Candlesticks…* S&P CNX NIFTY as of 10/10/2008
A big black candle occurred. This is bearish, as prices closed significantly lower than they opened. If the candle appears when prices are “high,” it may be the first sign of a top. If it occurs when prices are confronting an overhead resistance area (e.g., a moving average, trend line, or price resistance level), the long black candle adds credibility to the resistance. Similarly, if the candle appears as prices break below a support area, the long black candle confirms the failure of the support area.
During the past 10 bars, there have been 2 white candles and 8 black candles for a net of 6 black candles. During the past 50 bars, there have been 21 white candles and 29 black candles for a net of 8 black candles.
Three black candles occurred in the last three days. Although these candles were not big enough to create three black crows, the steady downward pattern is bearish.
<p>* S&P CNX NIFTY closed below the lower band by 13.7%. This combined with the steep downtrend suggests that the downward trend in prices has a good chance of continuing. However, a short-term pull-back inside the bands is likely.
Making the picture somewhat unclear is the fact that Bollinger Bands are 45.49% wider than normal. The large width of the bands suggest high volatility as compared to * S&P CNX NIFTY’s normal range. Therefore, the probability of volatility decreasing and prices entering (or remaining in) a trading range has increased for the near-term. The bands have been in this wide range for 1 period(s). The probability of prices consolidating into a less volatile trading range increases the longer the bands remain in this wide range.
The recent price action around the bands compared to the action of the Relative Strength Index (RSI) does not suggest any trading opportunities at this time. The current value for the 14 period RSI is 21.79.</p>
The current trend is down and all orders on the short side may be considered. Market activity analysis suggests that short trades put on outside of the +S+ focus zone have a lower probability of success than those placed in those zones highlighted on the expert ribbon. The current market price activity is Strongly Bearish and suggests favorable trade opportunities on the short side.
If already holding short positions, we would look to take partial profits at any retracement to 4,110. Traders with remaining short positions after profit taking should consider placing exit stops in the region of 4,224. Be prepared for a potential short term price pull back to the 3,830.area.
Suggested standing placement of fail-safe stops…
If Long — exit all contracts at … 3,198.
If Short — exit all contracts at … 4,303.
Nice article. Thanks.
Eugene