Friday, September 18, 2009

Conversations - Weekend Sept 18

The post title is elaborate since I tought I will use the basic heading 'Conversations' for future dialogs also.

Re: Wave Counts given for the Nifty

B.M. Kajaria says:
The elliot wave principles applied by you are not correct. So please first follow the right principles while drawing the wave pattern/trend line in the nifty chart. They are as follows.
1. Wave 2 cannot retrace more than 100 percent of wave 1.
2. Of waves 1, 3 and 5, wave 3 can never be the shortest.
3. Wave 4 can never end in the price territory of wave 1.

My Notes: I think I have followed these basic rules. In fact, these are the only three rules I follow when trying to identify a wave count. Please tell me where I have gone wrong. Please note that my chart is titled wave counts and not "Elliot wave....". This enables me to define a five wave count without getting caught in the web of Elliot wave rules (apologies to all Elliot enthusiasts!)

More from B.M. Kajaria:
In the chart the wave 1 and 2 that you are showing is the consolidating area of the nifty where it is building base from where a new wave starts only on 9th of march 2009 as per my opinion.

My Notes: You suggest an alternate wave count which will be equally valid. Shazia makes the same point "I think the point where the count should start is from March low.". I will put up a chart with the start in March 2009. (later today)

Shazia also asks: "what is your opinion on the poll you have published, kindly let us know your opinion also."

My Notes: The votes are surely a secret. I will of course share the results in this blog. Slowly, we could develop a sentiment indicator here. I hope so.

Viral Rajnikant Dholakia asks "Do u subscribe to the view that the Technical Gap left on the charts Post-Elecetion Rally needs to be Covered-up by markets sooner or later?"

My Notes: I am not a fan of "gaps will always be filled'. So, I do not subscribe to this view. But, I always believe that markets will revert back to their mean, excesses will be purged from the market. In that view, the retracement of the up move from 2200 to 5000+ could easily see the Nifty back to 3500, which, as a coincidence will fill up the gap.

The reason I do not subscribe to this view is my firm belief that the Markets can do anything. If this is so, Markets can then fill a gap, or, not fill a gap, or whatever else. I am wary of any rule that says "this has to happen". Who decided that? It also means , while a reversion to the mean is expected, who knows what will actually happen.

Zia asks: "sir why you choose 3500"

When you look at the Nifty weekly chart, you will see a lot of activity around 3500- (a) when it was going up in 2006 - 2007, (b) when it was coming down in 2008, and, (c) when it rallied again. I rounded off that zone to 3500.

Danish Kapoor says " don't agree with the wave counts. Although, we are near the top but these wave counts are not according to the rules of Elliot Wave or Neo Wave. The wave labelled 2 should be wave 5 of the correction which started in Jan 2008. It was wave 5 failure that ended above the low of wave 3."

My Notes: This is probably the correct / classical Elliot wave count. Does this mean the current up move is an A-B-C, or the first wave of a larger up wave. I hope you share your views on this. I do not go for classical elliot wave counts, since they rely too much on the past and the future, while I like to focus on the present.

Danish concludes wisely "All said and done, it is really how one manages the trade rather than counting the waves."

Well said. If there is one lesson in this post, this is it.


men says if the Nikkei could fall from 40000 to 10000 why should not the Nifty do so?
My Notes: One simple reason is that the Nifty is not at the bubble stage where the Nikkei was. Second, my point is: we almost did so last year. So, we have done our bit.

We have seen a 10 percent rally in the last 10 days. Such momentum is not sustainable. The Nifty should either consolidate or dip.


Danish said...

I think this is the first wave of the larger up-move, if we go by the price behavior. Also, we are in the fifth wave of that first wave and chances are again that the fifth wave will fail rather than completing its logical target because time-wise we are already there. Also, major world markets are running out of steam but I don't know whether that will have any impact on Indian markets or not. But once the correction starts, it won't end soon.

Tushar said...

As an intraday trader I have a question.
Many a times you have said, that you should have a view.
i.e. you want to buy or sell before the day begins.

My question is how do u decide that?
Do you read american market closing,etc.?
if yes how?
How exactly can we decide the direction to trade?

gourav said...

Hello Sir,
This is gourav here.i,a softare engineer in TCS, met u in cnbs investor camp chennai.I have few questions
1-Is it possible to trade and make profit for longer term in Ftures specially Nifty futures,by follwing EOD charts,and not looking @ chart in intra day.
2-How to move from part time trading to trading as a career

T said...

Excellent views Sudarshanji. I too agree with your conclusion on the basis that I believe that the market is in a much overbought zone. Moreover, valuations are also neglected in the current rally. Liquidity is the sole phenomena which is pushing the market upward very fast. One fine day liquidity will dry up and then only people will realise valuations. Regards.

Junaid said...

Thanks for adding this ConVerSation Column to the Blog, Sir.
I remember the time, I had first visit to your Blog. I was a total novice at that time. Used to trade according to the calls given by experts on CNBC and was losing a lot.
Your blog helped a lot in understanding the basic motive of the trading. :Its not just the call u need to trade, its your own effort and discipline which u need to put in, only then ua gona survive:
Thanks for your continuous support.

Since Trade Execution has top priority in trading rather than locating a trade. I please request you to share your best Winners and Losers whenever you have/had in the future. That helps a lot in understanding the trade execution process.

B M Kajaria said...

Hello Sir,

In CNBC some technical analysts had said that this Bull market has started in 2003 and is a 20year long-term bull market. If it is so than the correction in 2008 was the second leg of Elliot wave and now we are in the third leg of Elliot wave.

You can see the same by drawing a chart of nifty closings of each year as on 31st December. The closing data is given below for your ready reference.

Date Close
29-Dec-00 1263.55
31-Dec-01 1059.05
31-Dec-02 1093.5
31-Dec-03 1879.75
31-Dec-04 2080.5
30-Dec-05 2836.55
29-Dec-06 3966.4
31-Dec-07 6138.6
31-Dec-08 2959.15
19-Sep-09 4976.05

keralkrishna said...

hello sir
i hav been following trading steps and tips given by you in this blog for the past two weeks. eventhough initially i lost some money later on i could found it very interesting and lucrative. according to me trading is an art ver there is no hard and fast is purely the artist's(trader)observation, creativity and interpretation which makes things fantastic.ofcourse ther r some basic rules for every form of art and there r masters also. we need to learn the basics and to some extent follow the masters. it doesnt mean that we should copy things. this applies to the wavecount u mentioned also.hope u will write some day about this version also.