July 10, 2011

  • First chart shows a Broadening pattern breakout and price retesting the resistance line of the pattern. Normally when price reenters a pattern it is followed by good move in the opposite direction of the breakout. It may also be a partial dip into the pattern and then an Up move. Most important level here is 5604 and the 50 Day Moving average.
  • 2nd chart shows falling weekly trend line with Bearish candlestick patterns. We had two bearish engulfing patterns which gave good result for bears. Then we had a Pin Bar which is a powerful reversal candle. Now we have a spinning Top. Spinning Top is not a reversal candle It shows indecision. When black  spinning top appears after an up move it is normally followed by a correction.
  • Last chart shows the line chart of nifty week with reduced volume. According to classic technical analysis towards the end of a consolidation pattern the volume goes down as shown by the volume moving average in the chart. Now price is near the apex of the pattern we will soon see an explosive move out of this pattern with increased volume.
  • Broadening pattern failures can give good correction. We saw one such pattern during last week in S&P 500 Futures 30 Minutes Time frame. CLICK HERE TO SEE THE CHART
  • Pin Bar is a highly reliable reversal candlestick patterns.
  • If the GAP does not close there is a chance for an Island Reversal pattern.
  • These two patterns may reverse the trend in daily chart.


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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