Friday, July 17, 2009

Another head and shoulder revisited

Almost all stock markets are showing signs of developing a bullish head and shoulder pattern. This is a pattern that is not ideal, because it has shallow shoulders, but then the markets are not expected to be perfect anyway!
The pattern is revisited everytime the Nifty begins a rally, because that is the time for optimism, and, soon enough, extreme optimism. For the Nifty the neckline comes around 4750 approx. The targets, if the pattern comes about will be 2500 points from the neckline. You can do the math.
Now, these patterns need not fulfill their targets. We had a bearish head and shoulder in the Nifty which has seen a sharp rally and gets cancelled if it trades above 4500 - right shoulder.

Trend Days
In a comment Pi said about wednesday's one sided up move "first a point - today was not a classic trend day - a classic trend would being with a decent size gap, hopefully after a day or two of range bound trading, and would see a smooth uptrend through the day. Today lacked all these characteristics - though the strength of the move was phenomenal, the candlesticks chart looked quite messy, but yes it took supports at the right place and kept breaking past resistances"

I have to differ. A trend day opens at the low and closes at the high with a larger than normal range. (bearish days will open at the high and close at the lows). That's it. We use gaps and prior range bound days to answer the question: Is today likely to be a trend day?". If the day opens with a gap after one or more days of narrow range, then the chances of a trend day increase. But it is not a pre-requirement.

Men has a question about calendr spreads on the mini, which regretfully, I have not understood. Does it mean mini futures or mini options? An example will help.

Sandeep asks: "sir please kindly sugest tradestation or metastock"
My Notes: Both are excellent pieces of software. I have used tradestation for over 12 years for systems development, so I am more comfortable with this one.

7 comments:

men said...

Mr. Sudarshan,
I was talking of taking long position in Month1 and short month2in mininifty futures NOT OPTIONS.
For eg assume nity is at 4200 every 100 points down add one long and this way add up to 3300, same on the way up 4300 to 5200 short 1 every 100 points in month 2. Theroitically u have longs at 3300-4200 and shorts from 4300-5200. So you are covered from 3300-5200, problems outside this range wiil be hard to handle this is one majore -ve but this range covers 30% of historical nifty highs. These positions will take time to develop may be upto 2-3 years, taking one position at a time. Offcourse one shd book profits on the side giving profits leaving the other leg open. At some point of time you will reach a stage when the market being up or down 100 you just encash, on paper this sounds fine but is there anything I am missing out here.
Regards,

LIC Agent Noida said...

Thanks a lot Sir..... i always read your blog before i take any position in nifty.. i like your way of helping retail traders ..

Regards,
Mohit Singhal

deepak said...

Hi Mr Sudarshan ,
I 'm watching u on CNBC for many days.Thanks for your all great picks . I 'm new stock market invester as a beginner offcouurse . I wanted your suggestion for few best books for trading strategies which I can follow .Pls advice .

Regards
Deepak

niftykaapandit said...

Hi Mr Sudarshan ,
I 'm watching u on CNBC for many days.Thanks for your all great picks . I wanted your suggestion for trend reversal. when mkt take reverse how can I identify the trend. please suggest me a good tools in metastock or tell me the trend reversal tools.

Regards
Bhupesh sharma
sharma1.bhupesh@yahoo.co.in
sharma1.bhupesh@gmail.com

ADHARSHILLA CONTRACTS said...

sir kindly comment on webpage http://www.vipreetsafetrading.com/
of her charting skills i found her charts very informative.even institutional investors will found absolute interest in charts by her , as we recommend yours skills to other s so you should also appreciate her or at least post a comment .

Harinder Singh said...

Hi,

How can I buy tradestation software? I went to their website - but couldn't find a link to buy.

-Harinder

gulshan said...

Sir,

Please advice whether the uptrend in Nifty is resumed? (so that the idea to short the nifty is kept aside and to look for long only oppurtunities).

Please, alteast, say Yes or No. (A long description is always welcome, if you have enough time)

I need your guidance and I am sure you will reply because I have seen you help others when they need.

Thanks.