Category Archives: Hidden Positive Divergence

What to do now???

Hello Friends,

Today I got a chance to speak to one of the subscriber of Gann Square of Nine Method. It seems in last couple of days he lost his hard earned money and obviously now he was in search of some black box system which should work in all market scenario. He asked me few questions and i thought this questions are not only his questions, but in general all the participants must be thinking in the same way. Hence this article.

  • Friends, first look at this chart Nifty. I had nothing but drawn a simple trendline from the lows of Jan 2016 and adjoined to next two important swing lows, out of which one trendline is already broken and another is about to test in days to come, or God Knows if it will tested just today itself. Point of support based on this trendline is somewhere near 10180.
  • Secondly, on chart 14-pd RSI is plotted on down, where one may clearly see that RSI has broken the previous swing low, whereas price has not which is 9951. So in technical terms it is called as Hidden Bullish Divergence. Which indicates that after tremendous selling pressure possibility of pullback can’t be overruled.
  • Next one may see INDIA VIX which has made a high of 20.48 and lastly settled at 19.73.  On 8th Feb,18 it made a high of 24.035 wherein from it cooled-off. Importantly if we see in past, even after VIX cools-off from the highs, prices may continue to decline initially and after few days it starts recovering. So, it is better to assume that INDIA VIX may initially rise and eventually it starts cooling-off but that does not indicate bottom reversal.
  • And lastly one more important observation, If we see Average Range of Nifty, it has shot up dramatically, and it is not only Index but Average Range of most of the stocks has tripled, which is not obvious.

Now, how to interpret this data and how to poise ourself in the market. First and foremost you have to decide, why you are in the market,

  • For Excitement and Thrill
  • For taking Revenge
  • For making Money

If your answer is 1 or 2 then you are most welcome and enjoy the ride, but if your answer is 3 than my sincere suggestion is to wait for a while, no matter how good you are or bad your system is. Mostly none of the system discounts such a high volatility with such a wide Average Range. Take your prudent judgement and save your money from big time loss. If you are Investor than start accumulating selected stocks in a staggered manner. And if you are Trader than Just Relax, wait for VIX to come in its territory and wait for Average Range to switch to normal course.

Friends, i can give you couple of other points of analysis, but don’t want to confuse you much. I try to keep it simple. If you have any query feel free to ask me. I will answer you for sure.

Bank Nifty Technical Outlook for 3 June, 13

Bank Nifty Weekly Chart - 12475.65 (-293.70)

Bank Nifty Weekly Chart – 12475.65 (-293.70)

Bank Nifty Daily Chart - 12475.65 (-330.25)

Bank Nifty Daily Chart – 12475.65 (-330.25)

Bank Nifty managed to outperform the market, but due to lack of support from other members it has give up; or you can say others have pulled down. According to Dow Theory, divergence in main indices is a signal to turn alert.

Technical observations from attached chart of Bank Nifty.

  • Last week begin with extreme optimism in market players, that current fall is nothing but just retracement and market will turn positive again; and actually it happened, Monday Bank Nifty moved with enthusiasm and gave positive close. But this euphoria proved short sighted because Bank Nifty struggled to move higher above previous major swing high of 12972, and finally it started giving weak closes.

(To read full report, download)

 

 

 

Bank Nifty Technical Outlook for 27th May, 13

Bank Nifty Weekly Chart

Bank Nifty as on 24 May’13 – 12769.35 (-547.75)

Bank Nifty as on 24 May’13 – 12769.35

Bank Nifty as on 24 May’13 – 12769.35

From above charts of Bank Nifty, few things I would like to high light here.

  • Week begins with extreme Euphoria and Bank Nifty posted a new life time high of 13414.30. But that was happier moment for couple of minutes, immediate after which Bank Nifty started witnessing profit booking and major draw-down start happening. On same day Bank Nifty closed in red.
  • Even in 2010 when Bank Nifty posted new high of 13303.60 on 5 Nov’10, candle body was very small, it means price activity was very limited, and on next day it started giving up away. It is just like cracking another’s record for sake of putting yours.
  • In the weeks last session, prices made a low 12582.50, but from that level, Bank Nifty witnessed support and on closing basis, it closed with gains compare to prior session.
  • If you see in attached chart, still prices are hovering near trend line.
  • Last week, I had shown you Negative Divergence on weekly chart of Bank Nifty, which was honored. This week I have observed potential Hidden Divergence setting up between prices, if prices honor this divergence than we should be looking for at least retest of the highs.

(To read full report, Download)