#KnowledgeSeries - Does Technical Analysis work ? Learn it the #PNB way

Hi All,

I am sure that all of you might be aware about what happened with Punjab National Bank. Flamboyant diamond and jewellery merchant Nirav Modi, with the help of some corrupt bank officials, used fake LoUs to defraud the bank to the quantum of close to Rs.11,400 crores. Enough of the story is available on the internet, and I am sure you would be aware about it thanks to the media, the social media and What's App forwards.

This post is meant for something else though...

All those familiar with Technicals know that "PRICE Discounts Everything", i.e. everything is visible on price it self, and that to, many times well in advance.

And this so called PNB scam confirms this tenant once again. Those aware about some basic Technical Analysis methods, would have been able to predict, if not a scam per say, but a steep price fall, at least till 130 levels. 

Got this information on What's App, rechecked at my end, below is an image showing how charts have already hinted a fall in the prices before the news actually came out. 

The chart was very clear about something is cooking for short term and as a result of that a fall from 200 to at least 130 levels could have been expected in January, well in advance before the actual even of fraud was made public.... 

• Prices were rising from November, with thinner volumes
• Also, price rise was not accompanied by rise in OI, which suggest fresh long positions were not getting built up
• On 24 and 25 January, Nifty, on daily charts gave a Bearish Engulfing Pattern, which is a strong bearish reversal candlestick formation

I very well know that this is kind of post mortem, but the point I want to make here is that there are ways by which you can analyze a stock price, only thing is you should know how....

I am sure, you all are getting regular market updates, and fortunately Nifty is behaving in the same manner as per our Technical Analysis / chart discussion, hope you all able to en-cash this down move which started after Nifty broke crucial levels of 10900-800 ...

Before we end the week, here is my personal view on PNB . . .

The stock has been hammered from 200 levels to almost 120 levels, which is a massive fall of 35 to 40%. The next support area for PNB is near 110 (daily bottom) and 100 levels (78.6% retracement). 

After such a huge fall and given the fact that daily chart today ended up giving a Doji candle, which shows indecisiveness, if and only if prices cross and sustain above 129-131 levels, a small pull back can be expected with higher targets near  139-142, however post that it is expected to come down and if breaks 120 then, can fall down to 110 or 100.

So, risky traders out there can take positions according to the aforesaid levels...

For investors, I may not be the best person to comment on the fundamentals, just thought of sharing a news I heard that LIC issues a statement that they still believe in the company and not going to sell their current holdings at a loss. Also, being a government undertaking, it is unlikely that this scam will replicate the results which happened in the case of Satyam Computers or Bhushan Steel earliar... 

If you are convinced woth the fundamentals, I feel good time to accumulate 25% of your total investment kept aside for this stock and then enter later, if it comes down 

Cheers ! ! !

Hrishi

Market Update - #Nifty....Bears strike back.. Book profits

Hi All,

As expected, Nifty could not sustain higher levels above 10600 and gave off the gains and currently trading negative by almost 100 points or 1 % from yesterday.

People who are on the short side from 10600+ levels with stop loss above 10750, can book part profits currently near 10450, and trail stop loss at cost.

On daily charts, Nifty has broken below the bearish pennant pattern showed in earlier post, and is now expected to go down, with a simple rule of lower tops lower bottoms, the first target expected for the down trend will be near recent low of 10250-70, after that one can expect pennant targets to materialize near 9800-9600....

Cheers!

Market Update - #Nifty Bearish Pennant/Hidden Divergence.. Sell on rise

Hi All,

As posted earlier, Nifty faces a strong resistance near 10600-10710 levels and every rise in markets should be taken as a selling opportunity with a stop loss above these resistances.

Looks like Nifty is forming a bearish pennant like pattern (which is a Bearish continuation pattern) on daily charts and breaking 10500-10390 levels Nifty can further slip to 10260 levels and below which the doors are open for 10k levels on Nifty. Breaking of 10k levels will cause serious troubles for Bulls and Nifty can then move down to 9800-9600-9400 levels...

Nifty also showed a hidden bearish divergence on Daily charts (which is kind of opposite of the regular divergences we talk about) where in Nifty failed to higher than 10637, in spite of RSI is creating a higher high. This supports the bearish sentiment and levels of 10400-10270-50 will be important support zones.

A reversal for this bearish view is 10750 for Nifty....

Cheers

#KnowledgeSeries - Watch - Your Way to Financial Success ! ! !

Hi All,

Just thought of sharing a video, recorded by me couple of years back.

Check it out, to explore avenues for building wealth from Stock Markets....


An hour long video covers a detailed discussion on -

• Financial Success with Capital Markets
• Two prime ways for building wealth
• A popular, misleading myth, busted
• Secret to success.

Cheers...

Happy Weekend....

Market update - BANG ON ! ! !

Hi All,

As posted earlier, Nifty failed to cross 10620-10750 levels (38.2 and 50% retracement of the recent fall), and is currently down by more than 1.5% near 10400. Unfortunately though, due to the gap down opening many would not have been short on the higher side.

After a steep fall, Nifty might see an intraday bounce on the up side however, it may not be safe to trade it. For intraday supports will be near 10370-10340-10310-10270, however it is not advisable to go long currently without any material bullish evidence. Intraday resistance will be near 10480-10500-10530 levels...

Going forward, for short term 10270 will now be very crucial and breaking that Nifty might slip to 10000-10100 levels which is a psychological support zone... Below that the gates for 9800-9600 are opened for Nifty.

So, the Indian Stock SALE got cheaper as promised earlier, and it might even get more . . .  Long term investors are advised to accumulate quality stocks / MF / ETFs (Please Read - Wealth Creation with Stocks - Possible?) worth 25-30% of their investable corpus... so that remaining money can be pumped in when markets go down further.

Cheers  ! ! !

Market update - Stock SALE might get a bigger discount ! ! !

Hi All,

I am sure, by now, you all would have received Whats App messages regarding, Great Indian Stock clearing Sale with 20 to 30% off on Selected stocks. 

Let me tell you that, it might offer a bigger discount...

As a trader, it's all about game of probabilities, let us explore them briefly....

As mentioned yesterday, Nifty could not surpass 10600 levels and gave off entire gains of the opening trade.

After the status quo of RBI, Nifty showed marginal volatility, and went negative by 50 points, and settled the day near 10480...
After making a new high near 11180 levels, Nifty fell almost by 900 points to create a low @ 78.6% of the rise near 10276. After that from second half of yesterday and today, it rallied up to 10620 levels which is 38.2% of the recent 900 fall.

I personally feel, if Nifty fail to cross 10620-10750  levels (which is 38.2% and 50% retracement levels of the recent fall), it is headed southwards to create a new low with targets near 10000-9800-9600. A strong move above 10900/11000 might negate this possibility, but I guess the probability is lower.

Supports on the lower side 10430-10390-10330-10270-10200-10000, resistances will be near 10530-10620-10730-10850-10900-11000-11200.

In a nutshell, the bias remains cautious with taste of bearishness for short term, with above levels in mind, one can take a trade with strict stop losses accordingly. However, One observation is, market breadth of 13:4 was in favour of bulls...

If I get a chance, will post a tradable scenario....

Cheers

Hrishi

Wealth creation with stocks... Possible???

Hi All,

This might be a question troubling all of us, all the time and especially today.... 

Let us try and find out the answer....

First of all, though profits can be made in short term with buy buying lower and selling higher, the WEALTH creation definitely happens buy buying and holding on to something for a real long term, like more than 5 to 10 years. 

So, if you want to be a 

Short term Trader - who books profits by buying lower and selling higher, please pull up yourself, as for these quick money techniques you need first of all have the inclination towards this and need to put in lot of efforts and devote some time, if not done it yet.... 

Long Term Investor - Who want to be invested in markets for years to reap its benefits with some simple investing rules.. 

So, What should I do as a successful Long term investor - -   

The answer for that can be really tricky, but to keep it as simple, please find below the information to the best of my knowledge...

People with existing investment portfolio - 

• Should of course continue to hold it. 
• As markets have gave up almost 10% from the peak of 11200, its a good time to accumulate quality stocks.
• If you are a seasoned investors for more than 5 to 10 years, then who am I to tell you... you all know it better... :)
• However, if you started investing in past 2-3 years, this might be the biggest fall you would have seen till date, and a loss of 2 to 20% of your investments portfolio is normal, depending on the quality stocks you hold.
• Markets have seen much bigger single day losses than today, and those who STAYED INVESTED then are ripping the benefits of patience.
• The fall may not be over, as markets may correct another 5 to 10% based on other analytical permutations and combinations, in order to withstand such kind of sell offs, you can  
• Select quality stocks rather than accumulating higher quantities of small priced shares
• Take an informed decision, if you cant take help of advisors, research analysts, broker, etc
• Diversify your investments across asset classes, i.e. stocks, debt (FD/RD/PF, etc.), gold (in electronic form by buying ETFs like Gold bees, etc which is almost up by 1%)
• Stock portion should be further diversified in to various sectors with large cap (less risky), mid cap (moderate risk) and small cap (higher risk) companies. 
• If your lesser capital does not allow you to diversify, buy ETFs (Exchange Traded Mutual funds) which track major indices, like NiftyBees (1/10 of Nifty value, will go up when Nifty goes up, and so on for indices specified), Junior Bees, M100, etc
• If your capital is really less, better to go with Mutual Funds investments.
• And last but not the least by all means . . .  Sip your investments... Rather than putting a lump sum amount once in a blue moon, be disciplined and invest an equal amount at regular intervals, usually a month for optimum benefits of rupee cost averaging (buying more shares when price is down and lesser shares when price is up, so that the cost of purchase is much lesser) and Power of Compounding.

People who want to start investing - 

• Please read this , if you have been scared by the news and social media today . . .
• It's better late than never.... Markets have experienced much more shocks, many times bigger than this, and still managed to give 15% + returns consistently.
• Start it now....
• Keep in mind the points mentioned above....

Hope this might help many of us to at least have a basic understanding of investing...

Cheers.....

Market update - Yeh Bull hai ke Maanta nahin.... ! ! !

Hi All...

Thanks to the global meltdown on account of interest rate spike in US and inflation concerns, global stock markets including Dalal Street saw a massive sell off...

However, after the initial panic in the morning, markets recovered more than half of the loss.

As discussed, after taking support exactly at the 78.6% retracement of 10276, Nifty traded cautiously for first half of the day and then rallied further to recover almost half of the opening losses.

Though it closed negative by 168 points, the daily chart shows a strong bullish candle, which is not the case in Sensex however. Also, drilling down on hourly charts, Nifty ended the intraday rally with a Shooting start like candle, hence 10470-450 levels become vary crucial supports for tomorrow.

Also, on daily charts after gaping down by almost 300 points, Nifty recovered and close the gap before closing the day, hence there is no gap down / bearish window on Daily charts...

Going forward....

Might be too early / risky to take a bullish stance immediately, and I would like to wait and watch for another bullish evidence on charts, however one thing is imminent that bull have to surpass and sustain 10600 for any upside and bears have to break 10270-250 for further downside.

As posted earlier, 10000 remains a key psychological support, below which Nifty can drift down till 9700-9650 levels.

In a nut shell,

• Short traders might have already booked profits when the trade was initiated near 10800 levels, and should ideally wait for a favourable risk reward opportunity,

• Long traders should ideally wait and watch for something more concrete to happen...

Cheers

 

Hrishi.....

DON'T Invest in equity markets ever . . . . IF ! ! !

Hi All,

IF you can't / dont want to / chose not to,  understand it, select any other asset classes which can match it....

One of the famous rules for investing by Warren Buffet is, Dont invest in something you dont understand.... So follow that rule for equities as well...

As expected, after an anticipated sell off in markets..... posts started floating for calling it an end of equities, busting of equity market bubble, so on and so forth.

This post is for all those who are calling it this way, please be aware ....

• In a single year of 2008, markets have fallen by whopping 61% (in that case, current fall is just 10%)
• #Sensex fell from 21000 to 8000 and Nifty fell from 6300 to 2250 in less than 10 months
• The same indices, are now trading at (in spite of the recent so called Bloodbath or Carnage) near 10400 (Nifty) and 33700 (Sensex)
• Which is an absolute return of around 60%
• Moreover, those who BELIEVED in and invested when the markets went lower by 60%, the absolute returns on an average are more than 100% in less than 9 years
• This translates in to a per annum growth rate of 18% (against < 10% in all orthodox asset classes like LIC, FDs, PPF, etc)

So simple advise to those who are creating this due to sheers lack of knowledge / awareness, please feel free to select any other asset which you understand and which can beat inflation consistently and avoid Equity markets....

And coming to traders... 

The informed ones are already short and booking profits now...

Cheers

Hrishikesh

Market update.. Leeeee Bazaaaar.... #Sensex saade 33 Hajaaar... ! ! !

Hi All,

starting with the regular update, as expected earlier, Nifty couldn't sustain the the latest rise of 1k points and gave away almost 1k odd points from the all time high near 11200.

Nifty has bounced back today from a 78.6% retracement of the entire rise from 10k to 11.2k levels, and on the lower side, 10250-10100-10000-9800-9600...

Though downside looks very hefty, the same is required for creating a strong base for the next upward rally.

Traders are advised not to take any trades on long side unless there is a convincing evidence on charts.... who are short as per the sell signal suggested below 10900-800, can trail stops or book profits...

Cheers

Hrishi

#Nifty Go Go Gone....!

Hi All,

As expected, after breaking crucial supports, Nifty continued the downward journey and touched the crucial supports near 10600.

On daily charts, Nifty has multiple upward gaps (support area) near 10513-10566-10588, hence the area of 10500-10600 might act as supports for markets.

People who have Nifty short can book part profits and trail stop losses. Nothing positive on charts as of now to go long...

Cheers

Hrishi

#Budget 2018 - Update on the Nifty short book partial profits and trail stop loss

Hi All,


Update on the market view - 

As expected after breaking crucial supports near 10950-11000, markets slid further down and achieved the first support target of 10850...

Now going forward, 10820 (Daily Supertrend) -10760 (daily bottom) will act as crucial supports, traders can book partial /full profits around these levels, or trail stop loss at cost, as I feel that further downtrend can only accelerate when it breaks the mentioned supports.....

As of now, there is no concrete sign of bullishness, hence a long trade is not advisable unless we get to see something positive on charts.

Cheers

Hrishi

#Budget2018 - Markets gearing up for the D-Day ...! ! !

Hi All,


Update on the market view - 

As expected after breaking crucial supports near 10950-11000, markets slid further down and achieved the first support target of 10850...

Now going forward, 10820 (Daily Supertrend) -10760 (daily bottom) will act as crucial supports, traders can book partial profits around these levels, or trail stop loss, the further downtrend can only resume when it breaks the mentioned supports.....

As of now, there is no sign of bullishness, hence a long trade is advisable unless we get to see something positive on charts.

After taking a support near 10650-60 odd levels, Nifty continued its northward journey and scaled fresh highs near 11200....

Though last 2-3 days there were some bearish signs, nothing to worry about till such time Nifty is sustaining above 10950-11000 levels (Daily support and daily gap) as it is still maintaining the higher top higher bottom formation on daily charts, however breaking these levels, Nifty can slid down to 10850-10770-10650 levels.

By only looking at the charts (and not bothering about the Budget event), the bias will become bearish below 10950 with stop loss above 11200 levels.

However, as the #Budget2018 will be announced tomorrow, it's going to be a D Day for markets and traders are expected not to trade with high exposure and follow strict stop losses.

Cheers ! ! !

Bears Zinda hai.... But no strength ! ! !

Hi All,

Thanks to the good news for banks, Nifty scaled to to even higher levels and almost hit the century in the early trades today.

However it gave away almost all gains to take support near 10770 levels...

Though it's a bearish candle which looks like Bearish Separating Lines pattern, on daily charts a 50 60.points pull back by bulls do not give a sense of negativity yet.

Coming trading days will be crucial. Bulls have to definitely cross today's high near 10900 to continue their strength... Else bear can get an upper hand....

Cheers

Knowledge series - RSI Divergences... With a different dimension ! ! !

Transform your TRADING in to Successful TRADING

Hi all,

I am sure that the market followers and those who know at least a bit of Technical Analysis will be familiar with terms like RSI or any other indicator Divergences....... if not there is a lot of literature available on the same on internet,Its nothing but when the RSI diverges (move in a different direction) as compared to price....

Here is an example...



I Would like to share with you allone of my observation, which completely changed my Trading Plan, and needless to mention in a far better way.

A new dimension to RSI Divergence - 

I would like to share a different way to look at a Divergence, which I have named as Single Candle / Candle Divergence, though it is not as effective as regular divergence at times, can serve the purpose for small moves

The logic here is exactly the same which we apply while checking the regular divergences, only the difference is in what do we compare... the overbought and oversold rule would apply as it is without any change....

In regular divergences we compare price tops with respective RSI tops and price bottoms with respective RSI bottoms, Its important to look at these divergences in the overbought (70/60 in RSI) or oversold regions (40/30) as applicable... i.e. +ve divergence in oversold and -ve divergence in overbought zone.

However, the challenge doing this is we have to wait for these tops and bottom to form and no one actually knows when a bottom (support, demand) or a top (resistance, supply) is going to be formed.

I have observed that rather than waiting for a new bottom or a top to form, we can even use the exact same logic for two CONSECUTIVE Candles which reduces the waiting time to a large extent, it might be manageable to an extent  acceptable in intraday charts of 5 minutes or so, just imagine that while trading based on daily/weekly charts, rather than waiting for almost for an indefinite time till the new bottom or top forms and check whether there is any divergence, how about just waiting for the next immediate day to check whether there is a divergence or not!!!!

Sounds confusing, but its easy let me tell you with an example...

Check this Nifty charts way beck in Dec 2011, near the major lows of 4530.....



Just see the last two candles, they created a lower lows/bottoms where as the RSI for respective candles increased which is clearly visible.... I also treat the same as a divergence and trade on the long side once the high of last candle is taken out, in this example the level to enter was around 4763-65... with stop loss below the same candles low i.e. 4530.....

The result is this....



And not only at these crucial times this work even on 5 minutes intraday charts..... I take almost all trades based on this coupled with Supports and resistances for deciding targets.

One example for a short trade.... Recent high of 6111...



Same logic applied vice a versa....

As mentioned use this technique...... across all asset classes and all timeframes as per your trading preference and trading style.... Of course higher the time frame better the signal....

I have been trading based on this and a hit ratio in the range of 60% + can be expected.

PLEASE REMEMBER

With this you are trying to go against the trend and trying to find out trend reversals.... Please note that capturing short term moves is always advisable and a COMPLETE trend reversal is not possible always....

However with a proper time frame analysis and money management a successful trading strategy can be developed....

request you all to check the same and start following the same if convinced, please comment with any of the queries or doubts regarding the same....

Happy Trading and Money Making......

Cheers

Hrishi