Monday, May 4, 2009

the third leg as an intermediate top

Before I discuss the main topic, I received a comment from S Gupta, which says : Sir - Am not able to view or hear the video - wonder if other viewers are also facing any such problem?

Request to all readers:
Please let me know if you could hear and see the video which was posted at how-to-test-trading-system
Your feedback is important since I plan to use these video broadcasts to share charts, ideas with you. If you are not getting the content, then my effort will be useless. So kindly send me your comments (a) you could hear and see the video, or (b) you could not hear and see the video. I will not publish these comments (to avoid clutter), but they are important for me. thanks.

Now, for the main topic:
Aashish said:
You had made an interesting comment this morning on CNBC about the 3rd leg usually accounting as the intermediate top...Could you please elaborate a bit more on that?

My Notes:

For some reason, three moves in one direction is the sign of the trend reaching a short term saturation.

case 1. Elliot Waves, where three moves in the primary trend (Wave 1, 3 & 5) signal short term exhaustion.

case 2. Head and SHoulders, where three tops or bottoms are formed.

case 3. Broadening formation, where thre points are required on one side to confirm the pattern.

So we come to the three drives pattern (this is different from another pattern based on Fibonacci ratios).

In case of a rally,

(a) Two higher tops are made. A trendline is drawn connecting these tops. A third rally begins which exceeds the trendline (showing exuberance).

(b) A momentum indicator like the RSI, CCI or Stochastics shows bearish divegemce.

Sell when prices retreat from the third top, giving a sell signal by closing below the nearest swing low. An intermediate top may be in place.


harshal said...

Hello shudarshan ji,

The video is visible and audible too.I have seen it 3 times ,i did'nt face any difficulty.Flash player plugin(its a basic plugin)should be installed to see it.

Can you tell me which software you were using in that video to test the trading system.


Raj said...


What is the index level of Top 3?

Zack said...

Hello Sudershan,

The video is very much visible & audible & very informative as well.


anshul said...

thanx for valueable notes abt third leg of rally....belive me i have gained alot when it comes to learning from this blog and best of part this learning is that it is pratical ....thanx alot sudarshan ji

Market Info said...

Hello, Mr. Sudarshan,
Firstly thank you for taking time and sharing such wonderful and so much useful information here with us. There are very few people of your level (infact only you, i have seen)who would share such knowledge with us. A warm & hearty appreciation for all your efforts. I hope you keep up the good work. Thank You Once again. -

Oh yes, secondly the Video & Audio works fine. .....

S Gupta said...

Dear Harsh - Thank you - I am now able to view and hear the video.
Thanks again

genesis said...

thanks sir, i track u on a daily basis. can this market be shorted from the third top and wht would be nearest swing low

Mustafa said...

Dear Sudarshanji,

I am able to watch the videos properly.

For those who are not able to watch properly, just click on pause button after you start playing the video, and then play the video again after the whole buffering is over. This way the video can be watched uninterrupted.

shaq said...

it would be very helpful if someone could post on what exactly one means by trading from moving if someone says if he is trading of a 2MA difference system what it is...

anibhai said...

i could see the video/audio
now it maybe possible to do automated trading in india using interactive brokers
have you explored this. i would like to subscribe to and trade your strategies after they are automated