FOUR POINT TRENDLINE/BOX TOUCH - A CASE FOR BULLISH PATTERN
I have observed on numerous charts that price moves & touches the trendline or top/bottom box nearly four times, sometimes five times too before it breaks out. It happens on all time frames and it needs to seen, observed, studied and used diligently for taking trades.
When market makes a high and goes into consolidation it can be encapsulated in a bounding box. Sometimes it makes a new low with a new box below the original box. This retracement can be of varying fib levels (ie from 0.618 to 0.382 levels).
The price vibrates within the box with several swing highs and lows. The trendline on these local swing highs and lows can also go through iterations of four point touch and break out.
It is generally seen that second point touch is generally the divergence and third point touch with breaking of local trendline looks promising but is just going for a third point touch only to retrace back. If fourth point touch is a strong candle there may be imminent breakout towards the top of box.
Breakout. Sometimes the followup candle is a break out candle or sometimes it takes several weeks of further consolidation for a breakout. The breakout if it occurs at third touch point may turn into a false breakout only to correct later. This logic exactly rhymes with Mark Miniverni VCP philosophy. Market converges in so many ways. The path to GOD are different but destination is the same.
Alongwith it also can be clubbed the concept of twin trendline. There is a first trendline break thereafter is the second trendline touches. The trend develops when there is a second trendline and box break. One can see several price patterns like triangles, flag, cup & handle etc within the box.
If you plot the pitchfork the nature’s geometry also matches the four point touch logic. Boxes, trendlines, pitchfork are the simple but powerful tools given only if you can use it.
This is just a guideline and not a holy grail for every stock has a personality and DNA. Its vibration have to be adapted to four point touch logic and future predictions can be done. Sometimes the answer to the question is there in front of us but for our limitations to visualise.
With this four point touch logic we will be able to differentiate between which is a major move and which is a minor move whether its a retracement or a correction. The language of major move is prominently visible with candle strength and volumes on larger timeframe.
I learnt it the hard way from trade in Bajaj Auto.
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disclaimer - above post is for educational purpose only
Comment:
IMPORTANCE OF W IN TRADING (CASE STUDY FOR BULLISH TRADES)
The infamous 3 W's have always enthralled the MANKIND, however for creating wealth W is the most important component in stock market trading.
W classically can be divided in four legs, first leg that is the downward leg, next the second leg or creation of wedge, third leg is completion of the leg and final fourth leg which is going to make you rich.
Now position of these legs can be a barometer for the distance and speed of final leg. Each leg has a top & bottom and the relative positions of these legs(both tops & bottoms) with reference to each other give the fair idea of the propulsion of the final leg.
Before dwelling on final leg it can also be said that money can be made in first leg too but one have to critical and expert in reading the market. In the above case of NIFTY, if you see the first W the bottoms of W were sort of flattish so the propulsion of final leg fizzled out soon. In case of second W the bottoms of W were echeloned higher its distance was also constricted as compared to the width of first leg. And see the propulsion where one can see a clear break out on hourly chart.
The most important phenomenon in this movement is crossing of the wedge, it should be like a rocket and with volumes. The rocket part can be seen on the 15 min time frame.
Keeping the philosophy of four point touch, we hope that this breakout is not a false breakout like the one on third attempt wherein it gapped up only to be sold into through out the day.
What is important to see now is that NIFTY should sustain this breakout and trade above 17600 may be with a minor retracement. If it doesn't sustain and falls below the previous pivot of W then we have to wait for another to form later.
Why traders lose money in index trading is because they try their hand in second and third leg of W not able to discern the direction of the movement.
Based on the alignment of bottom pivots that is joint of first and second leg and third and fourth leg the distance of fourth leg can be reasonably predicted through fibonacci extension or the harmonic patterns.
It is important to note that crossing of wedge is not a magic potion and at times it would go for a second or third point touch or show a false break out and retrace. If you are a scalper simple tool of trendline can give you the target in case of second or third point touch and to book profits.
Final leg conviction the bull run which is going to make you rich needs a deeper study which should be done on the left of the chart. Each W on the chart gives you a fair idea of the personality or character of the index or the scrip.
Understanding personality of the stock needs a detailed study on different time frames. For eg:-
Nifty private bank doesn't form a W on higher time frames or just forms a cursory W which can be seen only on lower timeframes. The breakout from a retracement is quick. However if you see NIFTY IT there is considerable formation of W on all time frames. It is important to study the sectoral and corresponding stock behaviour so as to gain profits from the markets.
Views Welcome.
Regards
IMPORTANCE OF W IN TRADING (CASE STUDY FOR BULLISH TRADES)
The infamous 3 W's have always enthralled the MANKIND, however for creating wealth W is the most important component in stock market trading.
W classically can be divided in four legs, first leg that is the downward leg, next the second leg or creation of wedge, third leg is completion of the leg and final fourth leg which is going to make you rich.
Now position of these legs can be a barometer for the distance and speed of final leg. Each leg has a top & bottom and the relative positions of these legs(both tops & bottoms) with reference to each other give the fair idea of the propulsion of the final leg.
Before dwelling on final leg it can also be said that money can be made in first leg too but one have to critical and expert in reading the market. In the above case of NIFTY, if you see the first W the bottoms of W were sort of flattish so the propulsion of final leg fizzled out soon. In case of second W the bottoms of W were echeloned higher its distance was also constricted as compared to the width of first leg. And see the propulsion where one can see a clear break out on hourly chart.
The most important phenomenon in this movement is crossing of the wedge, it should be like a rocket and with volumes. The rocket part can be seen on the 15 min time frame.
Keeping the philosophy of four point touch, we hope that this breakout is not a false breakout like the one on third attempt wherein it gapped up only to be sold into through out the day.
What is important to see now is that NIFTY should sustain this breakout and trade above 17600 may be with a minor retracement. If it doesn't sustain and falls below the previous pivot of W then we have to wait for another to form later.
Why traders lose money in index trading is because they try their hand in second and third leg of W not able to discern the direction of the movement.
Based on the alignment of bottom pivots that is joint of first and second leg and third and fourth leg the distance of fourth leg can be reasonably predicted through fibonacci extension or the harmonic patterns.
It is important to note that crossing of wedge is not a magic potion and at times it would go for a second or third point touch or show a false break out and retrace. If you are a scalper simple tool of trendline can give you the target in case of second or third point touch and to book profits.
Final leg conviction the bull run which is going to make you rich needs a deeper study which should be done on the left of the chart. Each W on the chart gives you a fair idea of the personality or character of the index or the scrip.
Understanding personality of the stock needs a detailed study on different time frames. For eg:-
Nifty private bank doesn't form a W on higher time frames or just forms a cursory W which can be seen only on lower timeframes. The breakout from a retracement is quick. However if you see NIFTY IT there is considerable formation of W on all time frames. It is important to study the sectoral and corresponding stock behaviour so as to gain profits from the markets.
Views Welcome.
Regards
Comment:
ANATOMY OF W WHILE TAKING TRADES( CASE FOR BULLISH TRADES)
As seen from above chart NIFTY made a W from 13 to 20 july. The analysis is as follows:-
First leg - A drop of nearly 190 points however the it closed above the previous low. It was a 45 degree down move .
Second leg - A gap up of around 130 points. forming the wedge of with a sharp angle.
Third leg - A drop of around 80 points and with a sharp angle.
Fourth leg - An upmove for next 5 days at around 35 degrees and gain of 600 points.
Analysis - When second and third leg are echeloned up and with sharp angles the resultant fourth leg is explosive.
Views Welcome
Regards
ANATOMY OF W WHILE TAKING TRADES( CASE FOR BULLISH TRADES)
As seen from above chart NIFTY made a W from 13 to 20 july. The analysis is as follows:-
First leg - A drop of nearly 190 points however the it closed above the previous low. It was a 45 degree down move .
Second leg - A gap up of around 130 points. forming the wedge of with a sharp angle.
Third leg - A drop of around 80 points and with a sharp angle.
Fourth leg - An upmove for next 5 days at around 35 degrees and gain of 600 points.
Analysis - When second and third leg are echeloned up and with sharp angles the resultant fourth leg is explosive.
Views Welcome
Regards
Comment:
CONSTRUCT OF W AND DIFFERENT TIME FRAMES(CASE STUDY OF NIFTY)
Lets take the monthly time frame as the highest time frame and upmove of NIFTY which commenced in Apr 2020 post COVID. NIFTY classically didn't form a W but it was a straight move up.
However Bank Nifty did form a loose W before it commenced its upmove.
Lets see construct of W on weekly timeframe, a loose W was seen.
On daily time frame after the massive fall two W can be seen on the daily charts. The double W can be categorised as basing structure preparing NIFTY to commence its bull run.
It brings out that W are more prominent on daily time frames rather than weekly or montly timeframes which can be elucidated further with W being formed in Oct 2022 and Mar 2023. Formation of W gives a sort of confirmation that we are in for a bull run.
Are there W in the trend continuation pattern? It is not seen on daily or higher timeframes but they are clearly visible on hourly or lower time frame charts.
For intraday W on 15/30 min charts can reap handsome dividends If fourth leg of W is traded.
Checklist for taking trade! (These can be suitably tweaked based on type of trade like investment, positional, swing or scalping)
First it is important to find location of price with respect to different legs of W. Its like getting the GPS in your chart of where price intended to move. Each lower timeframe is subset of higher timeframe. So taking cue from higher timeframe the general trend can be ascertained. Once the trend is discerned then wait for fourth leg in your timeframe to take entry.
Views welcome.
Regards
Avoid first three legs for they are going to make you loose money with its volatility and wild moves.
Safe trade is when wedge of the W is crossed on fourth leg. With pivot of third and fourth leg being stop loss(may be a few points below)
Exit can be various modes like divergence on RSI, crossover on stoch, crossing of EMA, RSI above 70 levels on one up time frame, increasing of volatality at top, drying up of volume/formation of exhaustion candle. It is virtually impossible to catch bottom and top. Aim is to catch the main part of the trend.
CONSTRUCT OF W AND DIFFERENT TIME FRAMES(CASE STUDY OF NIFTY)
Lets take the monthly time frame as the highest time frame and upmove of NIFTY which commenced in Apr 2020 post COVID. NIFTY classically didn't form a W but it was a straight move up.
However Bank Nifty did form a loose W before it commenced its upmove.
Lets see construct of W on weekly timeframe, a loose W was seen.
On daily time frame after the massive fall two W can be seen on the daily charts. The double W can be categorised as basing structure preparing NIFTY to commence its bull run.
It brings out that W are more prominent on daily time frames rather than weekly or montly timeframes which can be elucidated further with W being formed in Oct 2022 and Mar 2023. Formation of W gives a sort of confirmation that we are in for a bull run.
Are there W in the trend continuation pattern? It is not seen on daily or higher timeframes but they are clearly visible on hourly or lower time frame charts.
For intraday W on 15/30 min charts can reap handsome dividends If fourth leg of W is traded.
Checklist for taking trade! (These can be suitably tweaked based on type of trade like investment, positional, swing or scalping)
First it is important to find location of price with respect to different legs of W. Its like getting the GPS in your chart of where price intended to move. Each lower timeframe is subset of higher timeframe. So taking cue from higher timeframe the general trend can be ascertained. Once the trend is discerned then wait for fourth leg in your timeframe to take entry.
Views welcome.
Regards
Avoid first three legs for they are going to make you loose money with its volatility and wild moves.
Safe trade is when wedge of the W is crossed on fourth leg. With pivot of third and fourth leg being stop loss(may be a few points below)
Exit can be various modes like divergence on RSI, crossover on stoch, crossing of EMA, RSI above 70 levels on one up time frame, increasing of volatality at top, drying up of volume/formation of exhaustion candle. It is virtually impossible to catch bottom and top. Aim is to catch the main part of the trend.
Comment:
Update on Escorts where the thread started
It seems to have worked.
Disclaimer - This content is for educational purposes only
Views Welcome
Regards
It seems to have worked.
Disclaimer - This content is for educational purposes only
Views Welcome
Regards