Timing Markets is Extremely Difficult

I am positing after long time...partly because of my other assignmnets and partly I was busy ovserving markets and in he porcess learning more...important lesson learnt is its almost impossible to time markets...
I will explain with the chart given below....

Lets loog at the point B at that point RSI had negative crossover (i.e. it cut 50 line and moving down) and at the same point Slow Stoicastic also had negative crossover(i.e. it cut the 20 line moved below it)..these indicated that markets are oversold, which in turn idicates that there are fari chances that mrkets will move up from this point...Alas!! Markets kept falling and falling untill they reached highly over sold position which is explained by the point A on RSI which has negative crossover....That positon on RSI indicates that its time to move up...and Markets really moved up after that....So technicals worked here..but again timing Markets proved to be difficult even wid technicals..what added to the roblem was high volatility in amrkets which again makes it very very diffcult to time markets...

Currrent Situation

As i look at the current chart for NIFTY i find did really difficult to predict about the movemnets of NIFTY....the chart is giving conflicting signals...now what do i mean by this...

If we looks at the MACD..At point D we can see that the red line is cutting blue line from below and moving up...which gives singnal that NIFTY may move up....At the same time if we llok at RSI its going down towards 50 line and more importantly if we look at Slow Stiochastic....At poitn C we can see that %K line is cutting %D line from above and gowing down towards 80 lines..which gives indication that NIFTY will go down...so really difficult to predict here.....

Sync With World Markets

What i observed in these days that there is a good sync between Global Stock markets and Indian stock markets...esp wid asian markets...I just wake up in the morning ..look at the Asian Markets and if theyr are up Indian amrkets will also be up but if they r down Indian markets wil also be doen...this is woring atleast now...

As i wirte this article DOW Jones is down 45 points...imp is we have to look at the Asian market tomorrow morning....My gut feeling is ...that NIFTY will move down tomorrow in coming few seesions...esp towards end of November......as we have seen a very fast rally recently..so it shud come down ....

Althoug its very imp at the moment to wait for 2 days and then see how charts give indications..

Elliot Wave

 Well while observing the markets and learning the new things..i came across a very good concept called elliot waves which predicts about not only shrt term but also long term outlook of market..i read this on the following blog....as m still not very well versed woth Elliot waves as yet so m not explaining it here on my own...rather I am giving the link of the blog hwere i first saw it

Elliot Wave

NIFTY Should Move Up Tomorrow ( Next Trading Day)

I posted yesterday that to predict further movemnet of NIFTY its better to wait for one more day....and the way NIFTY behaved today it just proved me right that it was better to wait for 1 day...The chart which has been formed now tell a better story....An inverted candle stick is formed in NIFTY chart....

Now before going further into this lemme explain what is inverted hammer

Inverted Hammer

Generally it is found in a downtrend . An inverted candle stick pattern is a "warning" of a potential reversal upward. It is important to note that the Inverted pattern is a warning of potential price change, not a signal, in and of itself, to buy.


Inverted hammer looks like this:

Here its very important to note that the wick should be atleast twice the body of the candle to make this pattern effective.

To know more about inverted hammer pattern click --> INVERTED HAMMER

NIFTY Chart

   Base Chart Source: http://www.icharts.in/charts.html

As we can see that NIFTY fell for 4 continous days...If we treat this as downtrend we can see that at the end of this downtrend there is fromation of an Inverted Hammer candle stick. This gives warning that trend reversal is about to happen and this makes me to blieve that NIFTY shoud move up tomorrow ( Next Trading Day)......

Well I have also looked at other indicators to double confirm this. If we look at the RSI it cans be seen that RSI has touched the 50 mark line and it has started moving up (indicated by gree arrow)

Again slow stochatic has already cut the 20 mark line and it can only move up from here

As for MACD its very close to 50 line...so it indicates that it will bounce back and move up from here

Thus all incators and chart pattern hints that NIFTY will move up tomorrow.....and in next couple of days...

Although the volume on formation of Inverted Hammer was not higher than usual ( or vey high) i still believe that NIFTY shoud move up from current levels....

Whats in Store ??

Hmm...so what from here on...wether NIFTY will move up or down?? whats goin to happen next...as always predicting NIFTY movemnet is really diffcult but let us look at the 4 indicators mentioned in the pervious post...(Also refer to previous post for the chart)

Bollinger Band  If we look at the bollinger band we can see that the candle sticks havent touched the lower boundary of bollinger band so there are chances of NIFTY falling further from current levels. But bollinger bands alone cannot be taken for purpose of prediciton

RSI  RSI line has touched the 50 mark line. Now there are 2 possibilities either NIFTY will bounce back from here or if RSI cuts the 50 mark line and moves downwards there will be further fall in NIFTY. So for a clear picture its better to wait fro one more day...then it will become a bit easy to predict the NIFTY movemnets for next 3-4 days...

MACD  MACD line is moving down..also it has come very close to 50 mark line...so here again its better to wait for one more day....

Slow Stoichastic  Here %K line is very close to 20 mark line and if %K line cuts this line then NIFTY shoud move up...So here again its better to wait for 1 more day

Well if we wait for one more day the picture will be clearer :-)

NIFTY 50 had a great fall !!

Well I havent posted anything fro last 10 days..the reason being I didnt have access to broadband...newaz i was never away from the action and I continued to track markets and yes..apply my technical knowledge to predict the future :-)

In my previous post i had mentioned that though markets look overbaought NIFTY might still move as the overall trend was bullish....Actually after the formation of hammer NIFTY fell for about 3 days...This indicates that Hammer is only useful when it is observed in a downtrend.....

But as i said the overall trend is bullish and markets will move up and i personally felt that they will move close to 5200 mark ans that exctly happend when NIFTY reached very close to that mark....The NIFTY chart after it reached that amrk around 5200 looked like following:

Base Chart Source: http://www.icharts.in/charts.html

Now if u look at all the different indicators at that point following can be seen

Bollinger Band: The candlesticks had touched the boundary of bollinger band so it indicates that NIFTY will fall from this level

RSI: RSI line is very close to 70 line mark which indicates that NIFTY is very close to being overbought and an overbought condition indicates a revrsal

MACD : MACD chart indicates that MACD line has cut the exponential line from above which again indicates that NIFTY will fall from this level

Slow Stoichastic: It shows that %K line has cut %D line from above. Also the %K and %D line are cutting 80 line mark from above and moving downwards. Both theses indicates that NIFTY will fall from here.

Thus all the 4 indicator indicates that NIFTY will fall from the levels of aorund 5200 and it can be seen that NIFTY fell 3 continous days after reaching around 5200 levels....Thus if any1 had spotted these indicators he/she could have easily predicted the NIFTY movement....

Hammer is formed in NIFTY Daily Charts

I will explain a new candle stick pattern- Hammer. Hammer is fomred when the market open, high and close are almost at the same level. As this pattern can has been made today in NIFTY Charts i thought its better to explain it. Below is the diagram of Hammer:

From above it can be seen that the open, high and close are almost at same level as a result of which the body of candle(orange color) stick is thin and small.

What does this pattern Indicates: If observed in downtrend hammer is considered as significant reversal pattern. Also important is that the size of the wick should be atleast twice the body of the candle...otherwise its not considered as significant...

To learn more about hammer click --> Hammer Pattern

NIFTY Chart: As i predicted yesterday that NIFTY might open at lower level, move down a bit then will recover in later part...this exactly happened today..Below is the NIFTY chart which tells this story

               

Now if we look at daily charts of NIFTY we can see that it has formed a Hammer.

                     

                             Base Chart Source: http://www.icharts.in/charts.html

                      The hammer us marked by the orange circle in the above diagram

Although Hammer is considered as significant reversal apttern only if its observed in a downtrend. As we can see in NIFTY chart there is no significant downtrend present but if we consider the fall in NIFTY over last couple of days we can consider it as mini downtrend (indicated by green arrow). Thus if we assume it as downtredn and look at hammer..it can be considerd that markets will move up tomorrow.

Again as can be seen on RSI that RSI has started moving up towards 70 mark line (indicated by orange arrow). Thus it also indicates that NIFTY will move up tomorrow....

Hope I am correct :-)

I would love to receive comments on my predictions...

NIFTY Slides a Bit

It was seen on NIFTY charts yesterday, there was formation of Doji which indicated that market will move down from yesterday's level. RSI also confirmed this as markets were on over bought area.I also expected amrkets to slide a bit today and thats what happened today. NIFTY opened some 100 points down then moved up a bit but finally closed at some 80 points down from previous close. It can be seen in the chart below that RSI indicates overbought position.Again Slow stoichastic show that %K line has cut the %D line from above which indicates that markets may continue to fall a bit.
Thus my expectation is that NIFTY may fall a bit tomorrow....then it may recover later on....
I am not competent enuf rite now to predict xact numbers....so lets wait and watch...teh movements for now...I wud invite comments and expert advices on the NIFTY movement and number calculations...

Base Chart Source: http://www.icharts.in/charts.html

Markets are Overbought !!!! Trade with caution

Well as I posted yesterday that RSI indicates that markets may move up a lil bit today...and they will reach in overbought territory..this xactly happened today..markets opened weak...went high and then went low..Finally closed at almost the yesterday's close levels....Now this has created a pattern called Doji..which i have already explained earlier..for more on Doji click here... Doji is generally considered as reversal pattern...This we see that formation of Doji indicates that markets might fall on Monday..i.e. a correction may occur...this is also confirmed by RSI which indicates overbought condition....

Base Chart Source: http://www.icharts.in/charts.html

Both Doji and Overbought conditions are depicted in above chart..marked by blue circles.....

Now, The markets may move up on monday and then move down to close at lower levels...or they may move a bit for couple of day then move down...

Also possible is that the down trend may be very small and markets again move up..and reach a new high till diwali...and then correction may take place towards October end....but for all these ...we have to wait and see how markets behave in next 2 days...

Back After A Gap

Hey..I am back after almost a gap of 10 days...these colleges xam kept me busy...Newaz..lot have happened in these 10 days...And things didnt go as i predicted..So i need to learn a lot..which means lota work left....Looking at the current NIFTY charts:

Base Chart Source:  www.icharts.in

If we llok at the 2nd Last Graph..i.e. The MACD graph... We see that the MACD Line(red line) is cutting blue line form above i.e. moving down while the markets are moving up, So there is divergence. Which indicates market might fall after going up a bit from current levels.

Also the last graph (RSI chart) indicates that teh line is going up and is about to cut 70 mark. When the line will cut 70 mark it indicates overbought position ans markets will fall from there. That is a lil bit up movemnets form current levels is expected in market.

I will not predict any levels now..as i need to learn a lot before predicting any levels.

Also when i say markets will fall...it dosent mean that a huge fall will be there...but a sort of correction will take place.. As the long term trend for market is bullish...

NIFTY based on some Indicators

Since i predicted that markets will move down (i predicted that on basis f what i have learned so far)..it moved donw only on Monday..that too slightly..but since tuesday a strong up move is observed....

                       Base Chart Source: www.icharts.in

Above is the NIFTY daily chart. I will introduce to you two indictors based on above charts. First is Bolinger Bands ( The blue thick area in the tiop Chart) and RSI (Relative Strength Indicator). I will post details of these two indicators later...(or you may go to the links i have posted in my earlier posts).

I will just explain here ....how to interpret market on the basis of the two indicators.

Bolinger Bands: In bolinger bands...when the chart touches the boundary of bolinger band then the markets will move in opposite direction...i.e. if in an uptrend chart touches boundary of bolinger band then the markets may fall...and for downternd its the opposite.....we cannot trade in any markets soleley on basis of Bolinger bands, we need some other indictors to confirm it
.
RSI: RSI is the chart which is shown above within the green Box. RSI shows the overbought or oversold position. If the line is above 70 mark its overbought condition and if its below 30 mark then its oversold condition. If markets are overbought then they are bound to move in other direction i.e. downwards, If markets are in oversold condition they will move upwords.

From the above chart we can see that market chart as touched the bolinger band (red circle) and RSI shows that markets are in ovebought condition (blue circle).....These two indicators indicates that market from here should move downwards....

But u never know abt markets so wait and watch...over next 2 days.....as per my learning so far ( i mean der is lot more left to be learned) ..NIFTY shoud move downwards....

NOTE: Markets are rising on the news of good US data. Ben Bernanke's statement that " US recession is likely over" has created a positive sentiments in mind of investors and they went on buying spree on Wednesday..which was clearly reflected in the fact that all the markets across world rose and closed at very high levels. All aisan markets have reached at very high level...Looking a the positive sentiments there are all chances that markets will rise today as well...so lets see...

Today's NIFTY Movement

Today NIFTY opened in positive and closed at some 83.5 poitns above the previous day's close. Whats more important is it broke a crucial level of 4880 and closed above it. The NIFTY movemnet is given below:

For most of the day NIFTY traded above 4850 and finally crossed the 4880 level. Although I have predicted a downward movemnet of NIFTY in short term..based on some chart paterns and technical indicators...now NIFTY movemnets become crucial as it has crossed a crucial mark. Most of the stocks in NIFTY are at overbought positions but still its going up...So now it become important to Watch the NIFTY movemnets for over next 2-3 days beforme jumping to any conclusion....

Comments are solicited ..if some1 can point out if my analysis is goign wrong somewhere it will be very helpfull also if some one can different perspective....it will be great for every reader of this blog....

NIFTY Movements

The NFTY opened at around 4800 , down about 30 points from yesterday's close. It then moved up and down but remained very much between 4794 and 4815, Except for the last few minute where it broke the 4815 level went up but eventually closed at 4808.60 i.e. above 4800 levels. Below is the NIFTY movemnet for Monday

We can say that for Monday the up level (represented by red line) was around 4815 and the down level (black line) was around 4794 i.e. NIFTY Obserevd a resistance at 4815 and a support at 4794. Which means it closed slightl down with respect to is previous closed. As I predicted NIFTY will go down and will start moving downwards from monday....I still blieve that NIFTy is headed downwards in short term..But i am a bit cautious here as NIFTY is not going down by much in last 2-3 days...so the crucial level again becomes 4780..if its broken then there will be more downside....
Lets wait and watch

NIFTY Levels- Predictions

Well I am now going to do what makes every novice Techanical Analyst generally apprehensive... I am going to predict NIFTY support , resistance level based on whatever little I have gained so far, specially fibonacci retracemnet, which was introduced to me by one of my followers(changemasters).
The recent Uptrend started when NIFTY was at about 4350...NIFTY closed at 4829.55. Which means that in total from 4350 there is upmovemnet of about 479.55 points. Now using fibonacci retracemnet we get that NIFTY should find first support at 4717. If this support is broken then NIFTY will fall to 4647. Where it has support. But applying the Ternd theory I must say the first target for NIFTY should be 4770-4780.
So the short term targets for NIFTY are
1. 4770-4780
2.4717
3.4647
NIFTY has strong resistance at 4880-4900 levels.
Note: Once I have learned using Fibonacci retracement comprehensively, I will post how Fibonacci works and its basics....

Few Basic Terminologies

For those readers who dont have any idea about technical analysis, I would advise them to learn basics about Technical Analysis by clicking here. As I found this website very good in explaining about different chart patterns and indicators. Another good website for learning is Informed Trades.Com. Lots of videos are available on this site which gives very good undersatnding about the different techniques used in Technical Analysis.
There are two basic things in TA one is Chart Patterns and other is Indicators. I am listing some of those:
Chart Patterns
1. Double Top and Double Bottom
2. Head & Shoulder
3. Wedge Pattern (Upper and Lower)
4. Flag/Pennat
5.Traingles
Indicators
1. Relative Strength Indicator (RSI)
2.Moving Avg Convergence divergence (MACD)
3. Stoichastic
4. Bollinger Bands
5. Avg Directional Movement Index (ADX)
6. Parabolic SAR
These are some very basic chart patterns and indicators for more detaisl and indepth knowledge, visit the 2 sites mentioned above .

NIFTY Short Term outlook

before predictiong let me tell you some terminology








Spinning Top : The first diagram shows the candle stick which is known as spinning top. Here the upper and lower portion of wick ar almost same. This indicates markets are relatively unchangened from where it opened. If its observed in any trend then tis means that there will be reversal of trend.

Shooting Star: The second diagram represents a chart called as Shooting Star. If this pattern is observed in upternd then there is a chance of trend reversal.

Doji: The third diagrams represents a Doji. Here the markets close at levels where they opened. If this pattern is found in a trend then there is chance of trend reversal.
NIFTY Short Term View

If we look at the above chart we can se that the recent trend in NIFTY ( for last 5-6 weeks) has been an Upternd. Now if we look at the Orange circle part we can see that in last three days NIFTY has formed the Charts, Doji, Shooting Star and Spinning top which tells us that there are chances pf trend reversal in shprt term and NIFTY is bound to fall from here....in next 2-3 trading days NIFTY should start falling (if not from Monday).....and market are due for a correction. we are going to witness sell off in near future.

Another indicator which confirms this is Slow Stoichastic indictor( i will explain it later) which shows the following:


the red line i.e. %K line is cutting %D line from above and going below. Also it has alredy gone slightly below 80 mark. Whic shows that markets are about to fall....
So these are my predicitons..lets se what happens and keep posting ypur comments.....

Candle Sticks Chart

Before predicting the future movemnet of NIFTY its very important to know about candle stick chart ...because in current NIFTY chart they are playing a significant role...

Candle sticks are most widely used charts in TA...lets begin

Above are two candle stick charts....look at the first chart..it says that the open price (of stock etc) is 44...High is 55, Low is 11 and Close price is 25. Thus candle sticks reveal lot of informations....
The middle mart is called body of candle and upper and lower parts are called wicks...
For more on basics of candle sticks use follwoing link...
http://www.youtube.com/watch?v=b3NRuzQvuxA&feature=channel_page

Few important point to remember

Well I would like to point out something here..which i feel is very important while trading solely on basis of technical analysis....
1. Same techniques are not applicable everywhere and same technique will not give you same results everywhere

2. No technical analysis is 100% correct..actually TA is interpretation of Charts of price movements....Now there are chances that different people will intrepret same chart in different manner....Also more accuracy comes with more experience and practice

3. Most Important while trading using technical analysis putting STOPLOSS is mandatory...u shudnt trade without a stoploss

4. Out of the different techniques..no single technique is gud enuf for prediction..Using multiple techniques always give better result

5. TA dosnet works well when market behave very unxpectedly ...as was the case during the recent subprime crisis...

6. And ya..TA always looks great in hindsight :-)

So folks always keep these points in mind..i have gather these points thru my experience, several books and after taliking to experts....

Chart Patterns

well i have learned all about technical analysis from the video posted on informedtrades.com

I must thank David for posting those videos and thanks for all his efforts for explaining everything in such a lucid manner.....
For all charts i consult http://www.icharts.in/charts.htmln/charts.html where all basic charts are available for free.....
Now the from the first few lessons i learned about the different chart patterns....And i found one such chart pattern in NIFTY....The chart pattern is 'Double Bottom'











In above chart i have put two black lines...beteen these two balck line the pattern formed is called double bottom...as u can see that market fell twice (marked by two arrows)..when this happens there is chance of trend reversal and this xactly happened...when market break the top black line...they are bound to rise and there will b uptrend...the xtent of the uptrend can be found by the difference betwenn upper balck line and lower balck line...
Here Upper black line is rufly at 4400
Lower black line is roughly at 4600...so markets must move by 200 points (4600-4400) from the upper black line...so the target for NIFTY (short term) should be 4800....
Thats what exactly happened...

I will post more analysis soon.....
Till then post your comments...