Monday, September 21, 2009

Nifty Futures Analysis - Ascending Triangle Pattern

Dear Readers,

In my post on Sat, Sept 5, I presented the possibility of a strong Ascending Triangle pattern on Nifty Futures Daily (EOD) Chart. The pattern developed and gave a Breakout on Sept 7 and prudent traders must have taken notice. After the breakout (BO) it was important to watch for a retest of BO level and then we got it as well on Sept 14. Following is the latest chart of Nifty Futures EOD with details:

Notice the nice rising uptrend line TL1 which also acted as support line for the Ascending Triangle. Even if this pattern fails, I will wait for this TL1 to act as support, most likely where it crosses TL2 at about 4770 (see Down Arrow). The resistance line of Ascending Triangle - TL2 was taken out on Sept 7 and then retested on Sept 14 (see UP Arrow). Now, since then, there is another trendline acting as support - TL3. This TL3 should act as first support if the upward momentum continues.

The Doubts:
I was not very excited on the BO of this pattern as volume was not higher that could confirm it. However, if price is running on its own then we can not keep arguing against the trend.

I am sure you dear readers must have taken advantage of this pattern. Don't forget, if this pattern runs its course then the target is 5500 - 5600.

Happy Trading...

Saturday, September 12, 2009

The New War Begins Now

Dear Readers,

Today I read one news on yahoo finance and it confirmed my fear of governments resorting to protectionism. Politicians are always like that, no doubt, and it was expected. In addition, I expect a lot more of these meassures by lot more (possibly all) governments around the world.

First, the news - President Barack Obama has imposed new punitive tariffs on all car and light truck tires coming into the U.S. from China.

This is one small step by The Man which will likely be a Giant Stride for Mankind. The great American President has started New War (they are really good at it - New Wars) and sure it is going to result in other nations following suit. Any sane person with a knowledge of economics knows how bad can this protectionism be for any possible global economic recovery, but politicians don't care about that. They want to please masses and masses like such things, even if its not in their favor! To put it simply, who is going to benefit? the consumers (read masses) who will be deprived of free choice of products and will need to pay more OR the inefficient domestic producers who can sell their products at higher prices without competition?

Expectedly, the Chinese are unhappy over it. Read following para from that news :

"China strongly opposes this serious act of trade protectionism by the U.S.," a statement posted on China's Ministry of Commerce Web site said. "This act not only violates the rules of the World Trade Organization but also violates the relevant commitments made by the U.S. government at the G-20 financial summit."

Why did He do it? Well, the culprit is Healthcare Bill. He needs support of unions for the bill. As its put there in that news:

While the White House announcement late Friday is likely to placate union supporters important to the president's health care push at home, it could alienate the strategically important Asian powerhouse and trading partner.

Now this is called Double Jeopardy - First, the bill itself is not the right thing to do if one cares about free markets and long term well-being of people; Second, in order to pass the bill, He has done one of the worst possible things a politician in power could do. But, isn't it that the consequences of this move are well deserved by the masses?

Saturday, September 5, 2009

Nifty Futures Analysis on Daily Chart

Dear Readers,
Today I am posing my views on Nifty Futures based on Daily Chart (EOD). This is after a considerably long time when I posted my analysis, partly because I was busy doing other things and partly because I did not find such interesting formation to share.

Coming to the point straightaway, let me start with trendlines - Following is the Daily Chart of Nifty Future (Linear) and it show a rising uptrend line holding since March lows:

The interesting thing is if we switch to log charts, then this trendline was violated (downwards) in mid-august and since then acted as resistance. However, the resistance was not that strong and my conclusion is this trendline looks not very valid in order to guide us for any meaningful trade.

The Ascending Triangle:
The most important thing that took my attention is the development of an Ascending Triangle pattern on Daily Chart. Let us first have a look:

Now, this pattern is identical on both linear as well as log chart and the implication is - if it manages to get through above 4770 with good volumes and stay there then according to Ascending Triangle pattern 5500 - 5600 is there as target! Falling below 4500 (volume not important) will mean this pattern is failed. Let us see what's in store in near future.

Failing Patterns are in Vogue:
Having written the above views about a possible Ascending Trianlge, I must remind my dear readers that patterns are not fool-proof and can fail. Recently there were two big patterns that failed miserably! First, there was a Head and Shoulders pattern, which, after breaking the neckline failed. Then, there developed an Inverse Head and Shoulders pattern and it too failed well after breaking neckline!!! Please see the following chart:

So, as we can see clearly that in the recent past we witnessed failure of big promising patterns, we must always remember that patterns can fail at times. If this pattern does give a breakout, we should never think that now the target is there for sure. Like what happened with H&S and Inv H&S, it can also show a false breakout, so keep your stops properly.

Happy Trading...

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