Monday, September 7, 2009

Have the bears stopped selling?

Shazia makes some points.
"On cnbc tv you said that if nifty crossed the 4760 mark then it may well be on its way to form another bubble, why ?"

My Notes: The 4740 - 4760 zone has acted as resistance during the current rangeing market. This is also the level where the larger picture cup & handle or inverted h&s pattern is confirmed. Therefore with so much compression in prices just before 4760, a big expansion in prices may come if 4760 is broken. prices may continue going higher beciase (a) everyone else is buying, and, (b) 'Liquidity'. That's how bubbles are made.

Again in comments today:
"The nifty is now more squeezed in a narrow range having almost the same top but ascending bottoms. Technically it looks like the bulls havent given up buying but the bears have given up selling beyond 4750, which is why there is no short squeeze to pull the markets up."

My Notes: These are usually the reasons for the market remaining in a range, which is what it is doing now. Bulls buy at support, and, either bears sell at resistance, or as you suggest, bulls themselves get out at resistance, while bears stay away. With the anbsence of bears, the bulls will have to get enough confidence to push the markets up. This could lead to a significant rally, because first the bulls will push prices, while intiially at least the bears may remain on the sidelines.

My grateful thanks to Student of the Markets for his kind words and sensible advice. Given here:
"today being the teacher's day, I want to express my deepest respect to you who has taught me so much in trading. The most important things I have learned from you are - Market is bigger than any analysis ( including yours! ) ; The trend is intact until it is broken ( i.e. do not anticipate end of a trend); Focus on following a disciplined strategy rather than focusing on making the correct call as that is what works in trading."

6 comments:

Shazia said...

Sir,
I am so glad you answer to all my comments almost, truly a sign of a devoted teacher.
I'd like to further add here that the current nifty charts mostly look like an inverted chart pattern made between sept 08 to march 09, wherein it was the opposite happening the bulls not buying below 2500 and hence the bears had to cover and take the markets back up. To cross the threshold of 4750 we need a big news event which could either be bad or good so that the bulls and bears get into action above this level. These days i am seeing that good news are driving the markets down just like it happened in the US last week with the positive housing data, which clearly indicated that the bears stopped selling after the good news and the bulls had to book thier profits and the markets tumbled while on fri last there was a bad news and the bears tried thier hands at shorting which ultimately took the markets up because of short squeeze, as i think the bears are quite jittery themselves and keeping tight stop losses.
Thanks
Shazia

aashish said...

Sir,

I recently came across someone who just sees the price (only) and trades with (the feel) of price.

Today, I shorted REL IND at 1990 covered near 1980 and it made a low of 1977 in that particular leg down and then above 1986, i went long again with some satisfying results.

Back to my new found friend. I really doubt the concept of ticker tape watchers. What's your view. The first book I read when approaching the stock market was One Up on Wall Street.

Having read it many times, I just came to realise that even the best fund manager was a technical analyst at heart. Else why should he maintain a chart book?!!!

So and therefore, I really doubt whether it is possible to trade without some form of trend trailing mechanism. Elliott Waves and the like have failed to strike a chord with me because they are very good postmortem techniques rather than entry techniques. I mean, what am I supposed to do once it is labelled a wave 3 once it is well into its peak... Till then my (so-called) award winning intelligent software was busy calling it a wave 4 !!!

Ultimately, I guess it is price that I am trading and not failure swings on the oscillators. Without getting into more detail, I wanted to thank you for the simple 10 min rule rather than usage of a 5,35 Oscillator.

As I wrote yesterday, I guess it is similar to the late 2007-08 situation but I guess once a trader is content trailing it, one needn't bother about the trend et al...


Take care!

Shazia said...

Aside of what i commented in the morning, today the bulls took charge fully and brushed aside the bears in style even if it was marked by lower volumes, so the current rally above 4750 may well go up before tiring and indeed is a bubble as without a bear this bubble will burst without any support, just like it did in jan 2008. I assume this is a bull driven market as no bear in his right sense would think of doing professional harakiri by shorting such a strong momentum.
Thanks
Shazia

Viral Rajnikant Dholakia said...

Dear Sir,

Speaking stock specific but query related to the chart pattern of 'Rounded Bottom'.

2 Stocks - PFC and Amtek Auto

Charts of both stocks show a formation of Rounded bottom since AUGUST BEGINNING. One witnessed a breakdown (PFC) & the other witnessed a breakout (Amtek).

What could be the reasoning provided by you for 2 disimilar results for a same chart patterm? Or is the end result a function of some intricacies or interpretation within the formation of chart pattern ??

I request you to provide your admired views.

VK said...

Hello Sudarshanji: Nifty has indeed crossed 4760 and closed at 4780 levels. I heard you on CNBC telling that this is a new beginning and this level assumes significance for a fresh upmove. While the trend is up, why does not the reversal point be upped to 4620 instead of 4350 or 4450, so that above 4620 people remain long and below 4620 people can go short. You are also right that bears are not shorting and may be they have gone on a holiday after Ganapathy till Diwali I guess. Let us see how far the bulls take it, may be 5300 or is it till the bears decide to enter. Your articles as well as presence on TV are really great and it does make people think a lot!!! Thanks a lot Sir.

gulshan said...

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. Where were their analysis which has suddenly come in front of all, when there is no need of it. Every chartist knows next target is 4850-5100-5300 (for those who have calculated their risk-reward ratio) then why to repeat again and again.

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.