Trendline can make wonders!!!

Yes friends, it happens that we forego simplicity and strive for more and more complex scenarios & solutions.  Beneath this mentality, human nature lies which discard the simple in favor of complicated. (More difficult to understand, more accurate will be analysis??) Personally, I don’t believe that complexity can give you better solutions every time.  You also have to look in for put in efforts and reward, that is what I understand; look for risk(time)-reward ratio man…

We are thought and also we have observed that some simple technical tools can do wonders and can give you an excellent, out of many simple tool, one is Trendlines. Trendlines are one of the most dynamic & versatile tool to apply in the analysis.  Despite being extremely useful, trendlines are often overlooked.


NIFTY AS ON 30/01/2013

I have applied trendline in below attached chart of Nifty, which itself speaks thousand words than I can write here, and you don’t need to be expert to understand from visual presentation.  As we can see Nifty is moving in an uptrend from mid May’12.  I have drawn rising trendline from the low of 4770.35, and adjoin it to the next immediate higher low of 5032.40, that’s it, after that I have only extended the line, and you can see how swiftly this trendline was respected, prices took support on this trendline, twice then after.

Now second observation- recently prices has formed a channel, where prices moved in a range, where it touches upper boundary of line and again retraces back to lower boundary.  Although, on Nifty this range is very small, but as you can see it is trading it.  Basically, prices are moving in a rising congestion, and breakout from this congestion is quite obvious, can you stay in a single room, when you are use to stay in one large apartment?  Obviously answer is no, you have to make compromises, and that is exactly what is happening with prices, one or another day compromise ends, and prices can blast.  Now, don’t ask me in which direction, you yourself guess and understand, do I need to answer your question.

Lastly, third observation which I like to highlight here is, just look at momentum oscillator RSI (14) there is clear cut divergence between prices and oscillator, which clearly indicates that momentum is not in tandem with price rise, alternatively, momentum is declining as prices are rising, such situation does not holds for long, either prices or momentum has to make compromise, let’s see who does?

Now let me give you a clue, once prices moved out from rising channel, you should be on alert, and if it breaks below than wait for day or two and initiate short position. Here let me speak some wise words….Never pre-empt the market, ask the question to market, rather asking to anyone, and I am sure it will give you answer.  I hope now you got the answer….hmmm

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