Wednesday, December 7, 2011

Why overbought means higher prices

Mouli writes: On Friday (2nd December)when Nifty December Futures was around 5000 the stochastic and RSI was consistently above 85 and 75 respectively in 5 minute and 10 minutes chart and I went short at 5025, but it went till 5090. How to trade in such situations and avoid such mistake.

 

My Notes: It appears that you are new to technical analysis. Traders understand very well that overbought levels in momentum indicators are actually bullish when found in an uptrend. The trend is much more important than momentum levels. On Friday, the trend was up.

 

Anmol says:  i have beenreading your blog for last three years .it helped quite good in improving my trading.i also watch your recomendation at cnbc tv 18.three days back you had given apollotyres as making HS PATERN but i am unable to find its stop loss.kidly clarify

 

My Notes: I am giving the chart for Apollo Tyres which will show the pattern, with stop loss.  The initial stop is placed below the right shoulder. Then, once strong momentum is seen, the stop should be moved to the candle just preceding the breakout, which is shown for the second (subsequent) pattern. You should be aware of how the targets are calculated. Do a web search if you are not sure.

apollo-tyres-dec7-11

Technotrader says: Sir, have u have watched HOEC I think it is forming H&S at the bottom, huge increase in volume seen, indicators are also moving up and close above 135 with volume will confirm the pattern? Is is Ok sir?

 

My Notes:

 

Chart for HOEC given below, with my comments.

 

HINDOIL-DEC7-11

6 comments:

Pratik Mukasdar said...

sir nfty is howrin around 5080
does it becomes a buy for fresh entry
or
bank nifty is much mor sutable for fresh longs

Technotrader said...

Thanks sir for sharing your view of HOEC. Secondly, Sir I trade in Future and the big problem I face is when to take position? Should it be based on 15 min stochastic? or any other view. As market are volatile its very difficult to trade. Lastly what if the trade do not come in the money in 4 to 5 days time?

AK said...

hello sir
i real super fan of yours... after reading this post my view to analyse rsi has changed.. sir i humbaly request you to keep on posting such educating posts atlest one daily so we viewer can have refined view towards tech analysis... and one more request please post one stock recomedation a month for us.. :) ;) regards AK

Technotrader said...

Sir again a H&S in IDEA, was taking support 0f 90 for a long time which was a neckline, today broke it and should I expect 80 level now (distance between head and neckline)
Thanks as always sir

Rushabh Shastri said...

Your view to buy PUT with CNBC interview is the best case scenario a BULL can do,,,below 10DMA its all depends how EUROPE span out...Currently it looks Trading settlement should fill the gap of 4850/4900 level. IT sector should weak again if they failed to maintain.Confirmation required to trade in IT

power-to-homemaker said...

Sir, can u pl give ur comments on relative strength of cement stocks-Ultratech making 52-week highs.