1. A significant resistance level continues to hold, pushing prices down whenever it is challenged. This may be happening in the Nifty where the 2800 resistance seems to be strong.
2. After a sharp up move, prices start moving sideways. Again, the Nifty is moving between 2750 - 2800 for past four days.
3. Price bars show decline in volatility - Narrowest Range in 7 days and / or Inside Day. The Nifty has both, today. This reflects uncertainty in the market. Now we have to ask ourselves, what is the market uncertain about ? The answer should come from price action. If the market feels there should be no dip, it will start another up move above 2825. If it is uncertain about continueing the uptrend, it will drift down below 2750.
4. Momentum Indicators reach extreme levels. This is the least important of all signals, but it does have value when used in conjunction with other patterns. tm Stoch, a modified stochastic used in Trend Mechanic (www.technicaltrends.com) has reached 100, suggesting an extended market on the upside. We may expect a dip or a period of consolidation.
5. Put Call Ratio. Bikramjeet Singh points out:
"While markets are going up, the PCR is inching down. Usually I have seen the reverse. What does it imply ? Please plot a comparitive chart of NIFTY PCR and NIFTY and give your views."
Unfortunately, I do not track the PCR or corelate it with the Nifty. Perhaps, readers who do so may like to offer their views. Thanks.
July 2 2010
4 weeks ago
Posts
9 comments:
Than u very much for ur analysis,ur fifteen minute rule is very good.how to read 5 minute chart,how to select the five minute time frame.
If u can share some technical learing,books,ur experience...
Good night.
Sir, I am a big fan of yours. I have been tracking yr blog since the beginning of this bear market and found you to be right almost all the times, sooner or later. I have one query in mind for you. On March,9, 2009 you wrote under the heading of BREAKDOWN that "Do not go bottom fishing if you are an investor. Why not keep your money with you?" And again on March 16, 2009 you have posted your notes under the heading CLOSE TO STOCK MARKET BOTTOM? I failed to understand that what made you to think that we are near to stock market bottom? I am an serious investor for long term ( 2-3 yrs or even more) Many analysts are suggesting that long term investors can start investing now in small amounts in staggered manner in blue chips. I would like to know your views in this regard. You valuable opinion will be of great benefit for small and serious investors like me.
Regards.
Sandip Thakrar
from my little understanding PCR is inching down which means that optimism is increasing in participants above upside move , thats the reason they are more calls than puts .
We can use PCR itself as indicator , when PCR is low , it can show a lot of optimism in market and hence a overbought situation and vice versa .
I am not if this makes sense in the context of this post or not , but this what little i can say about PCR .
Manish
http://www.jagoinvestor.com
Hi
You guys track Dow? I was reading some report that was extremely bearish and suggesting triple digit number for Dow in coming time?
What you make of that?
Danish Kapur
www.danishkapur.com
Sir a few questions
1.What should be the risk reward ratio for intraday trading.
2.Eg.if the market is appearing weak(intraday according to charts)and we short the index,and we find similar patterns in a heavyweight stocks say reliance/ongc etc and short them then doesnt this mean that they are one and the same trades and if it goes bad we lose a lot in one trade
should we adopt such a trade.
3.Sir u have mentioned in your interviews and this forum about hindalco as your investment sir can u highlight the reasons(technically),what patterns should we look on charts for finding investment opportunities.
Sir i know i am asking a lot of questions but these are some of the problems i am facing during trading ,many of my other trading problems have been solved by reading this blog so i am thankful to you from the bottom of my heart for enlightening me.Thank you sirji.
Happy trading.
for PCR and market direction follow this link http://www.indexindicators.com/charts/sensex-vs-put-call-ratio-equity-5d-sma-params-x-x-x/
Dear Sir
please correct me wherever required....
I feel that PCR is a “CONTRARIAN” tool.
In fact options are tools basically intended for hedging purpose.
1-If PCR is down-
It means that more calls are being taken.
But it does not mean that more people are optimistic(bullish) rather it means that more people are bearish and in fact have gone short in their "main position" and calls have been bought by them for hedging.
2-If PCR is UP
It means that more PUTs are being taken.
But it does not mean that more people are bearish rather it means that more people are optimistic on mkts and in fact have gone long in their "main position" and PUTs have been bought by them for hedging.
Some how extreeme of any above conditions causes overbought/oversold condition and reversal becomes due.
Moreover PCR ( OI) is another important factor and it should be very well understood that professionals love to write options to use "time decay" in their favour.
Now combination of all above along with "cost to carry" finally decides the "trading positions in the system and expected settlement".
Somehow I am a strong believer that any effect of all above things will become visual in price action & proper tracking of PRICE itself is sufficient for a retailer trader like me.
I wish we had the facility to upload image for charts etc in "comments" also.
regards
My views on PCR.
I have been observing the PCR with Nifty for sometime now.I see that High PCR (~1.5 or so) says puts outnumber calls, and downside follows in Nifty afterthat till PCR comes to less than 1.Similarly the other way out.
One more thing I don't understand is that Technical Analysts voice their opinion about Nifty targets,and when the Nifty goes the other way, I don't see anyone talking about the targets mentioned previously and they advise new strategy/targets!!
My reading about Nifty is that its headed towards 2200 over next 2-4 weeks.
Regards
Kapil Gupta
krishna check the link i posted, check historical PCR of Dow n Sensex. Most of time when PCR is high markets goes down n vice versa. Same is true with implied volatility, when its high, market participants r bearish n market goes down.
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