F2

Its been almost 3 years since the birth of my blog but still I dont have any follower. Only recently I started posting frequently otherwise it took 2 years to to write my 4th post. First of all Im really confused about the content of my blog. I dont wanna make it one where one see something that other sites and blogs are already providing. I want to make it specifically technical analysis oriented. I seek suggestion from my clients and colleagues to enhance the quality of moneyshankar.

New Lessons

Its my new initiative in my business. Though I knew its good practice and sometimes it is claimed to be imperative still I never bother to take cognizance of this exercise. After market hours an introspection or analysis of trade is very important and necessary. With this practice I can ascertain the reason behind fail trades, lesson I learnt from those mistakes and the measures I should take to avoid such mistakes in future. Coz lot of money and faith is on stake.

Above is the chronology of the trades of mini nifty. And the biggest mistake happened in the very first trade. Seeing the sell signal simultaneously on MACD and Stoch at 10:47:46 I short sold mini nifty at 5185. (the level and signal are encircled).

1. Mistake no. 1 is I failed to notice that inspite of sell signal the faster EMA is above the slower that signifies bullish (and not bearish) trend.

2. Mistake no. 2 is I failed to notice that even after the sell signal , the trigger lines on both indicators were moving horizontly instead of sloping down. And both lines were above zero when they were supposed to intrude the below zero zone.

3. Mistake no. 3 may prove suicidal as though I failed to notice all these movements still I kept it on. I should have square the trade in 15-20 minutes. On the contrary I squared off after 2 hours at 13:33:32 that too with loss. And see that at 14 hours the faster EMA crossed down the faster EMA.

Now see the whole movement in different perspective. 10 and 20 EMA gives good results with 5 min charts.

It is apparent from the chart (its 5 min) the sell signal on MACD and Stoch in quick succession. So we got the confirmation too. That’s good. Furthermore these signals were followed by EMA crossover that is supported by volume. All these movement signifies the change in trend. On safer side if we go short on EMA crossover (the middle of the corresponding candle i.e. 5198)

The buy signal on stoch can be ignored since the trigger line on MACD is still moving down and entering negative zone and the gap between both EMAs still exists. We gotta buy signal on stoch and the corresponding candle makes the low. That is at 5173. so we can easily get net 19 points. Good for quick trade.

 


               

Anticipation of Reversal

Amidst Greek crisis, market remained in Bears control for the whole week. Almost every indices sagged and Sensex shaded 4.5% while Nifty 4.9%. But ,if we believe on technicals, nifty and bank nifty is all set to bounce back. So we are on the verge of witnessing yet another reversal

As clear from the picture above that on 7th May , 2010 Nifty has formed a Doji, that too after a gap down. And Doji after a downtrend is a harbinger of reversal.

And if we plot Bollinger Band on Nifty May future, it supports our claim of reversal since the Doji is not only formed on lower band but its lower half remains outside the lower band. One more thing is apparent from second picture, that is last four candles have been in touch with lower band as well. This is not a common event, it happens when a unusual event affects the price movement of an equity or index and the price movement deviates from its normal course.

Technical Analysis

I still remember when I used to be a naïve to Technical Analysis. The remembrance of some of the mistakes I committed in those days makes me laugh. How stupid I was. But that’s the way one learns if he/she doesn’t have any mentor or godfather. I too started learning by and with mistakes. In my early days I picked stocks who had seen a drastic drop in recent days. The notion behind the selection was “ the stock has already dropped a lot , now its turn to move up” .


Well, later I learnt about moving averages and still believes that moving averages are crude and simplest way of learning technical analysis.

If we firmly believes the existence of TA doctrine and want to encroach upon, moving averages gives us easy way. A beginner doesn’t know when to buy or when to sell. So moving averages, if properly handled , give enough guidance to keep him from incurring prospective losses.

Below are some pictures of NF with 50 moving average and even a naïve can understand the timing of buy/sell. It a simple beginning.