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Unit_of_Technical_Analysis: Chapter 3: Bull CycleUnit_of_Technical_Analysis: Chapter 3: Bull Cycle: how to identify prior phase, The Bull Cycle, How to trade the Bull cycle. Tools used: 1. Fibonacci 2. Relative Strength Index (RSI) (36) 3. Moving Average Convergence Divergence (MACD) (18, 36, 9) 4. Moving Average (MA) (36) Time Frame: Daily Method: 1. Bullish Divergence & Falling Wedge (or Consolidation/Accumulation) for identification of uptrend along with Fibonacci 2. Bullish Divergence for Uptrend along with Fibonacci + Trendline Breakout Cycles within the Cycles: 1. Phase 1: Bullish Divergence Dates: 13/03/20 – 24/03/20: Pre-Phase of Bull Cycle We have seen in previous chapter that there was a bullish divergence at the end of 2008-09 Bull- Bear Cycle. Again it’s not necessary that we see a clear visible Divergence for a long period of 4-5 months like during 2008-09 cycle. It can also be for a short period like for 3-5 days also. In 2020, we continue with our Bear trend, and then from 2/01/20 to 12/03/20, we identify a Bullish divergence in Daily Chart. On 13/03/20 RSI(36) is 25.56 while on 19/03/20 RSI(36) is 22.69, and on 23/03/20 RSI(36) is 24.16 over a period of this 12-14 days, we identify a sharp increase in RSI (of around 3-4 points in terms of units), while the price is still creating Lower Highs (LH) & Lower Lows (LL) patterns these difference of Price moving downwards while Indicators moving in upward direction is called as Bullish Divergence. Falling Wedge: The price typically follows a pattern where it is moving downwards but with small and limited lows then the previous (swings) ones, the length of the swings are reduced which can be identified from the falling wedge. (Falling Wedge: an inclined line less than 45degree, where the price touches the bottomline of the wedge and starts moving upwards again) These Indicators/ Oscillators only give us Signals, while we can start getting confirmation from Fibonacci retracement, where price starts creating Higher High (LH) & Higher Lows (LL) after the 1st Range formation (check 1st Fibo with low of 7511.1 on 24/03/20 and High of 9038.9 on 27/2/20), we get a 50% retracement. The best part is to terminate your short calls if we don’t move and sustain below these 50% retracement. There are other methods too like trailing your SL to previous Highs, or Fibonacci retracements. Bullish Divergence in Daily charts are strong and should be taken very seriously, if we are in Short calls we should keep on trailing our SL to previous Highs/ trail SL after the High or wait for completion of Range, then trail your SL to High, and further trail SL to 0.5 level or 0.236 level of range thereafter. Idea is to keep maximum profits in your pocket and get ourselves prepared for the Bull Trend. 2. Phase 2: Start of Bull Phase Dates: 24/03/20 – 18/05/20: Start of Bull Cycle: At the start of Bull Cycle, Price, RSI & MACD are moving in same upward direction, i.e. with every upward movement in price, RSI & MACD are also moving upwards. We can see continuous Higher High (HH), Higher Low (HL) patterns in the Bull Market. The confirmation of getting into Long Bull call signal is important. Signal: RSI & MACD are moving in upward direction in tandem with Price after the Low of Bear cycle Confirmation to get into Long Calls for Bull Trend: The best part is to get into buying streak in Long calls is when we start moving above the 50% retracement in Daily. We apply the same method as seen in Chapter 1 & 2, we draw a range from Low of 7511.1 (Level 0) on 24/3/20 to High of 9038.9 (Level 1) on 27/03/20 and wait for a retracement upto the 0.5 level or range, we can get into smaller time frame and look for intraday/15 minutes price action where we get a signal on Fibonacci for an Entry or get an Entry once the market starts moving above 0.5 level with small SL we can enter into a trade as per price action. (We will work on detailing again in coming Chapters with smaller time frames, currently we moved from chapter 1: monthly time frame to Chapter 2, 3 & 4 Daily Time frame) (On 1/4/20 & 2/4/20 price closed below 50% level and on 7/4/20, it started moving above and also closed above 50% level of the range). After moving above 50% level, price further moves above 0.786/ 1 levels and hits a target of 1.272/ 1.618. This completes formation of the 1st leg {(0-1 range), (reversal to 0.236/0.5 levels) & (extension to 1.272/1.618) of daily chart in total is the 1st leg as called as Unit of Technical analysis}. Market may give a 50% retracement after completion of this 1st leg Always remember that after completion of 1st leg, market gives a 50% retracement or a small reversal, these short reversals at regular levels signifies a strong uptrend. These small reversals are again as per Unit of Technical Analysis pattern. The Downward trendline of Bear Cycle is also broken during the Bull phase yet another confirmation of Bull Trend. Trendline: From the market high of 20/2/20 to next lower high of 5/3/20, the line joining these 2 points will be our 1st trendline, please remember, there can be slight change in trendline or formation of new trendline after a period of time. The trendline breakout is generally followed by back-testing (after breakout with good bullish candle/s): (marked with highlighted portion in yellow) a. 17/4/20 & 20/4/20 breakout from Trendline b. 21/4/20 backtesting of Trendline c. 22/04/20 further upmove of bullish uptrend and again breaking the previous high of 20/4/20 and market started moving up again. (That’s how the fight between Bulls & Bears goes on) subsequently we keep on creating Higher High (HH), Higher Low (HL) pattern and the uptrend continues. 3. Phase 3: Bull Trend continuation Continuation of Uptrend The uptrend is continued by forming new Higher Highs (HH) and Higher lows (HL), After completion of the 1st leg, market had given a 50% retracement (Refer Fibo 2 on right) Important thing is to look for patterns creating an uptrend, followed by Bullish Divergence and most important Price moving and sustaining above 50% level. If price doesn’t sustain the 50% level/ 0.236 level, we are in reversal. These is the most important aspect that we saw in Chapter 1, where Bull Cycle follows a pattern of creating a Range from Low (0) to High (1) and Price taking a support at 50% levels (0.5 level of the range) or 0.236 level of the range. There can be small reversals seen during the cycles, these maybe followed as per Fibonacci levels (will be covered in Chapter 4: Trading Fibonacci Levels of the Bull cycle) or ever as per Gann 90/120 days cycle for High’s and lows, here knowing the start point is very crucial. Even if we can make out from the chart later on that, the price was the lowest on 24/03/20 of 7511.1, the real test is studying the market after 24/03/20 and finding out when we can expect a reversal and catch the trend during the time period. After the market has completed a downtrend, that marks the start of Bull Phase. (Remember, during live trading, we are not sure what will happen next but trade on the basis of price action, signals, indicators and probabilities) We can also refer to 2008-09 bull trend formation in Chapter 2, which will again give an idea of the consolidation formed during the Bull cycle. Subsequently, we see channel breakout, backtesting and price making further HH-HL pattern. Observations: The price movement during the Bull phase is systematic and moves in phases as described above, Identification of uptrend can be best identified with Bullish divergence and confirmation with price action in the form of Fibonacci Retracement and vive-versa for Bullish Divergence. For continuation of trend, Price, MA, RSI & MACD are moving is tandem. Conclusions: 1. Fibonacci retracement can be best used along with RSI & MACD. 2. We can identify signals when small Fibonacci (in 15/30/hourly charts) gives retracement @ 0.236/0.5 levels and Long Buy signal for Weekly/ Monthly calls with 50% Fibonacci levels are described above. 3. Reversal patterns can be best identified with Fibonacci when Higher-High :Higher-Low patterns are formed. Notes: What is Bullish Divergence & Falling Wedge, Moving Average, there are various YouTube videos available.
NSE:NIFTYEducation
by chetanpathare
2
How good are staggered Investments?HOW GOOD ARE STAGGERED INVESTMENTS? BACKGROUND We all know the catchy word “SIP” which stands for Systematic Investment Plan. This may well be the most frequently used word in the Mutual Fund business and for savings as well as investments in general. And there is nothing wrong about it as a large retail investor base would not be able to invest in various avenues of investment in a lump sum manner unless they receive a bumper or out of the ordinary windfall gains. INTENT The intent of this post is to introduce the readers to a variant of the SIP which I recently experimented with in the months of Nov - Dec 2021. As mentioned in the earlier para, I received an out of the ordinary large amount in Nov 2021 and I was exploring the avenues for placing it such that I do not risk more and yet am able to get a modest return. The aim was to protect the capital and not earn index beating returns. WHAT DID I DO During the course of my weekly analysis, I analyze the Nifty 50 and Bank Nifty scrips in particular using monthly, weekly, and daily timeframes and also several other scrips that form part of my watchlist. While doing so, I realized that there were several scrips that were at a good distance from their swing high which in many cases were the ATH levels when Nifty had hit 18604. The retracements were very significant so I thought why not make small investments in some of the scrips that I had identified. At that time, I also decided to experiment with staggered or phase-wise but not SIP type of investments in these shares. Beginning 8-11-21, I started the process of such investments and between then and now, I have made 6 such investments. I ensured that I did not blindly add to the losers but had a basis in my mind for the positional trades. During Nov 2021, Nifty made a low of 16782 and during Dec 2021, Nifty made a low of 16410. On 5-1-22, at the time of writing this post, Nifty is at 17837. This is a good 1427 points above the Dec 21 lows and is now up 8.7% which is a great ROI in 2 months. However, I just reviewed the status of these investments and they have at an aggregate level gone up by 6.36%. The highest ROI so far is in Mirza Intl @ 68.88%. The lowest ROI so far is in Tata Consumer @ -10.83%. CONCLUSION Obviously, I have no issues with the highest ROI scrip. Neither do I have an issue with the lowest ROI scrip as I have not added to the losing scrip even at lower levels as I did not want to increase the exposure. My expectations from these unexpected tranches of investments are not much so I am quite happy to receive a 6% gain as of now. I have not beaten the Nifty ETF but that was never the objective. Many of the scrips where I have invested in the “staggered basket” are those where I would not have ordinarily invested as my universe of investible scrips is limited. So this has helped me know the unknowns as well and that scrip has given the highest ROI! I am still sitting on some funds out of this lump sum so I can add to the position at any available opportunity even though the indices are at much higher level than what they were in the previous months. I can move the entire amount out of equity and place them in a Debt Fund and bring it back in when the market / scrips are at attractive levels. This is the approach that I would prefer the most though I am undecided on the course of action for now. My live experiment with the “staggered” form of investing in my view has been a good one so far and I am satisfied with the outcome. In fact, it is one of the ways to spread the risk and learn to identify good scrips at attractive price levels using technical and or fundamental analysis since the view is positional to long term. I hope the above helps you know how I prefer to trade the markets and keep exploring the opportunities available in the market to make incremental returns. This post has been shared for educational and informational purposes only. I welcome your thoughts and insights in case you have also experimented with such/similar way of trading/investing. Happy Trading/Investing, Umesh 5-1-22 Not SEBI Regd.
NSE:NIFTYEducation
by AVENUESOFINVESTMENT
Real Time example - TRIPLE ZIGZAG (Bullish)Let's talk about each waves of Triple Zigzag: Wave W (5-3-5) impulsive: ((a)) = ((b)) at 17709 which is close actual low 17613. Its a sharp zigzag. Wave 1X corrective: Wave ((b)) 3-3-5, Running Correction which is little complex. Wave Y (5-3-5) sharp: ((a)) = 0.786 ((b)) at 16824 which, is very near actual low as 16782 Our first question is, What is the Zigzag? In chart, a, b and c is zigzag which very easy to understand by picture. Its really easy to understand this wave counting if you read just below basic rules and Characteristics of Zigzags. The main question, What is going on in nifty? This Triple Zigzag is bullish pattern. Really market is follow this pattern? - Wait and Watch... Characteristics of Zigzags: — labeled a-b-c — subdivide 5-3-5 — typically occur in wave 2 position — ‘b’ wave does not approach ‘a’ wave origin — ‘c’ wave ends beyond ‘a’ wave extreme — belong to ‘sharp' Rules: - Wave A always subdivides into an impulse or leading diagonal. -Wave A always subdivides into an impulse or leading diagonal. - Wave B always subdivides into a zigzag, flat, triangle or combination. - Wave C always subdivides into an impulse or diagonal triangle. We can use channel for zigzag. The Wave C often ends upon reaching the extreme of the channel.
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NSE:NIFTYEducation
by Trade-Technique
30
How to profit from High tight flag pattern The high tight flag chart pattern is an extremely bullish formation. It is formed once a stock rises sharply by 50-100% within a few weeks or 1-3 months. After that stock pullback is small i.e. 25-30% In the next step the price tightens up i.e. small candles or less volatility in the price Finally, the stock breaks out with heavy volume The stop can be low on that day. Once the stock breaks out trail your stop loss to 10-20 SMA. This setup can be highly profitable for the traders. I found this setup for TCI and it worked as expected. Hope you like it.
NSE:TCIEducation
by ObliviousChart
1
Why should you take BTST trades?Are you confused as to how BTST trades work? Firstly, BTST trades simply mean "Buy Today and Sell Tomorrow." That is, you simply buy a particular stock today and exit it tomorrow. I would like to clarify that every broker allows you to take BTST trades and there are no extra charges for executing such trades. Like intraday and swing trading, it is just one of the styles of trading that is suitable for a lot of traders. Also, I'll be introducing you to a new indicator that I have coded myself and will show you how it can be used to find breakout trades on any stock. So please comment on the stocks below and I will analyze them in the follow up video. Now why do I prefer BTST over swing trades? The primary reason is that I have observed that 90% of the stocks give most of the movement in just 1-2 days and the rest of the time they either consolidate or fall. Also, in swing trades, it is very difficult to determine how long we should hold a particular stock, but with BTST trades, it gets easier. IN SHORT BTST TRADES ARE FRESH BREAKOUTS EVERYDAY WITH MAXIMUM PROBABILITY OF RETURNS You must also see this weird line on every stock. It is actually the indicator that I have coded that helps us figure out the breakout trades. In the next video, I will be analyzing charts using this indicator and teach you how you can draw important price levels using it. So don't forget to comment on the stocks you need me to cover in the next video.
NSE:SUPRAJITEducation
by breakoutinvesting
27
PART 4 : Risk ManagementThe majority of short-term trading results are just random. In the long term the money ends up with those that can trade and manage risk. Why Risk Management is Important? People who don’t follow Risk Management they can blowout their account easily. For instance, they are taking 20 % risk of trading capital, then only 5 wrong trade can blow their account. The 1 % Rule Let’s say you have 10,000 rs in your account and as per 1% rule you can lose only 100 rs per trade. For example, if you take 10 trade with 1:2 Risk Reward ratio and having winning percentage of 50 % then your P&L will be look like this. 1st trade: +200 2nd trade: +200 3rd trade: -100 4th trade: +200 5th trade: +200 6th trade: +200 7th trade: -100 8th trade: -100 9th trade: -100 10th trade: -100 Total P&L: +500 At the end of the day, you will take money in your account with proper risk reward ratio and money management. Position Size Calculation: Let’s say you want to long Reliance and having Stop Loss of 5rs with trading capital is 10,000 rs. So, Formula is Position Size = (1% of Trading Capital) / (Stop Loss) For our trade example, Position Size is = 100/5 = 20 Qty Hence, we required 20 Qty to trade Reliance with 100 rs as a stop loss. To conclude this post, trader should have (Min Loss, Max Profit, Breakeven). Whereas, Max Loss should be avoided to remain in trading career for long term. Please check my Fibo Trading Strategy post to know more about Stop loss, I will link with this post.
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NSE:BANKNIFTYEducation
by kleympermina
52
PART 3 : Candlestick Pattern Hello Traders, in this post I will be talking about our entry signal which we will use in our strategy. Most of us already know about candlestick pattern but we don’t apply in proper manner. Firstly, we should use candlestick pattern in Support and Resistance or Trendlines that’s where it provides good entry point. Secondly, size of candle is important compared to previous candles because small size candlestick pattern is having less strength compared to big size candlestick pattern. How to read candlestick without Memorizing. Size of Candlestick Bullish Candlestick Pattern Hammer Bullish Engulfing Piercing Pattern Morning Star Bearish Candlestick Pattern Shooting Star Bearish Engulfing Dark Cloud Cover Evening Star
NSE:BANKNIFTYEducation
by kleympermina
5
PART 2 : Support and Resistance, Complete concept with examplesSupport and Resistance Hello Traders, I will be discussing about Support and Resistance area in this part, which is backbone of Price Action trading. What is Resistance area? Resistance is a horizontal area on a chart. Where price experience selling pressure and tends to move down. What is Support area? Support is a horizontal area on a chart. Where price experience buying pressure and tends to move up. Why do we need Support and Resistance? Support and Resistance area often helps to set Target, Entry and Stop loss. Guidelines for Drawing Support and Resistance: For the same chart if you ask 5 traders to draw support and resistance area, you will get 5 different result. So, what are the important things to consider? I prefer drawing horizontal line instead rectangle to make chart look clean and easy to understand. Use Higher Time frame to draw Support and resistance area. For Instance, If you trade on 5 min chart then use 15 min chart to draw horizontal line. However, if you prefer 15 min then use 1H or 4H. Draw Horizontal Line which shows multiple touches. While, this line act as great support and resistance area compare to few touches which was due to volatility. Things to know: The more times support or resistance are tested in a short period of time, the weaker they become. So, what’s the logic behind this? One of the reasons is due to Institutional Traders prefer limit order on these areas, so whenever market touches the price, the limit order is filled only some quantity and the remaining quantity is filled after price comes to the same level. Once all orders are filled completely, there is no buying pressure and thus it falls significantly. When the price breaks support, it could become resistance and vice versa. There are 3 possible reason why this happens? Closing losing trade on breakeven. For example, let’s say you took Buying position on the support area and price went opposite direction and you decided to exit on breakeven instead of taking red. Thus, it creates an extra selling pressure. Traders who missed breakout move. For instance, you missed the breakout and you decided to enter only when price retrace back to get a better entry point. So, this also create a selling pressure and leads to resistance area. Traders who choose to enter retest levels. This is a entry strategy which many traders use. There are several way to find Support and Resistance area: Using EMA (9, 20, 50, 100, 200) are widely used to identify support and resistance area. For my trading I prefer 9 EMA in Trending market, 50 EMA for buying Dips and 200 EMA for ultimate support. Using Trend Line, Same logic as support and resistance area, if there are multiple touches in Trendline then probability is high that there will be Buying/ Selling pressure. Using Channel: this is useful when market is slightly up trend and downtrend as during that time market mostly moves in zig zag way and channel works perfectly. Ok so in next post we will be discussing our Entry Signal and we will connect all 3 PART to decide buying or selling. Summary Support is a horizontal area on your chart where potential buying pressure could come in and push the price higher. Resistance is a horizontal area on your charts where selling pressure could come in and push the price lower. The more times support or resistance is tested within a short period of time, the greater the likelihood it will break. Observing support and resistance is one way to identify an area of value on your charts. Others include looking at the moving average, trendline, channel, etc.
NSE:NIFTYEducation
by kleympermina
8
Nifty 50 for the next week (Dec 13–17)On left hand side chart, there is an upward channel on weekly time frame since Sep 2020 and downward channel from mid October 2021. NSE:NIFTY On right hand side, downward channel formed since October 19, 2021 is focused on daily time frame. Observations: A) On weekly chart, Nifty has taken support at the lower band of upward channel. B) On daily chart, Nifty closed at the upper band of downward channel today (Dec 10, 2021). Conclusion: 1. If Nifty breaks the upper band of downward channel at (B), the central line of upward channel can play as key resistance at 18130-18220. (more likely scenario) 2. On downside, the lower band of upward channel can play as support at 16985 – 17050.
NSE:NIFTYEducation
by Rajesh_Ramchandani_Delta
Head and Shoulder in Bank NIFTY!This is analysis is for educational purpose only! Since many weeks bank nifty is under performing in the market and today it has created Head and Shoulder Trend Reversal Pattern on its daily charts. By the huge structure of this head and shoulder we can expect a huge fall of 5900 points. Yes! 5900 POINTS. If Bank Nifty treads below 35300 you can initiate a sell position in Bank nifty. My target is around 29000 - 30000. Closing above 36150 on Monday (or any other day next week) will make this pattern invalid.
NSE:BANKNIFTYEducation
by AbNamjoshi
1
Price Action Trading Strategy : PART1 Market Structure What is Price Action Trading Strategy? Price action trading is about understanding the imbalance between buying and selling pressure so that you can identify trading opportunities and make a profit. Before we discuss about Entry, Exit and Stop Loss Signals, I would like to tell you some basics about the Market Structure, Support and Resistance and Candlestick Pattern. I will be dividing all these topics in different parts, so that it will be easy to understand. So let's start with PART 1 Market Structure. Market Structure Accumulation. Advancing. Distribution. Declining. If you have a clear idea in which structure market is moving, then we are in less trouble to find whether to Buy or Sell. Accumulation Stage This phase is common for smart money and waiting for High Up move. Price Tends to move sideways between support and resistance. Some Characteristic of Accumulation stage: It occurs after the price has fallen over the last five months or more (on the daily timeframe). It looks like a range market with obvious areas of support and resistance within a downtrend. The 200-day moving average starts to flatten out. The price swings back and forth around the 200-day moving average. Advancing Stage: This phase is commonly known as breakout. When Buyer pressure is more than seller and leads to Up Trend and forms an Advancing Stage. Some Characteristic of Advancing stage: It occurs after the price breaks out of resistance in an accumulation stage. You’ll see a series of higher highs and lows. The price is above the 200-day moving average. The 200-day moving average is starting to point higher. Distribution Stage: This stage Smart money distribute away their position and anticipation for price to come lower. Some Characteristic of distribution stage: It occurs after the price has risen for the last five months or more (on the daily timeframe). It looks like a range market with obvious support and resistance areas in an uptrend. The 200-day moving average starts to flatten out. The price whips back and forth around the 200-day moving average. Declining Stage: This phase is commonly known as breakout. When Seller pressure is more than Buyer pressure and leads to Down Trend and forms a Declining Stage. Some Characteristic of Declining stage: It occurs after the price breaks out of support in a distribution stage. You’ll see a series of lower highs and lows. The price is below the 200-day moving average. The 200-day moving average is starting to point lower. Summary: The accumulation phase occurs after the price has fallen and looks like a range market within a downtrend. The advancing stage occurs when the price breaks out of resistance (accumulation phase). This is also known as the uptrend. A distribution stage occurs after an advance in price, and it looks like a range market within an uptrend. The declining stage occurs when the price breaks down of support (from the distribution stage), otherwise known as a downtrend.
NSE:NIFTYEducation
by kleympermina
9