Monthly Archives: December 2012

Technical Analysis on USD/INR- 54.75

As you can see in attached USD/INR chart, prices are facing resistance near INR 55 level since from last few sessions.  This resistance comes from Golden Fibonacci ratio 61.8% of last move from all time high of INR 57.25 made on 22 July, 12 to low of INR 51.50 which was made on 5th Oct, 12. On the downside prices will witness immediate support from its 200 Day Simple Moving Average, which comes at INR 54.30.

USD/INR - 54.75

  USD/INR – 54.75

Prices moving gradually lower, so the momentum is also fading, it suggests some shorting opportunity.  At CMP INR 54.75 traders can take short position keeping stop loss above INR 55.10 with an initial target of INR 54.35

(Please read Disclaimer)

ZINC – Still sometime to go short??

As most of the commodities are relaxing after last one and half months rally.  Similarly Zinc 1 month MCX contract is moving flat from last few days.  As on 28 Dec, 2012 Zinc closed at 111.35.  Last few days back it broke from its rising trendline, but as such we have not seen any follow through action barring few choppy sessions, but in last session prices has engulfed last fourteen trading sessions price movement and closed in red, at first instance which indicates that Bears are active now.  Momentum is fading to support the basis.  Based on above observations, I sense that if we see follow through action on Monday, than Zinc has potential to go down further.

ZINC - 111.35

                                                          ZINC – 111.35

I am little skeptical only because of Christmas & New year holiday in US.  Traders can take short position keeping trading stop loss of 113.40, with an initial target o 108.

 

ALUMINIUM – 111.60

As on 28th Dec, 2012 Aluminum 1 Month MCX contract closed at 111.60.  Here I see a minor selling opportunity for risk takers & aggressive traders, risk-averse can excuse at this point in time.  I am saying because I am little late in tapping the opportunity.

Technically, prices has broken out from one and half month rising trendline, and momentum is deteriorating.  MACD is already trading with bearish convergence and RSI is tilted downwards, indicating weakness in prices.

ALUMINIUM

Traders can short on rise or at CMP keeping stop loss of 113.40, if prices breaks below level of 111.10 than prices can move towards 109.50 and lower, and if not than prices can reverse the trend and continue to move higher.  As of now, I see selling opportunity with keeping strict stop loss.

M&M – Selling Opportunity???

Currently Mah&Mah is trading near 930.

Technically, it has broken its rising trendline, and momentum is waning.  M&M witnessed sharp rally from 620 odd levels to recent 975; in last 4 odd months trendline is respected and prices witnessed bounce thereon, this time trendline is broken and it seems that prices will fall further.

Mah&Mah

Mah&Mah

I agree that long term investor will not agree with me, to go short on M&M because on broader level picture is still rosy, and I will totally agree with them.  What I see is trading opportunity to go short on M&M at current levels, keeping stop loss of 955, with 1st target would be around 890 levels.

Today Nifty gave Dark Cloud Cover, indicating weakness in Nifty.

Gail – 354

At current price Gas Authority of India Ltd is trading at 354.

Technically, stock is trading very close to its Major 200 Day Simple Moving Average (DSMA) since from few days.  Momentum oscillator MACD is trading with Bullish Convergence, whereas ADX has reached 19 levels, which indicates that momentum has not picked up from last few days.

GAIL - 354

                                                            GAIL – 354

I see here a buying opportunity, as MACD is about to reach “0” line from below, and I expect momentum to pick up gradually.  Also stock is just trading below 200 DSMA, so as momentum will pick up stock will shoot up.  On flipside, if this hypothesis goes wrong than, it is very much possible that stock will move down quickly, and to support that fact we can see Death Crossover taking place (50 DSMA crossing 200 DSMA from above).

Keeping above things in consideration, I advise to initiate long above 360 level keeping stop below 349, eventually I see prices to test 385+ levels.  Risk-averse traders can wait for close above 360.

(PLEASE READ DISCLAIMER BELOW)

 

Technical Analysis – Be aware of blog marketers.

Dear Friends,

Since from last few weeks, I am coming across few ads on web who is offering their services to teach Technical Analysis, claiming to make you trader and better investor compare to others.  Frankly speaking I really doubt the authenticity of such ads.  I believe some guys have really nothing to do with technical analysis, I am saying some guys not all, and they are offering their service to teach others, they are good marketer not technical analyst.  But, I am very sure, because of their smart marketing tricks many newbie’s get attracted towards this ads, and spend their money, and finally in return they get what is mostly available on internet this days.

My experience is that, it is very easy to learn basic concepts of technical analysis, but extremely difficult to digest and implement it, and far from fact to apply in real market.  To apply your analysis and earn out of it, you don’t only need to be good (I will say, you have to be excellent) in your analysis, but also you should have sound knowledge of money management skills, otherwise, market will crack your legs and you will not realize how it happened.  I am sure many of my colleagues will agree with this fact.

Purpose of writing this article is, if you are keen to learn technical analysis, than consult the person who are actually practicing it from last few years, and take their genuine advise, don’t just jump and get attracted only by looking some professionals on media, (mind you there are few, who looks quite smart and young, but they are dedicated personality and we respect them for their work).   And stay away from marketers; otherwise you are prone to lose interest very quickly.  Stay away from the person who is ready to show you some past history which has already happened, and then they are claiming on their sites, yes, I have done it; simple trick to assess such people is ask them for tomorrow’s outlook and see the result, you or I, don’t have to speak much.

If you are newbie, you are free to contact me on my mail id – way2profits.24@gmail.com.  Don’t worry I will not charge you anything.

Grasim – Sell on Rise.

Grasim Inds at CMP- 3171 looks like a selling opportunity to me.  In below attached chart, it is depicted that prices is already broken support of 23.6% Fibonacci Retracement of last up move from low of 2210 to 3505.  Also prices has formed double bottom near ~3150 levels, once this level is broken prices will move to test next Fibonacci support at ~3000 levels.  Momentum oscillator RSI (14) is also showing initial signs of waning out.  Risk involved in taking short is, stock can move higher by taking support near 3150 (forming triple bottom).

Grasim Inds

                                                            Grasim Inds

Risk-averse traders can initiate short below 3150 levels, with strict stop of 3250.   Risk takers can use rise up to 3250 as a selling opportunity with stop loss above 3400, targeting 3000 and lower levels.

(Please read disclaimer attached below)

 

NICKEL – 957.80

Nickel, after one and half months rally from low of 852 to high of 980, showing an initial sign of waning.  As we can see in below attached chart that, recently Nickel has broken its one and half month rising trend line.  Secondly, momentum oscillator MACD has given Bearish Convergence on daily chart, as well we can see that RSI is trading almost flat from last few days.  This gives us initial sign that momentum is waning, and if you are holding long Nickel than better book your partial profits here.  Confirmation of weakness comes in as and when Nickel close below 950 levels, and this will be the point where we like to go short in the counter, strategy should be taken according to risk appetite of individuals.

NICKEL AS ON 21 DEC 2012

NICKEL AS ON 21 DEC 2012

Tata Coffee – On the radar of Big Bosses

Anybody who looks below attached chart will agree with me that, for sure there are big hands involved in Tata Coffee.  If we see past price movement than it is quite evident that since from May’11 till June’12 Tata Coffee moved in the range of 900-800 barring few jerks, and that to were too small.  From June’12 onwards activity picked up and price moved gradually higher & higher.  In fact on 16 Nov, 12 stock made a high of 1564 with huge volume, which clearly tells us that either FII’s or DII’s increased their stake in stock, and if we see price movement then after, than in last one month prices are moving higher and closing slightly above than previous close, which clearly means that every dip there is a buyer.

Tata Coffee

Tata Coffee – CMP 1400

I know, up till second week of Nov’12 prices were trading just in the range of 1100-1000 and with one sudden spike range shifted substantially higher to 1450-1350.  For retail investor, this stock becomes too risky to take bet, but I sense that investors who are ready to take risk can take action on dip near 1250-1300 (if it comes) with stop loss of around Rs 50-100 according to risk-appetite.  Follow simple rule here, don’t hurry to accumulate and don’t panic with others when you see a dip.  Technical target for Tata Coffee is around 1750, so risk reward will be quite in favor.

According to my observation, in very few counters you see action like this.

Breakout Trading

Dear Reader,

While you are trading and following recommendation of many research houses, you must be reading technical reports and must have come across many jargon’s  clichés and specific words, which are either new to you or not understood the meaning or reason to behind the purpose of word or sentences.  In general human psychology is such that if you don’t understand something than it is either useless piece of material, or one step further its job of analyst to confuse your more.  We know it is not your fault, but it is the fact that many of the analyst try to give you unbiased view, where they like to stand on both the fronts, so irrespective of market takes any route their views held true, because they have given the possibility of both the moves. Any ways, we don’t like to delve much into it, in our series of Educational Articles, we attempt to educate our patrons, and make sure that whatever we convey, that should be fully understood by them, which helps to make them sound decision.

It is said and statistically proved that only 15-25% of time market trends, and rest of the time either it consolidates or give false breakouts and trade in choppy range.  If this is the case, than, it becomes difficult for any professional traders to trade the market, because there is little or no scope in range bound markets.  To solve this quandary or an alternate way to respond such type of market, many analysts have developed tools and oscillators, which can help you to take right decision, but that can only be applied with expertise and considering all the facts and figures into the account.  Simplest approach to this situation is trade only the Breakouts.

Breakout: – Stock that has consolidated against a price level for several bars.  The point where it breaks beyond that price level is called the “Breakout” and often is the beginning of a short to intermediate term move in the direction of the breakout.  Adding further to above statement, if price is consolidating for several bars and breaks beyond the price level on a downside than it is called as “Breakdown”.  This can be understood by below attached

Breakout Trading (a)

a)      Here price was consolidating in a horizontal range and gives breakout on an upside.  In such type of scenario, trader should always wait for real breakout to initiate the position i.e. initiate only after some minimum price movement in the direction of breakout.

Breakout Trading (b)

b)      This is a Rising Wedge formation in falling market, which is a continuation price pattern, well respected and traded in the market.  As we can see in the attached figure, price was falling up to one point and then started trading little higher, but the whole move proved nothing but distribution, than it gave a downside breakout after brief period which resumed its original falling trend with more vigour & intensity.  (There are total four types Wedges, detailed description is already available in our tutorial on Wedges).

Breakout Trading (c)

c)      It is a Flag pattern, another continuation price pattern.   These are small rectangles that form majorly on lower degree charts.  It is part of a fast moving market and signifies temporary halt in the trend that will continue the prior trend.  As we can see, on breakout price accelerates again on an upside.

Breakout Trading (d)

d)      It is another Flag, in falling market.  Crux remains the same; we have to wait for decisive price breakout on a downside.

Breakout Trading (e)

e)      Other than price pattern, trader should keep an eye on previous day’s High & Low.  Breakout from either direction gives excellent opportunity to trade.

Breakout Trading (f)

All breakouts are well traded if caught at a right time, with a sharp eye.  There are some Do’s & Don’t about Breakout trading

Do’s

  • Before taking any breakout trade, you should always check back history of an instrument, to understand its particular behavior on breakouts.  It will be a highly useful key to increase the success ratio.
  • Breakout from resistance or support line, is best to trade, but make sure price have space to move beyond the range.

Don’t

  • It advisable to wait for some decisive price move in the direction of breakout, otherwise you’ll get trap in the head fakes as you can see in attached figure (f).
  • If instrument has multiple resistances coming on its way just after the breakout, than avoid such trade, even if it has given ideal breakout from consolidation pattern, look for something else.

Generally, breakout trading is more suitable to intraday traders, who seat live on the market, or else you have strict watch on the market, if you are investor or occupied with some other work than it is not advisable to experiment such methods in your trading.

Keep trading…