The most important question now on the mind of all analysts and traders. Is this a bear market rally or is this the start of a bull move. Retweeting this as I will need a few tweets to explain my view
Everyone knows the HH-HL or LH-LL as per Dow theory. This can be a bit confusing on how one marks the Highs and Lows. Long back, I picked up this trick from one of the neo-Dow theorists on what to do in scenarios like this
Simply plot a 5 period exponential moving average on a different panel. A 5-EMA simply shows you a running weekly perspective and kind of smoothens the price where a single spike high/low is not of that much importance
You will see this 5-ema also making HH.HL.LH.LL. So now, rather than focusing on the highs/lows on the charts, focusing on highs/lows on the 5-ema gives a cleaner perspective
As per this charts, unless the 5-ema now closes above 17540 ( the ema, not Nifty price) I will not play this as a bull market. I will deal with this market as a counter move against the major bear trend
More about Dow theory here :
In a strong bull market, the 5-ema moves in tandem with price. The tops are broken almost at same time, max a few days apart and sometimes in advance. See the marked examples.
That is not the case now, which holds me back from calling this a clean bull market
Since end March 2020, we have had the first clean breakdown of lows and a Lower High - Lower Low scenario
The common consensus is that moving averages, whether simple or exponential are lagging indicators. So explain this, the 5-ema crosses previous high even before the price crosses the previous high. This is a massively bullish signal #ITC
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A bit drunk. But need to get this off my chest publicly.
A few months back a large trader came to kolkata. Wanted to speak to me personally regarding some trading issues ( not models or methods, mainly psychology). He was a student of mine a few years back.
We spoke, issues I am not at liberty to discuss. Suggested some pointers.
What I noticed was his size, probably 20-50 times more than mine.
Being from a middle class family, a school teacher mother and the experience of blowing up earlier, I was obsessed / fanatical about risk mgmt
So my size was small/managable at a max 0.25% max risk of my capital at any given trade
I have seen 1992, 2000 and 2008. Post 2008 , we have not seen any form of Global Financial Crisis. If you have entered markets post 2010 , you have not seen a true bear market. The 2020 covid dip and rise ( fuelled by QE) was not a bear market.
I strongly suggest one studies the earlier bear markets on charts, analyse the then economic and socio political scenario before taking any decision. Not all dips needs to be bought , beware of trying to catch a falling knife. Remember Japan 1991
Buyers will get numerous opportunities. Wait for some form of reversal signal, buy 5-10-15% above to be safe. More money had been lost trying to catch a bottom.
COI suggests positions still in the system, options positions have increased yesterday
BNF :
Expecting resistance to come in between 38300-400 region
Support at 37600
Nifty fut= Resistance 17350-400 region
Support at 17150
Until BNF closes above 38750 by end of day closing and NF closes above 17500 by end of day closing, will not be looking at the indices as strongly bullish
The most common problem faced by day-traders and it's easy solution which is extremely difficult to implement.
A thread.
( uses concepts I have discussed many times before in separate threads)
Problem : I have a good system, I understand charts and/or price action, but I simply can't make money. I hold my losses too long or ( this is most common) I get out of profitable positions too fast and cannot sit for the whole move
At many firms at NASDAQ, day-traders are seen as elite sportspersons playing in a difficult taxing game. That's why, they have regular sessions with sports psychologists. They are advised to follow the basic routine of sportspersons.
Train ---- Play tournaments --- Rest
BNF showing long liquidation while NF showing long buildup. In my experience, whenever the two indices shows divergent behavior, it's very difficult to cleanly trade the indices. We are probably starting a time-price correction
Traders will do best if they let this scenario resolve over the next few days before trying to trade the next trend move. Everyone makes money in a trending move but majority give back during this congested times. So, I will stand aside and give time to markets .