June 15, 2010


  • Dow jones moving up smartly after a break out
  • Bears should not worry anything that goes up must come down.
  • But this one many not come down that easily.
  • Dow may take a pause or a small resistance at 10400 before moving ahead

  • Dow jones breaks out shown here in hour chart.
  • Now the hour candle has to close above the horizontal line for the bullishness to sustain. 
  • 10350 area should be the next resistance

  • Dow is showing negative divergence in hourly chart.
  • But the daily chart still has a positive bias.
  • And dow in hourly chart is trading near resistance and will decide which side it wants to go. So crucial hours ahead for bulls and bears.
  • SP 500 and the commodity channel index may do a replay.
  • See how both the index and the cci is behaving similarly.
  • I am just trying to show the similarity but the price has to confirm by moving down.
A CLOSER LOOK


  • Powershares qqq Trust series I fibonacci levels of the fall from 50 levels to the 42 levels is shown here.
  • At the moment it is trading in between 38.2% level and the 50%.
  • The range is 45.60 to 46.66 so expect good movements after a high volume break out on either side.

  • SP 500 after breaking the channel is trying to move up.
  • But on a closing basis the resistance for the index is strong at 1103.
  • So a daily close above 1103 will be very positive and it will target 1110 its next resistance.


SPINNING TOPS
This candlestick pattern comes with a long upper shadow and long lower shadow and small real body. The most important thing to notice when a spinning top occurs is the colour of the spinning tops body. This pattern shows that there was indecision among the bulls and the bears.

Pattern psychology:
As we saw above spinning top occurs with small real body. which shows on a closing basis there was no movement from opening to the closing of trade. The long shadows indicate that bulls and bears were fighting and in the end no nobody was able to win convincingly.

Importance:
If the spinning top originates at the top of an uptrend it shows lack of buyers in the market and a possibility of a reversal of the current trend. This pattern needs confirmation.

AN EXAMPLE OF SPINNING TOP


DAILY CHART LINE



DAILY CHART
  • SP 500 has closed above its 20 day moving average. But was unable to conquer the 200 day moving average. The index tried to move towards the 200 day moving average but was faced with stiff resistance.
  • The daily line chart is showing a channel break out. It seems before the next up move the index will go and test the top line of the channel.
  • Hourly chart is looking weak after the trend line break.
  • The daily chart is also showing a shooting star candlestick formation which is also bearish.

  • Nifty is forming a head and shoulders pattern in the bigger time fram
  • So the target for this may come near 5310.
  • The right shoulder may be lower than the left shoulder as well.
  • But i am not expecting nifty to close above 5330 which will make this pattern invalid.
UPDATED CHART NIFTY GETTING SUPPORT AT 5170 - 5180
  • Nifty has broken an important trend line in hourly chart.
  • Need price confirmation below 5155 for shorting
  • Below 5155 the fall may become faster.

  • Nifty has formed an inverted head and shoulders.
  • The inverted head and shoulders looks bigger than the head and shoulders from which nifty came down. 
  • So if the inverted head and shoulders show its true potential or should i say if it achieve its target we should be seeing a new high for nifty above 5400.
  • CAUTION: ANY PATTERN CAN FAIL. TAKE A POSITION IN NIFTY ONLY IF IT BREAKS ABOVE 5220 WITH HIGH VOLUME.
  • Nifty closed above its 50 day and 200 day moving average.
  • A close above 5220 will give some strength to the inverted head and shoulders.
  • The 61.8% retracement level of the fall from 5399 to 4786  comes around 5165 if there is not big gap down this area should give some support.
  • The last chart shows nifty closing above an important trend line.
DAILY CHART - LINE
DAILY CHART
  • The hourly time frame looks bearish now with the break down of the trend line. Or the channel bottom line.
  • The daily time frame is trading near the upper end of the range with a negative bias. 
  • The falling wedge that i have posted here in line chart still looks good for some more upside. But as you can see in the 3rd chart we have a shooting star near the top of this trading range. Although the body of the shooting star is not perfect with that long upper tail it looks bearish.
  • so to summarize the hour looks bearish the daily chart looks neutral.

  • The cci indicator broke its trend line before dow broke its.
  • So the weakness was evident before the confirmation.
  • Now that it broke the trend line. We can expect a closed towards the low of the day. And a gap down opening tomorrow if everything goes alright for the bears. That means no good news to spoil the good short setup.


  • SP 500 MACD indicator in hourly chart is showing negative divergence.
  • the commodity channel index has broken a trend line.
  • So may be it is becoming tougher for SP 500 to break the upper resistance line of this range

Disclaimer

All the contents of niftychartsandpatterns are for educational purposes only and are not Investment Advice or recommendations offered to any person(s) with respect to the purchase or sale of the stocks / futures. Niftychartsandpatterns shall not be held responsible for the actions of individuals, parties, or corporations taken in response to the ideas, thoughts, concepts or information presented in this blog. Hence all the visitors are requested to apply their prudence and consult their financial or investment adviser before acting on any of the Ideas in this blog.

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My Favourite Quote

"All through time, people have basically acted and reacted the same way in the market as a result of: greed, fear, ignorance, and hope. That is why the numerical formations and patterns recur on a constant basis."
—Jesse Livermore