Technical analysis tutorial for beginners

I am planning to do offer a tutorial for beginners which will address the following topics
a) Trend following (What is a trend, How do you follow it? Where do you enter?
Where do you exit? Where do you place stops?? When do you worry that the trend is over?)
b) How to trade a breakout (Which chart patterns work/Profit booking Targets/stoploss levels)
c) Buy low, sell high (What is low and what is high?)
d) Wait for a dip/pullback (What is a dip?? What is a pullback??)
e) Buy at support, sell at resistance? (What is support? What is resistance?)

If Anyone is interested
Contact me : niftytradersinc@yahoo.com
Cost: 5000 rs
Time: 5 hours
Venue: 4/28/2007 online using netmeeting/msn messenger.
Payment mode: online bank transfer.
The niftytraders trend following system will be offered as a part of this tutorial.
(500 rs value) http://niftytraders.blogspot.com

Suggested Reading:
Alexander Elder: Trading for a living, Come into my trading room, Entries and exits
Bullkowski: Encyclopedia of Chart patterns

For those who are curious as to what I know about trend following.
Refer to my other site
http://niftytraders.blogspot.com
The site has a free nifty trend following system which uses yahoo data.
I am a software developer/trader.
My speciality is computers+mathematics.
The profitability of the trading system is also mentioned in the niftytraders blog; scroll down in the blog to see the stats.

INV Hns Selections

IDBI: 96 above 88
Key levels 83.2 breakout 88.4/93.5 res
Target 96-99-100-110
narrow Sl=83.2 on closing basis
Wide sl = 80

"
IDBI has also proposed to raise 1 Billion USD.

It seems IDBI is slowly catching the momentum like IFCI. We expect IDBI will be a fit case of FII investment with turnaround in sight. As on March 31, 07 IDBI has positive Net worth and any recovery on account of NPA like M/s SPIC, M/s Kusum Ingot,M/s Triveni Glass M/s Prag Bosimi etc will add to the bottom line of IDBI.

Long-term investors should remain invested in IDBI with a one-year price target of Rs 150.
Thanks & Regards,
Shailesh
"

Bulls in control

Impulsive move against inflation running it seems in nifty.
If bad inflation can't stop us I don't know what will. Monetary policy could do the trick but thats on the 24th or so.
Vision for next week: We're off to the races!! Best stock picks=inv hns breakouts
Those are your w3/wc candidates, confirm the move on fundas and go long.

Example: check out RCOM
Inv hns target is around 484-490 zone
My levels for the stock are 428/445/462/480/484/490/520
As long as its closing above 428 monster bullish.

Funda targets one year time horizon 520/707/770
Various fund houses
I am sure they started buying near 400 levels.
At 400 on yahoo I was getting the brilliant call fiis selling for target of 370.
Thats when accumulation was happening. This was after one fake spike low false break of support below 384.

follow the trend sl below 430 on closing basis
Support 438/441 or so from breakout


RCVL, Analysis Date:4/16/2007
Close/cmp:438.4
Swing : Up=Buy ( 9.000% sensitivity)
T1:430.429 T2:454.8
T3:494.229 1xR:474.4
SwingHigh:432.7 CMP:438.4
SwingLow:372.0 SLPivot:391.0
2xAtr14Stop:30.1038
Narrowsl:391.00
WideSl:365.15
Lower Chan:400.094 Upper Chan:457.172
ResLine:425.552

Pattern:IHSunc:1
Pattern:IHSC:1
Retracements :432.7-391
0.236:400.841 0.382:406.929
0.5 :411.85 0.618:416.771
0.786:422.859

Watch inflation numbers on friday

If inflation comes in sub 5.5%
then the market has an excuse to do an impulsive move up
Above 4040 fresh breakout on nifty begins
Target 4084-4140-4184
Target zone 4186 then 4440 (this is the impulsive scenario where 3556 low is done)
Below 4040+6% + inflation maybe we are setting up for a big slaughter, C wave below 3556 in may
I don't know 50:50
Fundas on sensex suggest downside shouldn't be that bad. considering next year eps of 1000 for sensex , 13-15k sensex valuations right now are justified with a 1-2 year view. One would still be outperforming interest rates. Mega value area remains 13-16x trailing earnings. Just look up nifty earnings and figure it out.

Only worry remains inflation. Because if that is up rates go up, interest costs go up
earnings growth slows , p.e goes down etc etc.



S&P CNX NIFTY, Analysis Date:4/19/2007
Close/cmp:4005.45
Swing : Up=Buy ( 9.200% sensitivity)
T1:4437.52 T2:4983.21
T3:5866.03 1xR:4516.4
SwingHigh:4,035.6 CMP:4,005.4
SwingLow:2,878.7 SLPivot:3,554.7
2xAtr14Stop:155.729
Narrowsl:3,554.70
WideSl:3,256.57
Lower Chan:3712.02 Upper Chan:4587.26
ResLine:4882.68

Retracements :4035.55-3554.7
0.236:3716.9 0.382:3817.25
0.5 :3898.35 0.618:3979.45
0.786:4079.8


Market managed to do the gap fill target
3930-3920. The gap on the eod chart is now gone
Covered the 3900 put 27-39 and 3800 put 15-13
Now short 4000 put and 4000 call
for 80 and 40
Loss only if expiry is sub 3880 or 4120+
Will hedge around 4000 mark as needed. Above 4000 i am long and below 4000 i am short.

We seem to be sustaining above the upper channel of the previous swing breakout. This means some serious weight has to be given to the possibility of a fresh impulse

As long as we are above 3971 or so bullishness can continue.

Watch hcc , gave the expected pullback
strength is only above 96 . As i said earlier v shaped bottoms are rare affairs.
System: (Tripple Screen EMA/FibChannel follower)
Stock Name: HINDCONS
Buyarea=96.3455
Support1 :95.0778 Support2 :96.2492
Resistance1:104.044 Resistance2:108.855
ATR(14)=4.81141
Target1:97.3078 Target2:101.157
Target3:104.044
SL1:95.3832 SL2:91.5341
Sl to be employed on closing basis

Trade long if intraday supports are holding in hcc

Tcs looks interesting 13/21 ema daily/weekly chart consolidation, triangular formation
If it breaks up can touch 1440

Vision: the light will prevail over the dark. Presumably thats bulls winning over bears
I don't know. Playing slightly bullish for now.

Think contrarian?

prem prakash (4/17/2007 3:26:39 PM): Dream......... ...... makes all things possible Hope..............makes all things work Love ..............makes all things beautiful Smile................makes all above work possible Markets...........makes all of the above IMPOSSIBLE
Raja (4/17/2007 3:27:46 PM): what if you dream about the markets, love to trade, take losses with a smile and achieve the impossible
prem prakash (4/17/2007 3:26:39 PM): prem prakash (4/17/2007 3:28:29 PM): that was a fast thought to rephrase
Raja (4/17/2007 3:29:05 PM): gotta think on one's feet in the markets
prem prakash (4/17/2007 3:29:57 PM): u only forgot to mention the HOPE...... HOPE TO DO THAT
Raja (4/17/2007 3:30:19 PM):
Raja (4/17/2007 3:30:47 PM): hope can be a handicap
Raja (4/17/2007 3:30:50 PM): in the markets
Raja (4/17/2007 3:31:38 PM): sort of like buying a stock at highest p.e ever above 52 week highs
Raja (4/17/2007 3:31:42 PM): and hoping it will go higher
Raja (4/17/2007 3:32:05 PM): if its going higher fine, but when it stops, time to stop hoping
Raja (4/17/2007 3:32:29 PM): amazingly enough these days nifty has staged a miraculous recovery even without a rally in banks
Raja (4/17/2007 3:32:30 PM): or IT
Raja (4/17/2007 3:32:46 PM): kuch chakkar hai jo apne ko samajh nahin aa raha abhi

Doh missed hope :)
I have a bad habit of always trying to get in the last word , possibly a sign of immaturity. hmmm
Anyway its all perception.
W3/wc, w3/wc, w3/wc
:)
Kuch samajh aaya?
Hoping based on facts is good.
Hoping without facts is bad.
let me give an example
A trend following system
Which uses breakouts to buy long is likely to underperform risk adjusted returns of buy and hold nifty on eod charts.
So if one is trading breakouts only in one direction.
One is trading them on hope and not facts.
If one trades pure macd , the risk adjusted returns are also lower than pure buy and hold. If one uses rs filtering or advanced hedging techniques then one can make some improvements but still outperforming risk adjusted returns of nifty is a challenge.
If one has to beat the market i.e risk adjusted returns of nifty one needs a filter
The 2 filters which I think might hold the key are a) relative strength and b) fundamentals. The two sort of go hand in hand usually a higher relative strength stock is the one with better fundas (another form of market efficiency).

The 2 real money spinning systems I have are
a)hedged opening range breakouts
and
b) taking small moves off of the center of the trend near 13/21 ema. (both systems are using marginal loopholes in market efficiency and not looking to completely defy gravity by buying at insane levels or short at ridiculously low levels)

Oh and of course I do hope to master trading some day.
Can't say I have done it yet. I am just gathering the facts as I go along and having fun doing it. :)

Nifty in another sideways correction

A friend of mine who shorted 4000 was getting worried
I guaranteed him 13 hour ema would come :)
Natural area for price/time balancing acts.
Came today

Unfortunately i cannot guarantee 3920 or 3820.
Thats the reason why today I hedged the 3900 put taken for 27 with short 3800 put for 15.
wave c or wave3, the eternal debate.
Also intraday i will prefer to trade the long side of the market, that is another way of being hedged. So today traded sbi/utibank long for small moves.
Tomorrow will try hcc/maruti/mnm/ipcl/tatatea.

If this is a sideways move then 3980-3975-3971 supports
gap up near 3900-3920 is a very strong support area which is my first target zone for the downside.
If bulls keep pushing then from 3980 they can attempt 4040-4080-4140-4184
All kinds of interesting possibilities are there.
if We go 4080++ then 3980 would become a key level.
Check sensex, I believe it has still not broken 0.618
Thats what we call divergence.
Check bank nifty has not even staged a breakout
More divergence.
Check autos?
U see a breakout there?
Maybe a bottom is forming, true near 52 week lows
+ 13x earnings , But the bottom is not even confirmed yet.
Maruti watch for triangular bottoming action support near 755
Breakout only above 800++
But if the trend is your friend.
Then every single ema in maruti is lined down
Indiacement did 174 walaa target. Now support at 168-165 , next target is at 188 then 200, At 200 might be a short 50% retracement of full decline from top to bottom.

Lots and lots of bullish calls have worked like magic.
jetair 606-616-626 buy area started from the dip stop held
worked its way up to 645-665 target zone
tatatea 622-700 almost today stop held target hit
indcement 158-156 buy area worked its way up to 174 stop held on closing basis target hit
rcom 404-408-410 buy area worked its way up to 434-441, narrow stoploss broken but not on closing basis, wide stop held, target hit
ipcl above 280=300-314 hasn't given the pullback entry, 284 is pullback buy area.
Then again a long time ago: Ipcl i gave the buy near 5x p.e @ 230 went slightly lower first but target for investors was atleast 290 within few months. Already done, now time for bonus till 314-350 as long as 280 is being held.

Check out hcc on fundas
I think it must be near value zone now
A very long time ago
I mentioned a funda report said hcc was worth 85-100
This was when hcc was at 160
No one bought the theory
The slightly weak results came
stock broke support
has underperformed since
Now
its at funda value
Stock is breaking res near 98.8 V shaped bottom don't be in a rush to buy, some good news is coming, pullback to 94-95 possible sl for traders=close under 90 or so
Target can be huge 120-130 easy
V bottoms btw are rare
u wanna see some consolidation after the V shaped bottom is done
either a sideways move(cup and handle) or a pullback(inv hns)
Infact the stock might not even do a deep pullback if its forming a cup+handle.
Might just hover around 98.8-100 and then break up much higher.

Elder tripple screen = impulsive

Elder tripple screen impulse system
Monthly=chart flat consolidation mode long or short
Weekly=Impulse above 3900 long only!! (last time our short trade at 3900 worked out because we had the weekly trend on our side)
Daily=impulsive
meaning all dips to 13/21 ema =buying opportunities (13/21 ema reads 3840-3820 spot)


So on a purely technical foundation the short trade I guess is not even allowed :D.
Reason even though monthly chart says one can trade long/short, daily+weekly only allowing long trades!! (standard levels 3900 ka breakout hai na)
Then again trading long at 3556 on the way down was not allowed either and we got away with doing that. SL as always on option trades is price of option.
Legin agar aap ko tension hai then SL for put can be kept above 4100 spot or 15 rs I guess.
If it goes under 15 its probably going to 0 anyway.
Also as a hedge one can short 3800 puts for 15.
IF nifty goes 4100+ then take the 15 rs loss on the 3900 puts
and let the 3800 puts sold near 15 expire worthless. Net loss=near zero.
Thats assuming we don't do psychosis=4100 then 3760 :)).
Just do the math before you take a position.


In 2004 first rally or failed 5th whatever you want to call it did 0.7 retracement of initial collapse before the killer downswing game and of course all mechanical systems were long at the top near 1931 before the may crash came.
Anyway the corresponding 0.7 level reads 4040.
Nifty intraday swings seem to be targetting 4040-4084 right now.

support at 13-21 hour ema 3960-3920 for a quick cover for people who took the put and are now having second thoughts.
For those who can handle losing the 30 rs for the 3900 put.
Can hold; if we touch 3900 any time before expiry the puts will double.
Mind you my last 3 options calls have doubled. I can't be right all the time now can I. The odds don't favour it.


Is there any reason to short not really
:)
It all depends
Is this w3 or wc?
if this is w3 then new highs for nifty coming target 4186 immediate, 4440-5000 for impulse

bulls took out 3980 like it was too easy for them.
Interesting point sensex has not yet taken out its 0.62 level 138xx or so.

if market visits 4080 first then dip to 3980-3920 will probably get bought
Anyway time decay will kill the put position very quickly.
So look for exits within 3 days. Your position will have lost half its value from time decay within 5 days.

My option calculator values 3900 put at 30+
Stock:NIFTY-I Date:4/16/2007
Stock Price=4005.15
Strike=3900
Trading days to expiry:10
Volatility measured over200 Bars
Volatility=0.243506
Call=148.288
Put=31.8572
with 10 days left put=worth 30 rs
with 5 days left
Stock:NIFTY-I Date:4/16/2007
Stock Price=4005.15
Strike=3900
Trading days to expiry:5
Volatility measured over200 Bars
Volatility=0.243506
Call=126.57
Put=15.7756
put will be worth only 16 rs even if market only goes sideways and stays at 4000. (If nifty is up near 4200 after 5 days put would be worth damn near 0 :D)

So PLAN ACCORDINGLY

If nifty is near 3900 with 5 days to expire the put will still be worth 60
So I am planning to hold for my 2x target atleast!!

Right now market seems to be not very interested in 3900 puts since we have just staged a breakout
I managed to get them for 27.
When fair value is closer to 32.

Need a downside bout of volatility to make money
3920 gap fill bhi chalega for a small profit
just give me the gap fill before friday!! :))
If nifty expires at 3900 next week with a gap fill puts would be worth 0!!

Watch the upper channel

Nifty future hits upper channel
3953, check max traded volume of nf right at day open with gap up
Some profit booking is going to come in over next 2-3 days

Suggesting nifty 3900 put april for 30 target 60-100-160
sl=price of put


NIFTY-I, Analysis Date:4/16/2007 11:53:59 AM
Close/cmp:3966.2
Swing : Up=Buy ( 2.000% sensitivity)
T1:3813.54 T2:3953.54
T3:4180.03 1xR:4220.95
SwingHigh:3,904.0 CMP:3,966.2
SwingLow:3,542.1 SLPivot:3,587.1
2xAtr14Stop:52.0756
Narrowsl:3,587.05
WideSl:3,390.54
Lower Chan:3623.13 Upper Chan:3970.19
ResLine:4406.74

A note of caution
Some stocks will make new highs
divis/abb/lt/bhel/reliance type stuff prime candidates for new highs.
tcs 1260-1388-1440 possible

There are some stocks which are just breaking out right now
ipcl above 280, 300
mnm above 745-768-780-800
tatatea just took out 648 opens up 700-720
rcom above 434 can do 458
Been bullish from 408-410 13/21 ema consolidation there

So there is lots and lots of stuff that is mega bullish.
Look to buy the breaks. Just be wary @ nifty 3981.

Also keep in mind.
sustaining above 3900 means we are in for a mega mega bull move
possibility of that fresh new impulse target 4240-4440 region

only rbi can spoil the party now it seems.
S&P CNX NIFTY, Analysis Date:4/16/2007
Close/cmp:4012.6
Swing : Up=Buy ( 9.000% sensitivity)
T1:4437.52 T2:4983.21
T3:5866.03 1xR:4516.4
SwingHigh:4,035.6 CMP:4,012.6
SwingLow:2,878.7 SLPivot:3,554.7
2xAtr14Stop:163.922
Narrowsl:3,554.70
WideSl:3,256.57
Lower Chan:3696.49 Upper Chan:4567.27
ResLine:4851.07
This is the flat correction
Which i talked about
a long time ago
3556-3656 if it holds
w5 could be left

But seriously
who is seeing a new high right now?
4440 anyone??

Post mortem of an old post+looking ahead

Market is now in the 5th lap of the hypothesized move http://fnocharts.blogspot.com/2007/04/trying-to-climb-slippery-slope.html

Now most of you would be thinking that with the ability to see 2 steps ahead of the market, one should be making a killing in the market?
a) I am not always right , Market could prove me wrong even right now by doing an extended 5th wave of sorts
b) I don't trade all my trade setups.
c) I don't trade the right setups (i.e Rs filtering, I know it in theory but it is not trading instinct for me yet)
Anyway the fundamentals at this point in nifty do not make me worry about a central extension.
Worst case for bulls rally is c wave, full retracement+reversal
Best case very mild dip till 13 ema+first gap fill
Average case=50% retracement.

'Gurus by definition are so busy trying to figure out the what the market will do in the future that they do not have time to trade the present'
T.H. Murrey
I will try to work on that part
Will take the 3900 puts.

P.S I just posted 3-4 posts over the weekend
Scroll down read em all!!

What goes up must come down?

Vision1=Iron man goes into the stratosphere gets hit by a nuke
Two interpretations possible
a) Armageddon: Index gonna crash. Thats what I was leaning on earlier. May 2004/2006/2007 would fit in nicely with time cycles.
I was even suggesting may puts for a crash possibly below sub 3600 levels.
For april the reasonable target would be gap fill 3800 region.

b) Steel/iron stocks gonna crash
I didn't post this earlier because it was a bit too absurd
but now that my good friend has posted some news
some lafda in steel stocks possible, rhetoric by govt regarding raising taxes or lowering duties?
Anyway the reality is always more important than dreams
Keep in mind 'what goes up must come down'. This is especially true for cyclical industries. Not as true for IT stocks which have not run into growh ceilings yet.
P.S even large cap IT is trading at upper end of valuation band near 30x trailing. 25x is value for something that grows at 30% per year.

Perhaps a suitable adaptation for the stock market is
what goes up a little will come down a lot 0.382/0.5/0.618 of the way usually. (w2 retracement usually)
what goes up a lot must come down 0.236/0.382/0.5 of the way. (w4 retracement usually)

Look at tisco , res region 512-520, support 490, above 520 can try 526/540/600.
Tisco is the weakest of steel stocks, has been weak ever since acquisition.
Sail would have a false breakout of a 52 week high if it starts closing under 120
Also it is near monthly upper channel/t2 125
The upper channel actually reads 135 or so so it looks like the stock can inch up a bit more.
Anyway you can wait for the top to form. Short below the trendline or whatever techniques you like. There will be shorting opportunities in steel counters soon.
I've actually been trying to short tisco since 500 with 0 luck.
A friend of mine has been using his 'magic level' near 512 to short with a bit more success.

Vision2=Ghost army comes to fight
Old supports=New resistances
Refer to the picture of nifty.

Also check out the nifty picture.
Nifty has closed above 13 week ema after a very long time.
So now you got monthly/daily/weekly charts all saying up!
This could very well be a fresh impulse.
Positional weakness is only on a closing below 3900.
Sustaining above 3900 opens up 4240-4440 region if the rally is an impulse.
Refert to divis/titan/bhel charts for examples of fresh moves.

I anticipate a period of trader's remorse even if trend is turning up
3900-3950-3961-3971 consolidation with spikes to the downside possible.
Rising 13 eod ema+gap up can be first target 3800 region