In my post Jackpot Trade No.4 ( see link Jackpot 4: when to initiate shorts)
I had posted following chart:
.png)
And on 24-09-2012 this bearish cross-over has taken place:
.png)
And thus my indicater for initiation of trade on short side has got triggered .
During last two days,I have got e-mails & messages (including indirect ones on FB group) expressing difference of opinion--primarily on account of:
1. Increasing FII inflows;
2.Increasing govt resolve on reform front;
3.Technically I have been told that I have jumped the gun as the channel has not been broken and 5/10 hr ema cross has not occurred.
First of all, let me thank all the people especially Shri Chandra Ranjan Gaur ji, for their deep insights and valuable inputs.
Markets,as all of us know,do not run in straight line. My bullish friends(they hugely outnumber bearish ones as on this day) are telling me that we are no going to look back before testing 5900.
All I am going to say is that it is this difference in opinion that is the fuel for markets.
Argument is simple:
1.Channel top has been tested;
2.Daily momentum indicaters have moved into overbought zone;
3. Hourly indicaters have shown negative divergence(on Friday itself showing decrease in upward momentum)
4. MACD 5,34,5 on Hour charts has given a bearish cross-over indicating first signs of reversal.
These are all initial indicaters,I agree,and chances of getting whipsawed are also there. New price tops have been observed (previously) despite continued negative divergence and Daily Momentum indicaters have been known to remain in overbought zones for days together. And therefore everyone differs on points of entry---some saying 5/10 ema cross-over,some saying channel break,some saying not rely on Hour charts---etc etc --and no one is incorrect.
Now let me concentrate on finding a proper Stop-loss (target has already been mentioned as sub-5350):
Stop-loss can be found with two criteria:
1.On the basis of Price;
2.On the basis of Divergence.
1.On the basis of Price:
Here my tool is EW:
The last subwave(impulsive) is 5538-5720* whose fractals can be seen as:
(i)=5538.1-5581.25=43.15
(ii)=5581.25-5541.6=40.35
(iii)=5541.6-5719.6=178(412%)
(iv)=5719.6-5663.3*=56.3
(v) [assuming (iv) to have ended at 5663.3]= can do max 1.618*(i)=70 points=5733.3
Stop-loss for shorts must be applied at 5735
.png)
2.On the basis of Divergence:
For negative divergence,the MACD (5,34 hr)reading at Nifty top(=5649.95) was 129.65;
this point should be used as benchmark for applying SL on shorts. If it is breached then negative divergence would vanish and (expected) reversal would become invalid.(please see the chart above).
I had posted following chart:
.png)
And on 24-09-2012 this bearish cross-over has taken place:
.png)
During last two days,I have got e-mails & messages (including indirect ones on FB group) expressing difference of opinion--primarily on account of:
1. Increasing FII inflows;
2.Increasing govt resolve on reform front;
3.Technically I have been told that I have jumped the gun as the channel has not been broken and 5/10 hr ema cross has not occurred.
First of all, let me thank all the people especially Shri Chandra Ranjan Gaur ji, for their deep insights and valuable inputs.
Markets,as all of us know,do not run in straight line. My bullish friends(they hugely outnumber bearish ones as on this day) are telling me that we are no going to look back before testing 5900.
All I am going to say is that it is this difference in opinion that is the fuel for markets.
Argument is simple:
1.Channel top has been tested;
2.Daily momentum indicaters have moved into overbought zone;
3. Hourly indicaters have shown negative divergence(on Friday itself showing decrease in upward momentum)
4. MACD 5,34,5 on Hour charts has given a bearish cross-over indicating first signs of reversal.
These are all initial indicaters,I agree,and chances of getting whipsawed are also there. New price tops have been observed (previously) despite continued negative divergence and Daily Momentum indicaters have been known to remain in overbought zones for days together. And therefore everyone differs on points of entry---some saying 5/10 ema cross-over,some saying channel break,some saying not rely on Hour charts---etc etc --and no one is incorrect.
Now let me concentrate on finding a proper Stop-loss (target has already been mentioned as sub-5350):
Stop-loss can be found with two criteria:
1.On the basis of Price;
2.On the basis of Divergence.
1.On the basis of Price:
Here my tool is EW:
The last subwave(impulsive) is 5538-5720* whose fractals can be seen as:
(i)=5538.1-5581.25=43.15
(ii)=5581.25-5541.6=40.35
(iii)=5541.6-5719.6=178(412%)
(iv)=5719.6-5663.3*=56.3
(v) [assuming (iv) to have ended at 5663.3]= can do max 1.618*(i)=70 points=5733.3
Stop-loss for shorts must be applied at 5735
.png)
2.On the basis of Divergence:
For negative divergence,the MACD (5,34 hr)reading at Nifty top(=5649.95) was 129.65;
this point should be used as benchmark for applying SL on shorts. If it is breached then negative divergence would vanish and (expected) reversal would become invalid.(please see the chart above).
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