be 61.8% of AD, which is about Rs.750
Second Target will be 127.2% of AD, which is about Rs.694


Time taken to form AB is equal to CD both took 30 mins to form, angles are same

Vtrend

FII have net sold 1300 contracts today. They have more or less day traded today. It is interesting to note that their OI has decreased by 10K contracts.
The PCR has increased to 1.12 today - indicating more activity in the Puts. The gap up open has been used to write Puts at a number of strikes.
The Desi MO is moving quite rapidly on either side indicating the rallies or falls are spread across the spectrum.
When I try to calculate the area of a pond, I will guesstimate the radius of the pond and multiply the square of it with 3. In an examination, when I am asked to calculate the area of a circle, I would measure the radius using scale and I would be using 3.14 as the value of Pi. However, when the area of my wrist watch is calculated, probably the Pi has to be taken with far greater precision. My point is, we actually do a trade-off for the accuracy against the purpose of the operation, difficulty in calculation and risk involved in error.
With the above statement as a backdrop let me explain - where and all I use averages in my data - and to what ends I use them.
Firstly, I try to deal with No. of Contracts as has been shown in the bold above. It is the number of contracts sold or bought - and it has nothing to do with lot size - whether it is 25 or 50 or 10.
Secondly, I calculate the average Buy price and average Sell Price. Now, before the trigger is pulled against me, let me explain, the purpose for which these two averages are used. Let me take the case of today's average Buy price and average Sell Price - located in columns D21 and G21 of the data sheet. The average Buy price is 5418 and average sell price is 5457. Today NF has traded between 5420 and 5470 for the most part. So, it basically tells me that FII have sold at highs and bought at lows of the day. For me, it actually does no harm, to think that these average prices are having some small error - ( I will come to the calculation of error percentage later) - My point of interest in using the average is to plot the day against FII activity. For example, today NF opened low, and traded at highs towards later part of the day. It basically means that FII bought in the morning, and booked large part of day buyings in the afternoon. They did not carry much of today's bought contracts. I hope all of you agree with me that, to make such directional judgements, even if the averages are skewed by a percent or two - it does not matter - simply because each day, the averages are skewed approximately by the same amount - and we are looking at their relative activity.
Further, I calculate the net contracts bought/sold, their value and their average. This also is calculated for a different purpose. Let me explain - Today, the average price comes to an absurd 7315. What do we do with it? Here is a small example. I buy 5 apples at 10Rs each - and sold 3 of them at 14 Rs. each. My average price for the remaining 2 apples is - (5*10-3*14)/2=4Rs. The low average of the remaining tells me that I bought low and sold high, and am carrying my buyings for the next day. Take the exact converse of this example - when the average is very high. It indicates that I am carrying my sellings to the next day. So, basically the net average price tells me what is it that the FII carried to the next day. Even here, the average even if it is wrong by a percent or two - it should not matter. We are using these averages as directional indicators.
Now, let me come to the average OI contract value which I refer to as FII SAR. This is calculated as the average price of OI each day -which changes according to settlement price. Though there are quite a few reasons why I started using it as an important price - it is here that the accuracy of the calculation is important - atleast it is more relevant here than any of the earlier use cases. So let us analyse this aspect in more detail.
As on 13th March, the Net OI in March Series in Nifty Futures is at 2,50,84,500. The OI of Bank Nifty at the same time is 12,04,475. So Bank Nifty OI occupies 4.8% of NF OI. Assuming FII are holding some positions in other indexes like Mini Nifty, CNX IT etc. - it is safe to assume that - all the rest of the futures will occupy 8% of NF OI. The basis for 8% in the below table is due to this fact. Please refer to the table below:
Instrument No. of Contracts Lot Size Average
Day Price Total Value
(B*C*D) Average Price
(E/C/B)
NF 300000 50 5430 81450000000 5430
BN(8%) 24000 25 10700 6420000000 10700
Net 324000 50 87870000000 5424.07
In the above table - the explanation for the numbers are like this. On an average NF trades 3L contracts daily. If you are not comfortable with this number, feel free to take any other number. So, BN will be trading approximately 8% of that using the above approximation. So, 24K contracts of BN have been traded. Now, the FII data will show us FII have traded 3.24L contracts. The lot size of each instrument - and the average traded price of the day are taken - to simplify the calculations. Assuming NF has traded at an average price of 5430 through the day and BN has traded at 10700 - the total value of each is calculated - by multiplying the lot size, traded contracts and average price. Their total is calculated at 8787 crore which is the number given to us in the FII data sheet. Now, I am taking the average contract size as 50 - and calculating the average price for the contract by dividing the total value with total contracts * lot size(50) - that is giving me an average price of 5424 against the actual average of 5430. Ladies and Gentlemen, I admit that I am inaccurate from the actual result by a whopping 0.1%.
As a trader, I will be watching a price zone rather than a price point. I mean - when I say FII SAR is 5424 - it does not mean that hell will break if the price moves by a point below or above. I am more interested in watching the price behaviour around that area - give or take x points either side.
To conclude, As I said above, our accuracy is a tradeoff between risk, purpose and ease of usage. I felt that I am not doing a sin by the compromise that I made in calculations - I mean - it is the best trade off I could have arrived at - given my parameters of evaluation and my trading purpose. If there is a better method to make use of the data, I request the esteemed readers to point out - so that I can correct myself.
You can find the entire data sheet here.





Instrument No. of Contracts Lot Size Average
Day Price Total Value
(B*C*D) Average Price
(E/C/B)
NF 300000 50 5430 81450000000 5430
BN(8%) 24000 25 10700 6420000000 10700
Net 324000 50 87870000000 5424.07




Dear Friends, now that I have presented whatever information that I have - I would like to admit that It will be difficult to continue writing this notes any further. However, I assure you that the data sheet will be updated on a regular basis. As I have repeatedly said, in my earlier posts, you do not need my colored glasses to analyse the datasheet. It is a piece of data - and every one can process it in their own way and arrive at their own conclusions. If the notes along with the datasheet, did help even one person, in their trades - it has served its purpose.

Very good wave theory

My theory is simple: Five waves break down into three channels, and three waves need only one. The price movement in and out of these channels confirms each Elliott wave.

Base Channel
Figure 61 shows three separate five-wave patterns with three different channels drawn: the base channel, the acceleration channel and the deceleration channel.



The base channel contains the origin of wave one, the end of wave two and the extreme of wave one (Figure 61A). Of the three channels, the base channel is most important, because it defines the trend. As long as prices stay within the base channel, we can safely consider the price action corrective. Over the years, I've discovered that most corrective wave patterns stay within one price channel (Figure 62). Only after prices have moved through the upper or lower boundary lines of this channel is an impulsive wave count suitable, which brings us to the acceleration channel.

Acceleration Channel
The acceleration channel encompasses wave three. Use the extreme of wave one, the most recent high and the bottom of wave two to draw this channel (Figure 61B). As wave three develops, you�ll need to redraw the acceleration channel to accommodate new highs.

Once prices break through the lower boundary line of the acceleration channel, we have confirmation that wave three is over and that wave four is unfolding. I have noticed that wave four will often end near the upper boundary line of the base channel or moderately within the parallel lines. If prices break through the lower boundary line of the base channel decisively, it means the trend is down, and you need to draw new channels.

Deceleration Channel
The deceleration channel contains wave four (Figure 61C). To draw the deceleration channel, simply connect the extremes of wave three and wave B with a trend line. Take a parallel of this line, and place it on the extreme of wave A. As I mentioned before, price action that stays within one price channel is often corrective. When prices break through the upper boundary line of this channel, you can expect a fifth-wave rally next.

In a nutshell, prices need to break out of the base channel to confirm the trend. Movement out of the acceleration channel confirms that wave four is in force, and penetration of the deceleration channel lines signals that wave five is under way.

Market wisdom

Nifty is up 9% this month and market seems to be showing no signs of exhaustion. Every day: it’s the same story: it makes small progress [minor gap-up] and refuses to correct. The market has been so strong that it has not even offered running correction this month.
Destination seems to be 200 dma.
It looks a Reversal to Mean rally

Source: www.chartalert.com
Nifty has been facing stiff resistance at 200 dma since May 2011. Three attempts to cross over 200 dma has failed since then. This looks like another attempt and considering that how market has rallied till now: it’s quite likely that Nifty may rally to 200 dma in next few days or a week. Anyways, it’s just 160 points from current levels
The Market is Overbought: Myth
Statistically, the market seems overbought. But one should ask a simple question – What does this kind of move would have done to the psyche of individuals who have been waiting for correction for days now? Overbought state has no significance unless it is accompanied by euphoria.
When people are unhappy with rally, you don’t call it overbought.
Today is Credit Policy

Today is Credit policy and one can expect some volatility today. One of the biggest criticism of the current rally has been that it has not even offered running corrections i.e. intra-day correction. For last couple of days: Nifty is stalling around 5055-5060 and hence it would be interesting to watch what Nifty does today post Credit policy..
CHALTE CHALTE
The market moves wherever it wants to go. It does not care about you or me. It does not play favorites. It does not discriminate. It does not intentionally harm any one individual. The market is always right.
Lots of times we miss the market move because we’re focused on what the market should be doing, rather than on what it is doing
Fundamentals fall by the wayside when emotion drives the market. That’s why the market can stay overbought or oversold for an extended period of time.
Remember, Markets don’t go to moon. They will stop…but for gravity to kick in…euphoria needs to build up.
Euphoria never builds up in prices but in state of mind of market participants. Once it builds up – it reflects in complacency [writing naked puts, buying unlimited calls, going overboard on building trading positions].
Complacency is a required condition to puncture euphoria. [No matter how smart you are, every human being is vulnerable to mass hysteria.]
Please let me know your views. Do give your feedback.

Tech.Anal 4

Nifty Technical Analysis Explained - 2.
5-D & 14-D: These are "Stochastics" indicators found in 8th&9th columns(H, I). A more detailed write up will be followed later. This indicator oscillates between 0 to 100 and helps in identifying "Overbought and Oversold" situations. It is generally observed as the prices of stock increase, the closing prices tend to be nearer to the upper end of the price range. As prices fall, the closing prices tend to be nearer to the lower end of the price range. This price range is selected for 5 days and 14 days and the positioning of the close price on any given day in this range is denoted as 5-D and 14-D. This confirms a rising, falling trend as well as Overbought and Oversold status. The colour changes to green when in uptrend and red when in downtrend.

Columns L shows the high point of 5 period range, Column M shows the Low point of 5 period range, Column N shows the high point of 14 period and Column O shows the low point of 14 period. Here too, the colour changes as the index maintains or makes new highs or makes new lows. Also of importance is these columns give you the ready break down or Break out points of 5 period or 14 period which keep changing as the days pass by.
PIVOT, Support & Resistances: These are shown in Column P,Q,R,S,T,U. and the same are copied and pasted in the Weekly Pivot table as well as the Daily Pivot table in the same sheet for easy viewing. The importance of Pivots & other S1,s2(supports) and R1,R2(Resistances) may be read here.
Weekly Pivot & Averages: These are collected from the same sheet as mentioned above as well as from Data.W (Colum V to Z). Use the close by averages, and other numbers for weekly trading strategy.

Daily Pivot & Averages: These are collected from the same sheet as mentioned above as well as from Data.D (Colum AH to AL for simple averages and column AN to Ar for emas). Use the close by averages, and other numbers for weekly trading strategy. Whenever the emas are above the simple averages, the near term strength is seen and the colour of the ema turns green and whenever the emas move below the simple averages, the colour of emas turn red. You can see all the emas have turned red as the near term strength is quite weak. And that is also an area bounces/ relief rally takes place. It is said "Market is weak when it is at its high and strong when it is at its lows" as advised by Robert Beckman of Elliott wave and hence EW encourages the trader to "Buy into the weakness and Sell into the Strength".
For the chart reading, I will cover it tomorrow.

Tech.Anal 4

Nifty Tech.Analysis File explained-1.
Pivot Sheet: As you key in the high, Low, High of any stock or Index, this table calculates the "Pivot" point, three supports & three Resistances. This could be used for trading purposes. For more on this, read "Pivot, Supports & Resistances".

Blog Data Sheet: This is the most important sheet in the file and it collects vital data automatically as you update the "Data.W(eek), Data.D(ay) and Data.H(our)" sheets.It has Date, High, Low & Close in the first four columns. If the high clears the previous two day's high, the colour changes in the cell. Similarly if the low breaks previous two day's lows, the colour changes telling us the change in the swing highs and swing lows.Generally a two day swing clearing is an indication of a change in direction. But there are also false breakout/ breakdown in this, hence I have taken 5-day high & Low breaking as one of the factors for "Conservative Trade" initiation.
5.Ema:This is placed in the 5th column(E) and it is the most important short term average. Unlike a simple moving average which averages the last 5 days prices equally, ema gives more weightage to the most recent prices by a mathematical calculation and thus it is a good indicator of short term strength or weakness of the market. The colour of the cell & the font changes to "Red" the moment the close price closes below this critical ema indicating the onset of weakness. And it changes to green if the close price closes above it indicating strength. As long as the weekly close was above this ema, the daily falls were bought into. Since the 18th Dec "weekly sell Signal" as per this ema, the first day resulted in a sell(21.12.09). Now the highly oversold daily as well as Hourly with positive divergences will attempt a reversal. For the week, the first week after the sell signal is the "fight back" week if there is any strength left in the earlier uptrend. A continued close below the week ema on 24.12.09 will more or less confirm a larger time scale reversal in trend. Similarly when the day close is closing below the 5day ema, a sell signal is generated and use this signal to sell in the hourly time frame everytime there is an intraday rally towards either hour ema or Hour high ema. Always give more weightage to the higher time cycle and play the lower time cycle till a "overbought or Oversold" situation arises in the higher time cycle when one should approach with caution but continue in the same direction.
High ema:This is placed in the 10th column(J) and it is the 5 day ema of the highs made on the previous 5 days giving more weightage to the most recent highs. Thus, as the Close price stays above this the upward momentum is intact and the market is expected to make continued up moves and new highs.The moment the close price closes below this, the colour changes to yellow and font to red signaling the onset of a correction. Sell on rises come into play and market will attempt during this period to move higher than this "High ema" during intraday but only a close above this will bring back a lasting momentum. Similarly the moment the close price closes above this the colour changes to green and font to green signaling the resumption of the upward momentum. Buy on dips come into play and market will attempt during this period to move lower than this "High ema" during intraday which generally is bought into but only a close below this will bring in a correction.
Low ema: This is placed in the 11th column(K) and it is the 5 day ema of the lows made on the previous 5 days giving more weightage to the most recent lows. Thus, as the Close price stays above this the uptrend is intact and any fall till this low ema may be construed as only a correction.The moment the close price closes below this the cell & font colour changes to red signalling the onset of a downtrend. Sell on rises come into play and market will attempt during this period to move higher than this "low ema" during intraday but only a close above this will bring back a "Neutral mode". Similarly the moment the close price closes above this the cell colour changes to blue and font to blue signalling the "likely end of a downtrend". Buy on dips for trading may come into play and market will attempt during this period to move lower than this "low ema" during intraday but only a close below this will continue the downtrend.
D.Macd & S.Macd: These two are placed in 6th & 7th Columns (F, G) and they are the values of fast macd(5,10,9) and Slow macd(12,26,9). As this numbers are ascending, it is in uptrend and as the numbers are declining, it is in downtrend and the colour changes to Red during downmoves and to Green in upmoves. For more on this MACD, please read an exhaustive write up here.

Tech.Anal 3

Nifty signalling a weekly up momentum.
The ending diagonal(green) has bigger rally potential while the corrective up(Red) likely to lose momentum around 5300-25. It gets negated above 5330.
JustNifty TA (17th Oct)

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Posted by Ilango at 4:31 PM 11 comments Links to this post
Labels: Ending Diagonal, Tech.Table


TUESDAY, SEPTEMBER 20, 2011
Nifty opened at Day pivot, paused around DHEma/ holding well above HLEma, moved past & closed above Friday's resistance of 5125-30.
JustNifty TA(21st Sep)
BankNifty TA(21st Sep)

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Posted by Ilango at 4:13 PM 4 comments Links to this post
Labels: Tech.Table
FRIDAY, APRIL 1, 2011
Nifty closes above all averages.
Nifty closed above all week/ day averages. So far overbought conditions have been corrected with intraday moves except in the case of Bank Nifty. Nifty is closer to another channel resistance point of Day-R2.
Observe how the short term pivots are moving above med. & long term pivots as do the averages.Similarly keep an eye on the High/ low emas positioning too to suggest strength/ weaknesses vis-a-vis different time set ups. There are more such observations could be made out of the Tech.table.
Once the "Hour lead indicator" starts to make "dots" above the 80 mark, an early indication of a trending move can be spotted...follow it up in the daily time frame and so on.Similar observations has been observed during downtrend too.
"Tomorrow's game too shall pass"..
Posted by Ilango at 5:15 PM 8 comments Links to this post
Labels: Tech.Table
TUESDAY, FEBRUARY 1, 2011
Nifty Premarket View.
How to use the Tech.table numbers for trading: I have shown below in the chart. There are no "fixed rules" here. Read the earlier post on it by typing in the "Search this blog". It is a good reference table. Once you understand the undercurrent of the market: downtrending, down & getting exhausted, down& exhausted& signs of bottoming, down & bottomed, reversal to Up, UP & overbought and so on.
In a sideways market namely consolidating during uptrend or consolidating in downtrend or pausing to make its mind about reversal, the Low Ema and High Ema range gives you tradeable points.
ROC(Rate of Change): It is another momentum indiactor. It is as good as any other indiactor with its limitations. It reflects divergences quite well. 12 period is a classic number. Though I have used it extensively earlier, I have found macd & stochastics combination to give the required direction.
EW Counts: Remove those words of "Proving me wrong" - no seroius trader will get into that kind of act. No labeling is etched in stone. We use labeling as the market unfolds to put it in perspective. As long as the market moves on expected lines, the labelling remains and the moment a deviation occurs, it alerts you to the alternative scenario. It has helped us tremendously so far and it'll continue to do so in future as well. There are many traders who are quietly doing it with great amount of success as long as they remain grounded with a strong sense of self-belief.
No method works 100% of the time. However, identifying different method at different times maximises your gains.
Till 5801 is scaled in quicker time, downtrend remains with short term bounces & rallies. Scaling 61.8% & 80% retrace of 5654 & 5724 are the early reversal possibilities. Till then the dreaded 3rd wave continues.

Posted by Ilango at 7:21 AM 59 comments Links to this post
Labels: Elliott wave, market Wisdom, Tech.Table
THURSDAY, JANUARY 20, 2011
Trading it the JustNifty way.
The oft repeated query is how to use the TT(Tech table) for trading purposes. There are improvements made in the TT over a period of time. Before you begin to read the tech table, you need to understand the market moves with the help of two basic classic technical indicators:
Trend indicator (Macd) & Lead indicator (Stochastics). Once you are able to put the segments of market uptrend with corrections with the use of the above two tools to be followed with market's downmoves with its share of corrective rallies, you will then be ready to integrate the numbers that are appearing in the tech. table to fine tune your trading plans/ executions/ management.
For eg: A buy in a lower time frame while the higher time frame is in BUY MODE would be a valid signal. (If you get a price closing above Day Low Ema while it is staying above Week Low Ema, it is a valid & viable one., exceptions when a market is reversing with +ve divergences). You read your tools starting to give a buy from oversold region, prices would close above the "Low Ema" of that time frame in the TT(depends on the hour/ day/ week TA).
Once the prices close above Low Ema, it is "Buy on Dips" for the short term until prices close above "Close Ema" signalling a "Hold". The prices are then expected to close above "High Ema" indicating momentous moves ahead and you may plan your trades accordingly by adding more for the short term swift gains.
In a sideways market, the prices tend to oscillate between High & Low Emas.
Similarly when the TA tools indicate a overbought with negative divergences, the prices will close below "High Ema" to suggest a "Loss of momentum" signalling a "Sell on Rises" and confirm it with a close below "Close Ema" for a hold and once closes below "Low Ema", the downward momentum will accelerate.
For Positional Traders, the TT has JNSAR and J10.SAR numbers to initiate trades which is a simple "Stop And Reverse" method.
If you can identify a larger trend change with TA tools, TT will confirm the same with its colour changing as the prices close below HEmas first followed by Day, Week and Month. You are safe as you side with these trend indicating colours. Do not go against them as one never knows how deep is the correction/ Fall or How high is the rally/ Upmove.
Besides these, TT also has Pivot table of three time frames & Fibonacci retracements to choose supports/ resistances for profit booking & re-entry.
If you can understand the rhythmic changes of the market (Using Elliot wave/ Technical Analysis), TT becomes a ready reckoner to choose the trading as well as investment numbers.
Yes, you can use the TT for individual stocks for an effective short term as well as Long term invertment/ trading purposes.
Always have JNSAR Trade,(Positional Trade) & Aggressive trades independently as per their criteria to maximise gains.
Use Option Strategy at critical moment to Maximise your returns.


Posted by Ilango at 7:20 AM 27 comments Links to this post
Labels: Nifty TA file use, Options Trading, Tech.Table, Technical Analysis
SUNDAY, NOVEMBER 21, 2010
Tech. Table made easy.
T-o-T Amit" has made some changes to these files that it has become absolutely easy to update with just 2 steps:
1. For each hour, copy the entire previous row, paste it in the next row.
2. Now key in the open, high, low & close for the current hour.

That's all..!! The Tech.table is updated with the latest data. You can key in the anticipated highs/ lows and check the developing emas too. Thank you, again, Amit.
Nifty
Tata Steel
SBI
(I will update more files as time permits)
Tech.Table reading
Applied Technical Analysis

Spend some time reading through the above two write ups. Making money in the market is not setting up a terminal and taking a position. It is like a game of chess... a game of football - there is always a different set ups developing and the one who is able to realise the subtle changes, exploits the same and benefita the maximum. And there are some very disciplined simpletons who repeat the known strategies time and again and keep winning with a disciplined appraoch.
Doubts come when you are on the path of progress and you must quickly sort them out, find the answers and move on..You can't have the same doubts time and again.
Just one strategy, dear to me, will fetch you the highest returns most of the time.......... Divergence Play along with Break out/ Break Down..
Posted by Ilango at 10:13 AM 17 comments Links to this post
Labels: Tech.Table, Trading methods
SATURDAY, JANUARY 23, 2010
Technical Analysis with Moving Averages - SMA & EMA.
Traders have seen the invention of hundreds of indicators. While some technical indicators are more popular (macd, Stochastics) than others, few have proved to be as objective, reliable and useful as the moving average (MA).
Moving averages help technical traders track the trends of stocks by smoothing out the day-to-day price fluctuations, or noise.By identifying trends, moving averages allow traders to make those trends work in their favor and increase the number of winning trades.
Every type of moving average is a mathematical result that is calculated by averaging a number of past data points. Once determined, the resulting average is then plotted onto a chart in order to allow traders to look at smoothed data rather than focusing on the day-to-day price fluctuations that are inherent in all financial markets.
The simplest form of a moving average, appropriately known as a simple moving average (SMA), is calculated by taking the arithmetic mean of a given set of values. For example, to calculate a basic 10-day moving average you would add up the closing prices from the past 10 days and then divide the result by 10.
These curving lines are common on the charts of technical traders, but how they are used can vary drastically. It is possible to add more than one moving average to any chart by adjusting the number of time periods used in the calculation. These curving lines may seem distracting or confusing at first, but you'll grow accustomed to them as time goes on.

The simple moving average is extremely popular among traders, but like all technical indicators, it does have its critics. Many individuals argue that the usefulness of the SMA is limited because each point in the data series is weighted the same, regardless of where it occurs in the sequence. Critics argue that the most recent data is more significant than the older data and should have a greater influence on the final result. In response to this criticism, traders started to give more weight to recent data, which has since led to the invention of various types of new averages, the most popular of which is the -
Exponential moving average (EMA):
The exponential moving average is a type of moving average that gives more weight to recent prices in an attempt to make it more responsive to new information. This type of moving average reacts faster to recent price changes than a simple moving average. The 12- and 26-day EMAs are the most popular short-term averages, and they are used to create indicators like the moving average convergence divergence (MACD). In general, the 50- and 200-day EMAs are used as signals of long-term trends. EMA responds more quickly to the changing prices. EMA has a higher value when the price is rising, and falls faster than the SMA when the price is declining. This responsiveness is the main reason why many traders prefer to use the EMA over the SMA. Below Tech.table will vouch for the efficiency of EMA (Note the change in colours alerting instantly).

Moving averages are a totally customizable indicator, which means that the user can freely choose whatever time frame they want when creating the average. The most common time periods used in moving averages are 5,10, 20, 30, 50, 100 and 200 days. Alternatively, fibonacci believers use 3, 5, 8, 13, 21, 34, 55, 89, 144, 233 days. The shorter the time span used to create the average, the more sensitive it will be to price changes. The longer the time span, the less sensitive, or more smoothed out, the average will be. There is no "right" time frame to use when setting up your moving averages. The best way to figure out which one works best for you is to experiment with a number of different time periods until you find one that fits your strategy.
Primary functions of a moving average are to identify trends and reversals, measure the strength of an stock's momentum and determine potential areas where an asset will find support or resistance.
Identifying trends is one of the key functions of moving averages, which are used by most traders who seek to "make the trend their friend". Moving averages are lagging indicators, which means that they do not predict new trends, but confirm trends once they have been established. This "lag" is somewhat mitigated by the arrival of EMA.
A stock is deemed to be in an uptrend when the price is above a moving average and the average is sloping upward. Conversely, a trader will use a price below a downward sloping average to confirm a downtrend. Many traders will only consider holding a long position in a stock when the price is trading above a moving average. This simple rule can help ensure that the trend works in the traders' favor.

To measure momentum, pay close attention to the time periods used in creating the average, as each time period can provide valuable insight into different types of momentum. In general, short-term momentum can be gauged by looking at moving averages that focus on time periods of 20 days or less(5,10,20).
Looking at moving averages that are created with a period of 20 to 100 days (25,50,100) is generally regarded as a good measure of medium-term momentum.
Finally, any moving average that uses 100 days or more (100,200) in the calculation can be used as a measure of long-term momentum.

One of the best methods to determine the strength and direction of a stock's momentum is to place three moving averages onto a chart and then pay close attention to how they stack up in relation to one another. The three moving averages that are generally used have varying time frames in an attempt to represent short-term, medium-term and long-term price movements. Strong upward momentum is seen when shorter-term averages are located above longer-term averages and the two averages are diverging. Conversely, when the shorter-term averages are located below the longer-term averages, the momentum is in the downward direction.
Support:
Another common use of moving averages is in determining potential price supports. It does not take much experience in dealing with moving averages to notice that the falling price of an asset will often stop and reverse direction at the same level as an important average. Many traders will anticipate a bounce off of major moving averages and will use other technical indicators as confirmation of the expected move.

Resistance:
Once the price of a stock falls below an influential level of support, it is not uncommon to see the average act as a strong barrier that prevents investors from pushing the price back above that average. As you can see from the chart below, this resistance is often used by traders as a sign to take profits or to close out any existing long positions.
Many short sellers will use these averages as entry points because the price often bounces off the resistance and continues its move lower. If you are an investor who is holding a long position in a stock that is trading below major moving averages, it may be in your best interest to watch these levels closely because they can greatly affect the value of your investments.
Stop-Losses:
The support and resistance characteristics of moving averages make them a great tool for managing risk. The ability of moving averages to identify strategic places to set stop-loss orders allows traders to cut off losing positions before they can grow any larger. Using moving averages to set stop-loss orders is key to any successful trading strategy.
Data Used in Calculation:
Most moving averages take the closing prices of a given asset and factor them into the calculation. It is my experience that it would be important to note that this does not always need to be the case. It is possible to calculate an "EMA"by using the close, high, low . When plotted on a chart or put in a "Tech.Table", these impact your analysis as well as your trading results in a very big way.
Finding an Appropriate Time Period:
Because most MAs represent the average of all the applicable daily prices, it should be noted that the time frame does not always need to be in days. Moving averages can also be calculated using minutes, hours, weeks, months, quarters, years etc. Why would a day trader care about how a 50-day moving average will affect the price over the upcoming weeks? On the other hand, a day trader would want to pay attention to a 5-Hour or 35 Hour average/ Ema to get an idea of the trading ranges. I have found the 5-hour High & Low Emas to be quite effective during intraday trading and 5 Day High & Low ema for positional trades.
Responsiveness to Price Action:
Traders who use moving averages in their trading will quickly admit that there is a battle between trying to make a moving average responsive to changes in trend while not allowing it to be so sensitive that it causes a trader to prematurely enter or exit a position.

Short-term moving averages can be useful in identifying changing trends before a large move occurs, but the downside is that this technique can also lead to being whipsawed in and out of a position because these averages respond very quickly to changing prices. It is highly recommended to look at other technical indicators such as Macd, Stochastics for confirmation of any move predicted by a moving average.
Beware of the Lag:
Because moving averages are a lagging indicator, transaction signals will always occur after the price has moved enough in one direction to cause the moving average to respond. EW STudy mitigates this "Lag". This again emphasises the point that no method should be used isolatedly to have consistent success in the markets. If you want to use only one method, then wait for the perfect set up and do your trades, though if the trades are a few but the success will be high.
Crossovers:
A crossover is the most basic type of signal and is favored among many traders because it removes all emotion. The most basic type of crossover is when the price of a stock moves from one side of a moving average and closes on the other. Price crossovers are used by traders to identify shifts in momentum and can be used as a basic entry or exit strategy. As you can see in the first chart, a cross below a moving average can signal the beginning of a downtrend and would likely be used by traders as a signal to close out any existing long positions. Conversely, a close above a moving average from below may suggest the beginning of a new uptrend.
The second type of crossover occurs when a short-term average crosses through a long-term average. This signal is used by traders to identify that momentum is shifting in one direction and that a strong move is likely approaching. A buy signal is generated when the short-term average crosses above the long-term average, while a sell signal is triggered by a short-term average crossing below a long-term average.
Moving Average Envelope:
Another strategy that incorporates the use of moving averages is known as an envelope. This strategy involves plotting two bands around a moving average, staggered by a specific percentage rate. Traders will watch these bands to see if they act as strong areas of support or resistance.
MA has also been used in the development of other indicators such as -
Moving Average Convergence Divergence (MACD)
One of the most popular technical indicators, the moving average convergence divergence (MACD) is used by traders to monitor the relationship between two moving averages. It is generally calculated by subtracting a 26-day exponential moving average from a 12-day EMA. When the MACD has a positive value, the short-term average is located above the long-term average. As mentioned earlier, this stacking order of the averages is an indication of upward momentum. A negative value occurs when the short-term average is below the long-term average - a sign that the current momentum is in the downward direction. Many traders will also watch for a move above or below the zero line because this signals the position where the two averages are equal (crossover strategy applies here). A move above zero would be used as a buy sign, while a cross below zero can be used as a sell signal.
Bollinger Band:
A Bollinger band technical indicator looks similar to the moving average envelope, but differs in how the outer bands are created. The bands of this indicator are generally placed two standard deviations away from a simple moving average. In general, a move toward the upper band can often suggest that the asset is becoming overbought, while a move close to the lower band can suggest the asset is becoming oversold. Since standard deviation is used as a statistical measure of volatility, this indicator adjusts itself to market conditions. The tightening of the bands is often used by traders as an early indication that overall volatility may be about to increase and that a trader may want to wait for a sharp price move.
Speed Kills, so usage of moving averages which smooths out the noise & Choppiness is your best bet to navigate your trading/ investments in this financial race field..Moving averages can be effective tools to identify and confirm trend, identify support and resistance levels, and develop trading systems. As with most tools of technical analysis, moving averages should not be used on their own(But tell that to my critic who uses just moving average chart to make perfect entry points), but in conjunction with other tools that complement them. Using moving averages to confirm other indicators and analysis can greatly enhance technical analysis.
This, more or less, covers all Technical analysis that are sufficient to make consistent money in the market - namely Trendlines, moving averages, Trend Analysis, macd, stochastics and the Tech.Table.
And that is "Getting Rich Slowly".
Posted by Ilango at 10:41 AM 10 comments Links to this post
Labels: Tech.Table, Technical Analysis
WEDNESDAY, DECEMBER 23, 2009
Nifty Technical Analysis Explained - 2.
5-D & 14-D: These are "Stochastics" indicators found in 8th&9th columns(H, I). A more detailed write up will be followed later. This indicator oscillates between 0 to 100 and helps in identifying "Overbought and Oversold" situations. It is generally observed as the prices of stock increase, the closing prices tend to be nearer to the upper end of the price range. As prices fall, the closing prices tend to be nearer to the lower end of the price range. This price range is selected for 5 days and 14 days and the positioning of the close price on any given day in this range is denoted as 5-D and 14-D. This confirms a rising, falling trend as well as Overbought and Oversold status. The colour changes to green when in uptrend and red when in downtrend.

Columns L shows the high point of 5 period range, Column M shows the Low point of 5 period range, Column N shows the high point of 14 period and Column O shows the low point of 14 period. Here too, the colour changes as the index maintains or makes new highs or makes new lows. Also of importance is these columns give you the ready break down or Break out points of 5 period or 14 period which keep changing as the days pass by.
PIVOT, Support & Resistances: These are shown in Column P,Q,R,S,T,U. and the same are copied and pasted in the Weekly Pivot table as well as the Daily Pivot table in the same sheet for easy viewing. The importance of Pivots & other S1,s2(supports) and R1,R2(Resistances) may be read here.
Weekly Pivot & Averages: These are collected from the same sheet as mentioned above as well as from Data.W (Colum V to Z). Use the close by averages, and other numbers for weekly trading strategy.

Daily Pivot & Averages: These are collected from the same sheet as mentioned above as well as from Data.D (Colum AH to AL for simple averages and column AN to Ar for emas). Use the close by averages, and other numbers for weekly trading strategy. Whenever the emas are above the simple averages, the near term strength is seen and the colour of the ema turns green and whenever the emas move below the simple averages, the colour of emas turn red. You can see all the emas have turned red as the near term strength is quite weak. And that is also an area bounces/ relief rally takes place. It is said "Market is weak when it is at its high and strong when it is at its lows" as advised by Robert Beckman of Elliott wave and hence EW encourages the trader to "Buy into the weakness and Sell into the Strength".
For the chart reading, I will cover it tomorrow.
Posted by Ilango at 7:42 AM 1 comments Links to this post
Labels: Tech.Table, Technical Analysis
TUESDAY, DECEMBER 22, 2009
Nifty Tech.Analysis File explained-1.
Pivot Sheet: As you key in the high, Low, High of any stock or Index, this table calculates the "Pivot" point, three supports & three Resistances. This could be used for trading purposes. For more on this, read "Pivot, Supports & Resistances".

Blog Data Sheet: This is the most important sheet in the file and it collects vital data automatically as you update the "Data.W(eek), Data.D(ay) and Data.H(our)" sheets.It has Date, High, Low & Close in the first four columns. If the high clears the previous two day's high, the colour changes in the cell. Similarly if the low breaks previous two day's lows, the colour changes telling us the change in the swing highs and swing lows.Generally a two day swing clearing is an indication of a change in direction. But there are also false breakout/ breakdown in this, hence I have taken 5-day high & Low breaking as one of the factors for "Conservative Trade" initiation.
5.Ema:This is placed in the 5th column(E) and it is the most important short term average. Unlike a simple moving average which averages the last 5 days prices equally, ema gives more weightage to the most recent prices by a mathematical calculation and thus it is a good indicator of short term strength or weakness of the market. The colour of the cell & the font changes to "Red" the moment the close price closes below this critical ema indicating the onset of weakness. And it changes to green if the close price closes above it indicating strength. As long as the weekly close was above this ema, the daily falls were bought into. Since the 18th Dec "weekly sell Signal" as per this ema, the first day resulted in a sell(21.12.09). Now the highly oversold daily as well as Hourly with positive divergences will attempt a reversal. For the week, the first week after the sell signal is the "fight back" week if there is any strength left in the earlier uptrend. A continued close below the week ema on 24.12.09 will more or less confirm a larger time scale reversal in trend. Similarly when the day close is closing below the 5day ema, a sell signal is generated and use this signal to sell in the hourly time frame everytime there is an intraday rally towards either hour ema or Hour high ema. Always give more weightage to the higher time cycle and play the lower time cycle till a "overbought or Oversold" situation arises in the higher time cycle when one should approach with caution but continue in the same direction.
High ema:This is placed in the 10th column(J) and it is the 5 day ema of the highs made on the previous 5 days giving more weightage to the most recent highs. Thus, as the Close price stays above this the upward momentum is intact and the market is expected to make continued up moves and new highs.The moment the close price closes below this, the colour changes to yellow and font to red signaling the onset of a correction. Sell on rises come into play and market will attempt during this period to move higher than this "High ema" during intraday but only a close above this will bring back a lasting momentum. Similarly the moment the close price closes above this the colour changes to green and font to green signaling the resumption of the upward momentum. Buy on dips come into play and market will attempt during this period to move lower than this "High ema" during intraday which generally is bought into but only a close below this will bring in a correction.
Low ema: This is placed in the 11th column(K) and it is the 5 day ema of the lows made on the previous 5 days giving more weightage to the most recent lows. Thus, as the Close price stays above this the uptrend is intact and any fall till this low ema may be construed as only a correction.The moment the close price closes below this the cell & font colour changes to red signalling the onset of a downtrend. Sell on rises come into play and market will attempt during this period to move higher than this "low ema" during intraday but only a close above this will bring back a "Neutral mode". Similarly the moment the close price closes above this the cell colour changes to blue and font to blue signalling the "likely end of a downtrend". Buy on dips for trading may come into play and market will attempt during this period to move lower than this "low ema" during intraday but only a close below this will continue the downtrend.
D.Macd & S.Macd: These two are placed in 6th & 7th Columns (F, G) and they are the values of fast macd(5,10,9) and Slow macd(12,26,9). As this numbers are ascending, it is in uptrend and as the numbers are declining, it is in downtrend and the colour changes to Red during downmoves and to Green in upmoves. For more on this MACD, please read an exhaustive write up here.
More on the "File & Chart Reading" tomorrow - Part-II.
Posted by Ilango at 6:34 AM 20 comments Links to this post
Labels: Tech.Table, Technical Analysis
TUESDAY, OCTOBER 20, 2009
Nifty's fall stops @ the short term trendline.
Subsequent to the sharp rise from 4935 to 5152 in 3 days, Nifty has been sideways with a corrective kind of intra day moves. Holding above 5067, it can move higher too if world cues are +ve.. Internal weakness is visible in the prices of last 3-4 days but a confirmation of a reversal is due from the markets. Until then, trade..
Daily weakness continues and gets reflected in the hourly prices..Break below 5077 & 5067 is an early warning and a break of 5020 decisively may end this rally..
What are these averages signify..? asks "Sudhin Bathija"...
There are "close ema" (appears after the close price of week, day & Hour), "High ema" & "Low ema".

High ema- staying above it indicates upward momentum; below it downward momentum but if it stays above close ema during this period, it could simply be a correction.
Low ema- staying above it indicates uptrend is intact; below it the downward momentum increases..a follow up action is required.
Close ema- as highs and lows can be manipulated, the close price which is used to calculate most of the momentum oscillators plays quite an important price factor. Simply put, market is in uptrend above it and it is in downtrend below it in those time cycles.
These emas become useless once a trend is in place and they come to play some roles once a correction sets in after "OB" or "OS" situations.

There are more averages below the pivot table with colour changes depending on thier prices.
Avg: is a simple average which gives equal weightage to "n" number of period. for eg: a 5-day avg is calculated using last 5 days closing prices thereby giving equal weightage to all the past 5 days.
ema:emas are exponential moving averages which is calculated using a mathemetical formula that gives more weightage to the more recent prices thereby considered to be more dynamic as well as volatile.
Whenever "ema" value is more than the "avg" value, it means bullishness and whenever the "ema" value is lower than "avg" value. it signifies weakness/ bearish.
3, 5 ,10 are considered for short term; 20,30 days are considered for medium term; 50, 100, 200 days are considered for long term. These can be experimented with as market is evolving all the time. More traders become aware of a certain method or a pattern, a likely failure is possible. So keeping an open mind but at the same time using our own experiences manifested as our "Intuition" can guide us tremendously.
Posted by Ilango at 4:50 PM 7 comments Links to this post
Labels: Tech.Table
SUNDAY, NOVEMBER 23, 2008
Trend following & Tech. Table reading..
There are various time cycles operating in the market all the time like monthly, weekly, daily, hourly, 5-minute, etc and each has their own trend.
For eg.We have presently the weekly trend down, daily attempting & nearly achieving a reversal, hourly turning up on Thursday and so on.

To confirm a trend, market need to close above or below 5 ema. Why ema? Because they give more weightage to the recent price action unlike the simple moving average which gives equal weightage to the last 5 days closes. And also the slow macd (Difference between 12 & 26 ema) should be up and above its trigger (9 sma of macd).Why 5 ? 5 trading days a week..Besides, I have found it to be stable , though some use 3, 4 etc.

If I wait for a daily buy signal, I miss 200 points from the bottom before the trend turns up. And after the trend turns up , market pulls back as a correction before rallying further and you may end up holding at higher levels for a brief period of time. So we look for the hourly trend to take position but this should be done only when the daily is in oversold status.

Similarly when the hourly is in oversold status, look at 5 minute to give you a buy signal for a possible reversal in hourly.On the fateful 27th Oct, Nifty's low of 2253 was accompanied by an excellent +ve divergence which helped to take a buy call even before the hourly buy signal.

If you see the Tech table in which Market is shown to be down in weekly (always closing below 5 ema) and in daily (Closed above 5 ema but macd is yet to move above the trigger and still closed below the 5 high ema).

5 High ema tells you the upward momentum in Nifty. As long as it closes below it, it is sell on rises.(So for Monday, Nifty needs to close above 2750 (high ema) to sustain the Friday's momentum..Just intra rally above 2750 is not enough). If it closes above it, then buy on dips & hold longs.Use it in conunction with weekly, daily, hourly.

5 Low ema tells you the downward momentum in Nifty. As long as it closes below it, it is hold shorts.If it closes above it, it is buy on dips & sell on rises till it closes above 5 high ema.

In simple terms
....Up & buy on dips above 5 high ema
....dn & sell on rises below 5 low ema
....sideways & trade supports & resistances as long as it closes
inbetween 5 high ema & 5 low ema.

These are certain indicative tools and not an absolute one for trading.

Use always channels for your trading along with other supportive indicators. the primary guide should be prices and that travels within channels most of the time. Channels most often break during a 4th wave. So keep that in mind. (Eg. Say a downtrend develops in to a 5 sub waves. After 1 dn, then 2nd up, then a 3rd dn and now on its 4th up. Draw a line connecting 1st bottom and the 3rd bottom. Bring a parallel line touching the 2nd top and you will find the 4th wave breaking this top trend line briefly and move back into the channel and make a low and then rise breaking this channel decisively. Barring these, Channels offer excellent trading guides.
Observe in all the "SAR" charts posted here, how these channels have helped in intra days and even helped in avoiding whipsaws.

Finally, an interesting article about the recent financial meltdown...you may have read the first few paragraphs already elsewhere but the last few paragraphs are the surprising ones. don't miss them.
Posted by Ilango at 11:17 AM 38 comments Links to this post
Labels: Tech.Table, Trend follow
FRIDAY, AUGUST 1, 2008
Nifty's High & Low Ema's for Trading.


As you can see from the Table above, Nifty's ema of "High", "Low", & "Close", have given good entry, exit, Resistance, support points. Same may be applied to Weekly for Investment purposes

Tech.Anal 2

How to combine EW with macd
RENU asked about reading EW with macd:

Illustrated here with "IOC" & "Nifty" chart:-
(I have chosen IOC as it is not manipulated, nevertheless widely traded in its sector)
1. When the down trend is nearing its "oversold" &" public apathy" & "Panic" situation, you will notice a +ve div in the down move's 4th & 5th wave down OR in "b" & "c" down OR in "c4" & "c5", there by identifying the start of the 1 st wave.
2. First wave generally gets exhausted with the macd moving into +ve area and this can be fine tuned with the help of hour charts. In underperformers, macd may find it difficult to get into positive territory but moves closer to "0".
3. In the Second wave, macd moves back into negative once again. In outperformers, macd may stay above "0" but moves down closer to "0".
4. Third wave upmove takes macd strongly up to the extreme upsides. Then. in outperformers the macd may move down with prices continuing to move up and as the macd moves up again, prices move much higher. This is where the "novice" investors/ traders read the direction of the macd with prices quite literally and miss a huge upmove..Exhaustion in this uptrend can be gauged from the "gaps", "volume" as well as following the 3rd wave subdivisions in the "hourly charts".
5. Fourth wave moves become triangles to carry out time correction if the third wave was very steep and swift Or an alternation to the second wave(if 2nd is flat, then the 4th is zigzag and vice versa). In underperformers, the macd moves into negative while in outperformers it stays above "0" but comes well off its high reading to set itself for a negative divergence base.
6. Fifth wave or the "froth" or the "speculative move" will bring in mostly the retailers with a herd kind of move to new highs while the macd making a lower high thereby developing a negative divergence. In a strongly trending markets, the 5th wave gets extended with series of negative divergences frustrating the bears and confounding the bulls and the falls happen with a sudden reversal when complacency sets into bulls.
7. During the reversal, the first wave down takes the macd into negative territory and the second wave up into positive and the cycle repeats itself in the opposite direction.

Sounds simple..But as you watch the prices move on your monitor, you generally tend to forget all your lessons. Best EW practioners have "military discipline" in them..those who mean business ...be it in any phase/ aspect of life.
When a trading competition was held in the USA for EW practitioners, most of the toppers had military background which gave them the edge over others in carrying out the commands without questioning.
All the EW followers will admit that the most difficult part of EW practice is "to believe in what one sees" . Correct labeling of the charts once the moves are over for posterity is easy . Needless to say here that "you are right only when you make money" and that is "act when you should without questioning".
Posted by Ilango at 12:12 PM
Labels: Elliott wave, Negative Divergence play, Positive divergence play, Technical Analysis
9 comments:

Renu said...
Dear ilango ji,

Thanks a million for answering my query with so much of patience.

Renu
October 25, 2009 10:14 AM
ttthakur said...
Ilango Sir,
Namaskar.Thanks for your excellent expose on the topic of EW and Macd.
Sir, excuse me for digressing from the topic under discussion but still relevant to the financial markets nonetheless.
It is about what I observed in the election results of Maharashtra State Assembly declared a few days back.
I have observed the Fibonacci numbers sway in the elections:
a)Elections were held on 13th October 2009- 13is a fib number.
b)Congress NCP combine won 144 seats - 144 is a fib number.
c)144 seats are 50%of 288 seats of Assembly- 50% is again related to fibo series.
d)BJP Shiv Sena combine won 90 seats- 1 seat more than 89 fibo number.
e)Congress NCP combine has won for 3rd consecutive term- 3 is fibo number.
Lastly, i have observed these 5 fib in the elections - 5 is a fib number.
Sir, what is your reaction to all this fib power? I would also request you to explain in your inimitable style, how to apply fibonacci
in trading financial markets.
Thanks and Regards.
ttthakur
October 25, 2009 1:15 PM
niftywave said...
Can I see weekly/monthly chart of sensex from birth.
Where it is available.
October 25, 2009 5:40 PM
ravi said...
hello thakurji,idon't understand what fibonacci numbers have anything to with election results. I think you are doing too much research on these things which deviates us from true knowledge. There are `n' number of things all around us which seems to have some logic and relevance to stock markets like full moon/no moon, stars, etc. We need to take these things in a pinch of salt. Because these things hardly has any permanent impact on financial markets. Please don't take my words as criticism but please try to take it as somebody's point of view only. Regards,
October 25, 2009 5:46 PM
Ilango said...
Hi..Renu,

You are welcome. Questions have made me delve deeper into years of experience.

Hi..ttthakur,

I remember reading about "Fibonacci" chapter in "Elliott wave Explained" by Robert beckman and amazed by the fibonacci sequences in flower petals, tree leaves, human body parts, sea shells, etc., etc. It is a subject that can keep a person occupied for a life time. And your observation is one such example.

When my critic read the EW Book while he was convalesing, he applied the golden ratio retracement (61.82%) during the market fall and sell into each retracement and was rewarded quite handsomely. He would place his orders with the exact golden ratio retracement levels for many stocks and would not bother about any lesser retracements or a bit higher retracement but in the end he was comfortable holding his shorts.

Fib.. can be used to project targets, retracement levels to buy & sell. Like any method, it may not work at times. So you combine it with other methods and take a balanced strategy..

Hi..Niftywave,

Vivek Patil's weekly posts has Sensex yearly charts..You will find them at VFM forum.

Hi..Ravi,

"Take it with a pinch of salt" is the way to approach events to financial markets..

Best regards.

ilango

October 25, 2009 9:13 PM
ttthakur said...
Ilango Sir,
Thanks for your precious guidance.
If Ravi permits, I can add one more fibo observation from Maharashtra Elections- MNS party of Raj Thackeray won 13 seats- 13 is a fibo number.

Thanks and Regards.
ttthakur
October 26, 2009 7:58 AM
Yoda said...
This was indeed a wonderful explanation of EW on MACD - you're such a good patient teacher. I still remember with gratitude the hours you spent explaining EW to me.:)
October 26, 2009 8:43 AM
Ilango said...
Hi..Yoda,

Thank you. You would agree with me on "the threat to EW following is our own disbelief in what we see"..

The story that moves me the most in the "Life line" weekend post is "Rebuilding the House".

It is wonderful to have you here..

Best regards.

ilango

October 26, 2009 9:10 AM
jpj said...
Sir,
Will you pleae send me the excel sheet.I am a beginner and learning from your blog.Thank you
my email ID:joyaai@gmail.com
joy,Madurai
January 1, 2010 9:51 PM

Tech.Anal

How do we know overbought and oversold...?
If I want to create any setup then what is my preferences for the setups or what the route should be taken by me?
How do I understand this market?
How do I make a trading plan & execute?
First know the trending & sideways market.
There are two contexts wherein OB & OS emerges.
a) Trending periods: In uptrend, the technical oscillators reach the OB zone soon but they tend to stay there for long periods and traders often miss the big part of the move by exiting their trades the moment oscillators reach "OB" zone. Identifying a trending move is important and there are many ways to know a trending market.. Price making higher high & higher low..TT-Tech table-prices closing above DHEma while higher T/F TA too in upmode, and so on. Apply the same to downtrends too.
b) Sideways periods: During uptrend or downtrend, markets tend to pause for some time after a sustained price rise/ fall. Prices tend to move in a sideways mode in a channel which may be a horizontal type(Flat correction), in a converging/ diverging channel(Triangle) or in an upward or downward sloping channel (Zigzag). This may be identified best with a close below DHEma during uptrend or a close above DLEma during downtrend. Oscillators tend to move from one extreme to the other and once they reach OB or OS zone, they promptly reverse.
Since the markets spend most part of their time in a "Corrective mode", oscillators work well most part of the time. However, this also leads to complacency on the part of the trader and they fail to see the different acts of this oscillator once the trend emerges or resumes. Thus they either miss on the "biggest moves" or "find themselves holding hugely loss making position, unable to accept the change in time, not applying stop loss strategy.
Knowing that there are many technicals working at all time...month/ week/ Day and Hour, etc.. will help you to be prepared for the most important aspect of "Technical Analysis" which is "Trend asserts itself when it matters most which is - at the close period of month/ week/ day & Hour, etc". This is the reason why prices may behave contra to the trend most part of the hour but go back towards the trending side at the closing of the hour. Similarly for day, week and month. Intra week upmoves get fully retraced on the last day of the week. Intra month rallies are retraced towards the last part of the month. Intra settlement moves are well settled in favour of the trend at the close of the settlement.
Believe in this most important characteristic of technical analysis, the most practical one. The prices will make you most uncomfortable with their counter trend moves during the "intra period but within the permissible levels" but will go back to their trending direction when the said period (Month or week or Day or Hour) comes to a close.
If you can believe in this, and make it a part of your strategy, you'll then look at the counter trend moves as opportunities to initiate the most rewarding trades and if you are already in the trending trade, you will learn to "sit through the counter trend moves with amusement".
Remember also that some of these counter trend moves tend to be "reversals" and thus you may get stopped out of few of those trades. Some of these could be overcome, if you keenly observe the "changing dynamics of the market by observing the changing momentum of the market" using "Divergences" as well as learn to "play the counter trend moves" using:
1. Pivot trading with Support and resistances.
2. Intraday trading
3. Tech.Table reading.
Market, most often, makes its intention clear by way of certain "developing patterns" such as continuation patterns and reversal patterns. Your ability to spot them and merge them with your other studies such as classic TA, EW, Gartley patterns, Market profile, Open Interest analysis, SAR study, etc. will make you arrive at a "trading plan which has good risk-reward ratio". The next step is to identify the tools of execution:
1. Buy/ sell futures.
2. Write option.
3. Buy Option.
The degree of your comfort level with the above tools besides the type of market - trending or sideways and the time remaining in a series would decide the tool of execution.
In a trending market, option gives you unlimited profit irrespective of the time of the series. However, if the comfort level is less, writing gives easy gains provided you choose a better strike price.
In a sideways market, writing PE near the support level and writing CE near the resistance works OR simply write both CE & PE at the pivot point. Remember to take those profits once the option gets to 5 to 10 while leaving some on the table & freeing the margin money.
Armed with the most basic knowledge, arriving at trading plans based on the most objective, honest observations, executing such plans in a detached manner, you’ll gain experience slowly and steadily. This experience will turn to intuitive power which will lay the foundation for Getting Rich Slowly and Quietly.
We wish you a very Happy and Prosperous New year in which you’ll grow in all the aspects of your life and be a lighthouse for all around you.