Tuesday, September 22, 2009

3500 seems far away

Sunil asks: "Cud u pl help me in confirming my view that whatever was a major resistance, will prove to be major support once the resistance is crossed."

My Notes: Yes. Once resistance is crossed, that zone will act as support. In fact, if the resistance was strong, then it will act as strong support, maybe years later!

A poll was taken on : WIll the Nifty touch 3500 again? My vote was: Yes, but I cannot say when. This is in corfirmity with my view that we can forecast time or price but not both. I think 3500 is possible, but when ? I cannot say.

There was a comment about narrow ranges in the Nifty. Devesh compares the current low volatility period to that in Feb-March. Will we see a big move soon?

My Notes: Yes, quite possible. We have narrow daily ranges, low volatility, low implied volatility - all of this is a setup for a big thrusting move (just like April-May). Now comes the question: will this move be up or will it be down? That's a question only the market will answer. I wish to explain that as traders, we must have an open mind. Suppose, the move is on the upside. If this happens, do not fight the market. Do not say "No, No. The market cannot go up now". We do not decide what the market wants to do. We simply try to follow the market. I make this point for the upside, since the poll says that we are all prepared for a big down move, so that will not be a surprise.

Rakesh feels that technical analysis may not be working since "From the past few months i am seeing that in spite of negative divergences and topping out signals from various indicators the index is making new highs and those technical analysts are being caught on the wrong foot."

My Notes: Most technical analysis will face problems (losses) at some time or the other because the market may not move according to their analysis. This dos not mean that TA does not work. It does. Also, most liquid markts, including India are too large to be consistently manipulated. Finally, a note about divergences. A divergence is just an early warning that a top may be coming. It is never taken as an independent signal. Never!

The Mat Hold candle pattern attracts the attention of Viral. The pattern consists of a long white candle, then three black candles which result in a shallow retracement. IDFC was making such a pattern. Viral has some detailed queries on how to confirm this pattern.

My Notes: I do not track or trade this pattern so my answer is generic rather than specific to this pattern. After three down days, if the fourth day (a) is a white candle, (b) closes in the top 75% of the day's range, (c) closes above the previous close, I would take this as confirmation of the pattern. Yes, higher levels should come. Think of this pattern as a flag on a lower time fram chart, i.e. 60 minute.

1 comment:

Technical Analyst said...

Sir I want to do cirtification in TA. My question is that which one of the following is more appropriate?
1) Chartered Market Technician
2) CFTe