Hello Friends

We had a two day good upmove in Nifty and it managed to give some life to downtrodden bulls. Today, I will analyze Daily as well as Hourly chart of Nifty (It looks very attractive). Following is my analysis of Nifty Daily first:

As we can see in the chart (Nifty 26 June.png), the Bear Market that started in Jan is still going on (Line 1) and there seems to be little chance for bulls to get over it. Even the secondary Downtrend line (Line 2 - in red colour) is looking too far away. Lot of things happened this month, the most important was the break of Jan low and break of trend line drawn from Jan low (Line 5). The fundamentals of our economy are weakening and to add to the chaos, there are political uncertainties.

If we see closely, there are three resistance areas for any upmove. The first is Line 3 which is around today's high. If Nifty fails to cross this line, then we can see a fresh selloff starting tomorrow itself !!!
The second resistance is at Line 5. The level comes around 4540 !!! This means if Nifty manages to go up from today's close, there are good chances for it to touch 4500 - 4550 levels.
The next and big resistance for Nifty is at the RED line - Line 2. One thing to notice is - the 34 EMA also falls nearby. The level comes at around 4600.

I deliberately did not speak about Line 1 - the main downtrend line. This is because it is too far away and I don't find any catalyst in the near term which can make Nifty move so far up side. However, for the sake of level, it comes at around 4800. Interestingly Nifty will face 50 DMA before facing Line 1, so chances are more than remote for that to happen.

By reading the above you can have the idea of how severe this Bear Trend is. Even by moving up to as much as 4800 will not end this Bear Market.

THE HOURLY CHART

As we see the hourly chart of Nifty, there is a rising channel or what some people call flag formation. This is bearish flag as it is in a larger downtrend. One more thing to note down is today's high that Nifty made is exactly 38.2% retracement of the latest downswing from 4680 to 4097 !!!

The big resistance in hourly chart is also surprisingly coinciding with that on the Daily chart !!! around 4500 - 4550 levels. However, we should note it that its not necessary to reach the biggest resistance and then fall, I am more inclined towards the break of the rising channel.

I hope my post will be useful for readers.

Thanks & Best Regards
Harish Dobhal

Is the Bear Market Over?

Dear Friends,

What a nice up move shown by Nifty today !!! This up move has made a lot of people to think whether the downtrend is over and are we in a new bull phase?

Well, As I have been posting here for so long the charts showing a Bear Market, my views are still intact. I've attached EOD chart of Nifty (see the lower chart) with only three trend lines :

Line 1 - The uppermost Down Trend Line, starting from Jan High (all time high)
Line 2 - The second Down Trend Line starting from 4th Feb High.

Line 3 - The Latest Support line in this downtrend starting from Jan low.

As you can see the Line 1 is still too far away. So let us see the Line 2. Today Nifty managed to almost touch that line, which should act as a good resistance for Nifty even tomorrow. The level comes around 4670-80. Given the volatile Global Market Conditions, this res can be taken out overnight. If Nifty opens above 4680 tomorrow and moves up, then there are good chances it can go further up.

The Line 1, although looking a little too far right now, level being above 4900, will be a BIG resistance IF IN ANY CASE Nifty manages to go there. To remind you all, Line 1 if taken out will mean the current Bear Market is in danger. But for me, the chances of that happening are almost not there. The reason is there is no fundamental support coming in the near term.

The Line 3, which was breached just few sessions back, has been restored for the time being. The slope of this line is not much and so the level is still there about at 4500.

The points to be noted here, as my friend Vivek Marne puts it, today's move of Nifty halted at 38.2% retracement of the down move from 5167 to 4369. AND the 61.8% retracement of this down move comes coinciding with the Line 1 !!! (see the upper chart)

As we can see, at this juncture Nifty is around in the middle of the range between 4500 to 4900. There are all the possibilities that this up move proves to be merely a Bear Market Rally, which will fizzle out as sharply as it came.

For those who think Nifty has found bottom, just think two points :

1. The up move is a more or less a V - shaped rally, which is not a good sign for bulls.

2. The volumes are not supporting the up move, a BO by definition happens when volume supports price action, which is not here.

So friends, All in All, I look for shorting opportunity rather than playing on the upside - After all, the Trend is best friend and At this time the Trend is DOWN.

Disclaimer: Same as earlier - Do not trade on my recommendations...


Thanks & My Best Regards
Harish Dobhal

Nifty Long Term - An Overview

Dear Friends,

Today I am presenting here my views on the long term of Nifty.

Please refer to the attached chart for your reference. I have drawn Only two trend lines and the two are speaking volumes. Now let me come to the point one by one :

* In my chart, I start a line joining the low of 25th April, 2003 and the low of 17th May 2004. On extending it, I get a nice Long Term Trend Line which had been holding for so long (The lower line).

* I draw another line above it - I chose low of 24th June 2004 (in fact I could also chose low of 21st July 2003) and low of 2nd May 2005 and extend the line. This also gives another very nice Not-So-Long Term trend line.

* On the upper line, Nifty took support and moved up on six occasions (1 to 6).

* Whenever Nifty failed to take support on the upper line, it fell and took support on the lower line - The Bigger Long Term Support Trend Line. As you can see, Nifty took support on this line on three occasions and it held, saving bulls always.

* Now look at the upper line, it was broken in start of March month this year and it took support on lower line in the same month. People were almost sure that Nifty has found a good bottom and a nice up move started which took Nifty to 5299 levels.
If you notice, this latest up move found resistance at the upper line and started falling from there. Now the last hopes of bulls were on the Bigger support of Lower Long Term Trend Line. But on 4th June, Nifty broke the ultimate Long Term support and is trading way below that.

Come on friends, this is not a small thing. Nifty has created a Historical Turnaround in Jan this year and has now confirmed that it is indeed a BEAR MARKET.

A picture is worth a thousand words...

Your Novice Analyst
Harish Dobhal

Nifty Analysis on June 8

Dear Friends,

First my apologies for posting so late (I had promised to post yesterday).

As you all know, markets have been showing weakness most of the time and even a small attempt of recovery is getting sold. The current trend is definitely down since Jan this year.

Following is my analysis for Nifty based on trading till 6th June:

We have seen Nifty breaking some imp levels last week. We see it going to sub 4600 level, which was an important level for many traders.

In the attached chart, I have drawn several trend lines, some of which you are already familiar, and two new lines. Line 1 is the major downtrend line starting from Jan top. Line 2 is another downtrend line which I drew from the Feb intermediate top (4th Feb) joining the top of 27th Feb. Line 3 is the well known last uptrend line, Line 4 is the current downtrend line and Line 5 is the support line joining the Jan low and Mar low.

Line 1 is holding there as the final frontier for bulls, which seems far far away now. Line 2 when extended has proved to be the resistance on 6th Jun, as we see Nifty touching it and falling from there.

Now, the case is there for bulls only when they can conquer the current downtrend line - Line4, which comes to around 4790-4800 mark for tomorrow. Also, it needs to go above the Line 2 which comes at around 4740-50. Interestingly, the two lines cross at around 4720, which should become a big resistance area for next 2-3 day

According to some good analysts, the final support line should be - Line 5, which is formed by joining the Jan low and Mar low. It comes at around 4500 for next few days. So looking at it, it looks like there is going to be fierce battle between bulls and bears near that level. Bulls will lose all hopes if that is broken. The fear factor for tomorrow is - Global Markets. The only thing that was not affecting Nifty too much for some time. In most probability, tomorrow can be a big day for bears.

I conclude my analysis here and hope you will reply with your valuable comments.

Disclosure

My analysis is just analysis in letter and spirit and not a trading recommendation. Trading in stock markets is full of risks and please consult professional advice before doing on a trade.



Thanks & Best Regards

Harish Dobhal

Nifty Analysis on 3rd June 2008

Dear Friends,

I am posting here the latest Nifty chart and again will write something about what the EOD chart is saying.

The chart is just a continuation of my first chart, just in the sense that there are two trend lines that are still there.

Let me come to the point straight away. If we see the major downtrend line - Line 1, it proved to be a good resistance and for the time being, looks like it will be very difficult to break it. Let me introduce you another downtrend line - Line 2, that has been drawn joining the high of 4th Feb and the high of 27th Feb. This line extends to meet and cross the erstwhile uptrend line - Line 3 on 12th-13th May, showing it was also there standing as a "support" along with Line 3 on 13th may.

Now, let me come to the latest downtrend that in my view started on 20th may. If we connect the high of 20th May to next high on 29th May and draw a line, it looks a perfect short term downtrend line, I named it Line 5. This line when extended has proven good resistance in last few days.

The Line 4 is just a tentative "target line" of this ongoing downtrend.

Interestingly, yesterday Nifty broke Line 2, which was respected on 12th May. And... today Nifty even opened below Line 2 !!! and made a recent new low.

These all observations are pointing towards a bleak situation. However, as it looks oversold and showed some signs of pull-back towards today's closing, I am considering an upmove tomorrow if all goes well. Also, for Candlestick lovers, Nifty made a good hammer today, which also supports some upside.

So, considering there will be an upmove tomorrow, I find Nifty to face resistance first at about 4750 - 60 (the orange dot on Line 2). This is because, I think the Line 2 can act as a resistance now.

The second resistance in my view should be 4830 - 40 for tomorrow and 4815 - 20 (see orange dot on Line 5) for the day after. This is at recent downtrend line - Line 5.

There can be more resistance areas which can be calculated depending on other tools, but I'll look at these two as most important.

Nifty can be in buy mode only after it closes above the main downtrend line - Line 1 (see the green star on Line 1). The level for that is around 5000.

I conclude my analysis with the above and invite comments from readers.

Thanks & Best Wishes
Harish Dobhal

Disclaimer: The above analysis is just an analysis and not a trading guide. Please consult a professional adviser before trading in stock markets.

PS: The Indicators are as following:
above - Volume
Middle - OBV
Bottom - RSI

The S&P 500 (US) for Near Term

Dear Readers,

We saw a lot of drama happening for few days, regarding US markets. Sometimes there is crude oil playing spoilsports, sometimes renewed fears of credit crunch and then the Japanese currency. Well, I'm not going to delve into the fundamentals for the time being. I'm writing this just to put an interesting view of S&P 500 index chart. The chart is from Yahoo Finance and you can view it at http://finance.yahoo.com/q/ta?s=%5EGSPC&t=1y&l=on&z=l&q=c&p=m200,m50&a=&c=

I selected one year chart (3day) of S&P 500 and just put on 50 and 200 Day Moving Averages (DMA).

In January, the 50 DMA crossed 200 DMA on the downside which is considered quite bearish. Since that time, it is trying to get past the 50 DMA but managed only in April. After this "achievement", its trying hard to cross 200 DMA and even 50 DMA is moving up to cross 200 DMA. If we see last two candles in the chart, it took support exactly at 50 DMA.

Now the situation is quite interesting. The 50 DMA is moving up, while the 200 DMA is falling. This means there are good chances the two will meet. BUT... the question is - is it going to be a touch and retrace kind of thing OR a crossover? Well, the bulls are sitting with their fingers crossed but for a trader who is willing to trade and not trying to preempt, that meeting point or thereabout should be a good time to go short with risk reward ratio being good. The Stop Loss for shorts should be a powerful crossover with good volumes. If it goes like that, then shorts can turn the table and go long side, at least for some short term good returns.

I conclude my view with the usual but important caution: Trading in Stock Markets is risky and may not suit all. Its better to get professional advice before you take any real trade.

Happy Trading

The Fundamentals of Technicals

Dear Friends,

Today I am posting this after pondering over a few things. The different feature of this post is I am not referencing to any chart, not because I have lost my charm with them Smile but because for the kind of talk I'm going to discuss here, there will be no requirement for charts.

The first thing I should do is disclaimer : I request all to read my post just as an ANALYSIS and not as a CALL. I reiterate again that I do not find myself in the position or capacity to give any trading call. Anybody who wants to trade based on my views, should definitely refer to some expert professional advice.

Now, I think I should come to the point immediately, without wasting time and words. Following are the issues I thought about and tried to dissect :

The Unnerving Expiry on May 29

We all know what happened in the month of May. It was a very eventful month despite Nifty trading in a range. The month witnessed a starting with a TOP formation, after a very good going up trend, which started from the bottom made on 18th Mar at 4668 thereabout. Most people were bullish for the month, not only for Nifty but most of the markets globally. The downside that started on 2nd May looked kinda normal as a retracement was due for the upmove. The downtrend continued, but what was promising for the bulls were two things - 1. The uptrend line was intact and 2. more and more puts were written of 5000 strike. These two things almost ensured traders that the settlement will be near 5000, if not above it. What followed was mainly attributed to the rise of crude prices to record highs and not showing any signs of cooling off. On may 12 when Nifty bounced back from the uptrend line, traders were happy to open long positions and seek targets of 5300 - 5400, myself included. However, another downtrend started on 20th May which broke the important uptrend line and there was a sense of despair among bulls. Although the sentiment was hurt, still many were hoping 5000 as it was a good put support. Then came the day of expiry with hopes still on 5000 but surprisingly, despite having been a good and hopeful session in the morning and before noon, markets started to tumble. Most people kept their hopes including me, that Nifty should close near 5000 but all hopes shattered as time passed and finally it closed below 4850 !!! a good 150+ points below the so called support !!!

Now what surprised me was that during the entire day, there was no weak clues from global markets, nor there was any bad news although there were some talks about fuel price hike etc.

Well, it signalled something was cooking in there, but alas, only few could guess that. I was expecting a bounce before any further selloff, and next day we did see a bounce but only for that day, which again could not materialize into something bankable. In technical jargon, Nifty made a Bearish Engulfing on thursday and an Inside Day on friday.

On monday, after a promising start for bulls, the Nifty started cracking and broke many supports during the day finally closing at the low at more than 2% down. This has turned even hard core bulls into bears and why not? when you see supports getting broken like that. There were many rumours passing, the biggest of them being a support withdrawal by Left to the UPA government on fuel price hike. No rumour proved to be true so far when I'm writing this, but one thing is certain - The Indian Stock Markets are looking very weak and vulnerable. In order to catch the uptrend, it has to go a long way now. The weakness in Rupee has been continuing with some rare strong days, which is evident of foreign money getting out from India. Inflation is not showing any signs of cooling down and is threatening to move to double digits. The government is in a catch 22 situation as it is helpless and can't do much to contain inflation.

I salute Mr C T Rameshraja of icharts.com for his call on going short on the past Thursday. I still remember his logic that for some consecutive weeks, markets have shrugged off inflation nos, but this time it can be the other way.


The Ever Rising Crude Oil

What most people are worried throughout the world is rising crude oil price. It is making new highs and not showing any signs of cooling off significantly. When crude oil touched USD 135, there was a kind of panic globally. There are many schools of thought regarding the reason behind high crude prices. Interestingly, crude is looking the most precious thing in the world over.

Some analysts have concluded that crude is rising on mere speculation which is largely based on worries on supply and continuing demand by developing countries, China leading the race. They say the speculators are creating a bubble which is inflating and is very soon going to be ripe for a burst when the high price will act as a deterrent for growth and the spiraling price move will fall off the skies. In a newsletter by a US economist, I read there are reports of Oil Vessels just lying idle in high seas paying as high as USD 175,000 per day as charges. Now this if true, will lead to a larger than expected fall when the bubble (if it really is) is burst.

Other analysts have gathered some intelligence information and are almost sure there is going to be a conflict in middle east involving Lebanon, Israel and possibly Iran, not to mention US. If this is true then I don't think there will be any respite from it and instead it might skyrocket.

Well, I went through all these to come to one conclusion :

We are in a real dangerous situation. This is not to create panic but just an expression of the severity of the situation. However, the doors of hope are always open and any one big enough fold in circumstances can change the situation around.

I wanted to throw some light on few other things but given the length of text I have already put here, it is better to leave it here Very Happy

I sincerely hope you all went through it and will post your responses and comments or brickbats Very Happy

Thanks & Best Regards

Harish Dobhal

Changing Trends Technicals and Fundamental

Dear friends,

I am posting here my analysis of Nifty. This is a very humble effort and I hope you will be kind enough to apologize me for any mistake.

The first thing I request to all of you is - kindly do not think I am 'predicting' or even 'guessing' any move by Nifty in any direction. I put it here very clearly that I'm only trying to analyze chart and data and presenting my view only. Kindly trade after consulting some expert advice.



Please see the attached chart. If we draw a downtrend line from Jan high to recent high, its meeting at three points. In other words, after Jan high, if we consider 2nd May high as last resistance and draw a trend line, extend it, then recent high was exactly at that line on 16th May. This, according to me, is a validation of the down trend continuing, as the line became resistance and Nifty started falling from there.

Now, let us talk about latest uptrend. In my opinion, the latest uptrend started on 18th Mar, when Nifty made a low of 4468 thereabout. The uptrend of Nifty continued touching 4628 on 7th April and continued its upmove. I drew an uptrend line joining these two, and Nifty respected the support of this line until 22nd May. But on 23rd May, Nifty broke that trend line and in my opinion the uptrend was disturbed.

For any resumption of last uptrend, Nifty has to go above that trend line, which is above 5200 and rising.

Now, considering the downtrend is in place, I have this assumption that Nifty can still move upto 5000 - 50 levels as it might try to test the downtrend line.

One more thing to watch out is Nifty made a Bearish Engulfing on 29th May and an Inside Day on next day, so it will be difficult for it to move up in a hurry.

Also, if we remember May Expiry day trading and the way Nifty closed at almost near the low, it tells something strange is there. The way 5000 Puts were written and the way most of the global markets were doing (most of them doing good), it is very difficult to digest Expiry day close. As we see, the downtrend is continuing and there is weakness in the markets with all up moves getting sold out.

Looking forward to your comments/suggestions

Harish Dobhal