High 2,869.2000

Low 2,701.7500

Close 2,828.4500

Change -44.5500 (-1.55%)

A black body occurred (because prices closed lower than they opened). During the past 10 bars, there have been 4 white candles and 6 black candles for a net of 2 black candles. During the past 50 bars, there have been 21 white candles and 29 black candles for a net of 8 black candles. A long lower shadow occurred. This is typically a bullish signal (particularly when it occurs near a low price level, at a support level, or when the security is oversold).

NIFTY closed above the lower band by 33.5%. Bollinger Bands are 103.32% 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 14 period(s). The probability of prices consolidating into a less volatile trading range increases the longer the bands remain in this wide range. The current value for the 14 period RSI is 36.4886. The RSI and price are not diverging.

Summary

The current market condition for * S&P CNX NIFTY is: Very Bearish

The close is currently below its 200 period moving average.

The close is currently below its 90 period moving average.

The close is currently below its 30 period moving average.

Nifty has corrected 14% since it faced the resistance at 3147 levels – to make a low of 2702 and closing at 2828 levels, recovering nearly 4.5% from the low. On weekly charts Nifty is indicating immediate resistance at 2860 but on the lower side Nifty is facing some support around 2740 levels on closing basis. One can expect some consolidation this week and Nifty could move in the range of 2700 – 2940 levels.

Trading Tip
Technical analysis helps you detect insider buying and selling. Charts reflect all trades by all market participants-even by the insiders. They leave their tracks on the charts just like everyone else- and it is your job as a technical analyst to follow them to the bank.

The successful investing comes down to a matter of correctly answering these two questions:
§ WHAT to buy and sell.
§ WHEN to buy and sell.

BASIC OF TECHNICAL ANALYSIS

Technical analysis based on three basic beliefs

1) Price discounts every thing.
2) Price tends to move in trends.
3) History tends to repeat itself.

BASIC CHART
Basic chart shows the price range and change in value of any asset instrument plotted with price on Y-axis and Time on X-axis. Normally it is accomplished by volume.
A price chart is a graphic record that depicts the market men psychology of the price of a particular stock, commodity, fund, precious metal, etc.

Establishing Trends
Trends are established by drawing lines on price charts which connect as many highs as possible on one side and as many lows as possible on the other side. These lines, called trend line, are actually price zone. When drawing trend lines, there is need to take precaution to make it as meaningful as possible. In technical analysis, a line based on one peak or one trough means nothing. You require at least two points to draw a meaningful line – anything less is fantasy. Two highs or two lows is the bare minimum. The more points you can connect the more significant the resulting line.

Support and Resistance
Support and resistance represent key junctures where the forces of supply and demand meet. As demand increases, prices advance and as supply increases, prices decline. When supply and demand are equal, prices move sideways as bulls and bears slug it out for control.

Here is an illustration of demand and supply. Imagine that a water purifier of a well-known band is released for Rs.15,000. As the manufacturer analysis showed that consumers would not demand water purifiers at a price higher than Rs.15,000, only ten water purifiers were released because the opportunity cost is too high for suppliers to manufacture more. If, however, the ten water purifiers are demanded by 20 people, the price will subsequently rise because, according to the demand relationship, as demand increases, so does the price. Consequently, the rise in price should prompt more water purifiers to be supplied as the supply relationship shows that the higher the price, the higher the quantity supplied.

If, however, there are 30 water purifiers produced and demand is still at 20, the price will not be pushed up because the supply more than accommodates demand. In fact after the 20 consumers have been satisfied with their water purifier purchases, the price of the leftover water purifiers may drop as water purifier manufacturer attempts to sell the remaining ten water purifiers. The lower price will then make the water purifiers more available to people who had previously decided that the opportunity cost of buying the water purifiers at Rs.15, 000 was too high.

Figure 2. A simple set of trend lines showing support and resistance. The up arrows indicate troughs (points of support) and the down arrows indicate peaks (points of resistance). It is often almost uncanny to see how perfectly the successive highs and lows line up along a developing trend line.

Three Simple Rules
o BUY only when the long term trend is UP.
o SELL only when the long term trend is DOWN.
o STAND ASIDE when the long term trend is SIDEWAYS.

How Technical Indicators work?
Technical Indicators summarize price and volume behavior in different ways to highlight important features. This summarization brings many unique features of data that was earlier invisible. All that an indicator does is to present a particular feature of the data in a more readable format — while eliminating skew ness.
There are dozens of technical indicators like MACD that are just as useful for timing entry and exit points. These sets of tools can make your investment decisions better than the majority of investors.

Figure 3. The MACD indicator and some of its common signals.

Trend indicators such as trend lines, price patterns and moving averages identify a change in trend after it has taken place. Momentum indicators, such as ROC, RSI and MACD, can further help in strong decision-making, often well ahead of the final turning point.

Steps to a Successful Trade
The steps involved in making a successful trade are generally as follows:

o Determine the long-term trend by drawing trend lines on the appropriate price chart. Consider buying or selling only in the direction of this trend.

o Use the analytical tools at your disposal – indicators such as moving averages, MACD, stochastic, RSI, etc, can provide you with excellent signals for positioning your entry and exit points.

o How much are you willing to lose? Pre-calculate acceptable losses before you enter the market. If the market falls, get out when this loss is realized. Don’t hesitate.

o When the long term trend line is broken it’s time to take your profits.

o Wait patiently for the next opportunity. Don’t be in a big hurry to make a fortune.

Conclusion
Price charts and technical analysis can help you make investment decisions more easily and in a more business-like manner. These should be considered as a complete investment tool kit. The biggest benefit of using charts and technical indicators is that they offer an objective framework for evaluating and profiting from an investment. A price chart gives you an immediate graphic record of all factors influencing the historic price of a commodity or security. Indicators can provide very effective tools for determining the best time to buy and sell.

During the past 10 bars, there have been 6 white candles and 4 black candles for a net of 2 white candles. During the past 50 bars, there have been 20 white candles and 30 black candles for a net of 10 black candles.

Bollinger Bands are 35.63% wider than normal. The current width of the bands (alone) does not suggest anything conclusive about the future volatility or movement of prices. * S&P CNX NIFTY closed above the lower band by 44.0%.

The RSI is not currently in a topping (above 70) or bottoming (below 30) range. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a Buy 5 period(s) Ago. The current value for the 14 period RSI is 42.1505.

Divergence

The RSI and price are not diverging.

Summary

The current market condition for * S&P CNX NIFTY is: Very Bearish

The close is currently below its 200 period moving average.

The close is currently below its 90 period moving average.

The close is currently below its 30 period moving average.

Technically, for this week I m expecting nifty should test 3070 levels, (once again) If market sustains above mentioned level, can give spurt up to 3385 levels, otherwise it will correct & test these levels on the down side 2700-2580.

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…

Theory: One should buy panics.

Which panic – Monday panic or Wednesday panic. What are the chances that it may arrest here? Every day – new problems are coming on the surface and it seems the world is in fire fighting mode. This is the first time in financial markets history that the entire world is feeling the pain.

Investors and traders need to understand the enormity of the problem. This is not a panic because one institution has gone bankrupt. There is crisis of confidence. No one wants to lend to each other, and no one wants to believe that the other party is financially sound to do business with. In such circumstances, one rumour is good enough to make some one go out of business.

We are staring at systemic problem which has shaken up the foundations on which business is done. This is not the time to be brave and become hero. One analyst has described the situation – “Market is exhibiting poison” and buying the current panic is like consuming the poison. I guess a feeling needs to develop among broader community – This market will never go up again. I guess that’s the sort of sentiment one should wait for. Right now, there is still lot of HOPE.

The best way to approach the market = OBSERVE. Let the market find its own feet. The bailouts are not working and it’s clear now that getting excited by Government intervention is recipe for disaster. I guess the theory of “Buy the panic”, as the world knows it, needs to bust.