Tuesday, September 8, 2009

Buying the Nifty on Friday, pre-breakout

Gulshan makes a point: "As the nifty rises and broke out, suddenly momentum also turned up to this blog also (some times there was 1 or 2 comments and most of times it was 0). Everybody is proving to be right, then where were all when the nifty was in a range."
He asks: "Tell me, if any person has taken a position in Nifty on 20-08-2009 based on assumptions which are posted now after the breakout.".

My Notes: I am not sure why anyone should declare a breakout when the Nifty was in a trading range. I did not understand why we should be buying the Nifty on 20-08-09. On Friday, Sept 4, the Nifty rallied from its lows and was pushing against 4650 which was a minor three day resistance. As Nifty futures moved above 4650, I did buy the Nifty. In fact, the move from 4650 to 4680 was fast (5 minutes) so the actual entry was much higher than 4650.
I do not usually discuss my positions, but I explained the trade here since Gulshan was making a point that we are all discussing without action. That is not so. We do act on many ideas discussed here. In any case, this is not a trading journal. It is about using technical analysis in trading. I carry the trade as I write this blog, on tuesday morning.

Stops for the position trader MUST be trailing. Thanks to the parabolic advance, there are no logical stops. On the 60 minute futures chart, the average true range is currently 31.5 points. If I give a multiple of 3 to ensure that I am not stopped out due to noise, the stop is 3 * 31.5 = 94.5 points from the highest high of the up move. Today morning, the high of the move is 4805. So the stop is at 4805 - 95 = 4710. The stop will change (a) If the Nifty makes higher highs, (b) if the ATR changes, (c) If we start seeing divergence on the chart between price and an oscillator. - decrease the multiple. (d) When a minor low is made, at which point the stop can be some points below the low.
Have Fun!

12 comments:

CHANDU said...

As always i salute your descipline and we are very lucky to get your posts everyday.

As i know ppl may dont put comments but you have huge follwing.

Warm Regards

kaustubh bedekar said...

sir,this is kaustubh bedekar from nagpur.sir i asked you few questions 2-5 days before this.kindly tell me who will provide me complete technical theory notes. so that i can study more. as you discussed about ave.true range here and about the 31.5*3 for the long position s/l this kind of theory is not avilable or nobody share. or else i request you to provide me your past theory notes so that i can study more. so kindly help me on this.
regards,
kaustubh bedekar

Shazia said...

Sir,
We might get disillusioned about the breakout and be skittish about it, as in the past we did witness failed (one day affair) breakouts , my sense is that this breakout could well be carried further to make it look real and not be a one off affair. I like to study market behaviour and the way it does the unexpected always amuses as well as enchants me. All i know is if markets rally straightaway to 7200 which is your new target for the nifty without going back and touching its 200 DMA even once then this rally may not be sustainable. I have tried fundamental and technical analysis and in both i have seen that as soon as a trend/fact is established then the markets reverse direction, as you have stated above we have to take a high risk buying breakouts and not wait for the actual establishment of any direction, that is what markets are all about, and in any case making money has never been easy anywhere in the world. It is said " no risk no gain" and ocrrectly so.

Gurvinder said...

Sudarshan ji,
We're Ardent & Silent supporter of yours.
If any comments are not written doesn't mean we're not reading it.


** Whenever I come to your blog I try to make atleast 5 clicks on the advertisements.
My 2 cents contribution :)

Thanks

Deepti said...

Hi Sudarshan,

I have one query about the time chart which should be used. I have been doing some backtesting and realised that during trading times 5 mins chart proved to be useful , and during trending times 30 mins chart helped. I wanted to backtest this method with the historical data, but sadly data on 5 min and 30 min charts is not available for more than a year. Now i am wondering how to establish this probability.

Also from your personal experience which time frame do you think works out the best.

Istree said...

HI Sudarshanji,
Am sorry for using these means to communicate with you, just don't know how else!

A friend recommended you as THE person to learn technical analysis from. I am keen. Would you please send me any of your contact details so i can get in touch with you to talk with you further on this?

Regards
Masooma
email: ninapillai27 at rediffmail.com

Leo1970 said...

Buying the Nifty on Friday, pre-breakout
Daer sudarshanji,
Namaskar,
Its an excellent work on NIFTY.I am reading your blog daily but since market became range bound my thurst for master piece is not satisfied. but you just come and played century.
I want to know as you mention STOPS (ATR*3) like any target formula is there ?
I mostly buy @right but I am not satisfy by my profits(On position trading).I know that It is not the aim of your blog but It may/will/Must useful for many miniature traders.
Thanks very much
We expecting much more as you try to fulfill it.
Happy trading to all

Gaurav said...

Dear Sir

I will also like to learn from you.

Can i get an appointment with you when i am in Delhi?

Regards
Gaurav
gaurav.pro@gmail.com

gulshan said...

sir,

I have never doubted your expertise in the T.A.

One day will come when my name will be "Gulshan Kumar@Sudarshan Sukhani".

I started reading this blog only to get some tips, but one day you have written that "this blog is not for persons who visit to get tips" I was disappointed. At that time I have never heard about T.A. but with passage of time and with the information provided in this blog helped me a lot and now I can undertstand various technical terms. My study in T.A. is only six months. Few months ago I was experiencing ticker in my dreams in night but now I keep on reading & studying T.A. only. Although I have not made enough profit in trading till date but I will manage it. Now I have stopped looking in trading account in terms of Rupees now I take it as points. The more points, the more I am happy. Now atleast, I got a route to follow.

I have written all these because I want to let you know how you change the lives of persons who lost their hard earned money in this battle of Bulls & Bears.

I will always be thankful to you for showing me the right way.

It is not necessary to post it in comments but if you read this then please say some words.

Thanks

Gulshan

sudhanshu said...

Hi Sudarshan, i am one of the ardent fan of your views. i follow your advise with utmost faith as they are based on very sound analysis and never buoyed by market sentiments. I used to search net for your views and comments to find my next stock pick. I am sure you are having uncountable fans just the case is not many knew we could post our comments just like me in this instance.
Thanks for your valuable advises. please keep posting as they are my ultimate guide....

Rohit said...

Good morning Sudarshan Sir, my self is Rohit Kapoor from New Delhi.
I am writing first time on your blog but I met you two times before if you remembered. First at your place at Greater Kailash in year 2000 and second at investor camp in intercontinental hotel. I still remember your wise words when you said to a novice in Technical Analysis like me that it will take 10 years to become a Doctor 5 years of study and at least 5 years of practical experience. So how can you become a Technical Analyst in few months?
Very rightly said Sir, I am still learning everyday and I think it will never end. Since then Sir I try to track every comment of yours in financial media and try to learn from your articles at your website. I learned a lot. Thanks.

My question is that the breakout which is given by the market (Sensex) on 7th of Sep above the 16002 level. Is it voided by the Major Channel Line Resistance (drawn from the June and August highs) at around 16270 levels?

Email-kapoor.rohit@yahoo.co.in

syed zafer said...

Sudarshan Sir, myself is Zafer from Bangalore.. I started entering this market just 06 months ago and as an amateur incurred huge loss.... Then ive started following you in ETNow.. and now i even read ur blogs.. sir WHY ARE YOU NOT ON ETNOW NOW.. Sir, WHAT DO I DO NOW.. PLZ...