Wednesday, November 30, 2011

Nifty View for 01.12.2011.


What a Day another "Day of Stop Losses " being hit.Its now a regular show with huge volatility and wild swings.Today opened gap down and went down till our second target of 4753. The second target on both sides is breakout target which did not break and Nifty recovered from there.So it was contrarian buy  or at least to book shorts.On the upside we had two entry points at 4822 with target of  4857 the second level.Missed it both times but if trailed at first level target would have earned 18+18=36 points.Not bad on a day of huge swings.So always work with levels to save losses and gain profits in such markets.
Now what is ahead after this move.We have closed at the higher of the the earlier range so we are in the bullish zone and open for targets of 4928 and 4950.Above 4950 close can hold delivery for 5000 targets.Today's move down was utilised for buying and hence we may open gap up tomorrow Traders trapped today on shorts should look to hedge theirs shorts buying calls as security or book losses.Today after many days the FII figure has turned positive for first time which is bullish. Also unwinding is seen in 4900CE and 5000PE. and huge writing in 4700PE.Addition of open interest is seen in 5000CE,5100CE and 5200CE.Above scenario looks bullish.Keep watch on those figures for further clues.
Spot Nifty levels for intra-day trade on 01.12.2011
No trade between 4815 and 4849(to avoid whipsaws)
Buy above 4849 with SL of 4829  for targets of 4867-4884-4902-4919-4937-4954-4972-4990.
Sell below 4815 with SL of 4835 for targets of 4797-4783-4760-4746-4728-4711-4694-4677.
Happy Trading !

Tuesday, November 29, 2011

Nifty View for 30.11.2011

Today's day can be termed as "Day of stop losses" for intraday traders.It was open equals to high for starts one could have short the nifty as per old rule(open equals high = short and open equals low = buy,with suitable stop loss).Those who could follow this rule would have entered the trade early.For those who waited for the short levels at 4834 would have achieved the second target at 4799 and trailed it as per our system.After hitting the trailed stop loss one would have waited for the entry again as per levels.Another short at 4834 and achieved the third target of 4782 and nearly fourth one of 4765.Again trailed stop loss of 4782(third level) hit for the day.So for the day those who were disciplined enough and could follow the levels a gain of 35+52=87 points as per spot levels given.This was achieved when professional traders stop loss where hit twice.Once on the upside at 4866 when it crossed the open level.Second when it went below the 4797 and again closed above 4800 at 4805.10.
Now let see the move till today from 4633 to 4771(first swing,139 points),4771 to 4693.10(second swing,78 points) and 4693.10 to 4866.10(third swing,173),4866.10 to 4787.1(fourth swing,79 points).Above 4866.10 we have 4890-4928 as resistance.Below 4787.10 we have supports at 4767-4756-4730 and 4703.This situation was like Friday after the expiry spurt on Thursday with the break of 4700 in last hour of the day and close above 4700.In the same way we had a close above 4800 today after the spurt of yesterday and today's dip below 4800.The trend is up yet if 4787.10 is not broken.Below 4787.10 one need to watch the level of 4693.10.
Spot Nifty levels for intra-day trade on 30.11.2011
No trade between 4788 and 4822(to avoid whipsaws)
Buy above 4822 with SL of 4802  for targets of 4840-4857-4875-4892-4910-4927-4945-4962.
Sell below 4788 with SL of 4808 for targets of 4771-4753-4736-4719-4702-4685-4667-4650.
Happy Trading !

NIFTY PENDULUM MOTION


Monday, November 28, 2011

Nifty View for 29.11.2011

Well it was one way as expected and markets obliged us with a close of 4851.30 on Spot Nifty.On friday markets gave a false break below 4690 and close above 4700.This created doubts in the mind of traders whether to carry longs or not after such a great recovery on expiry day.These are misleading moves after a big run-up or run-down on the markets.The stop loss levels are hit first then big moves happen in markets.This was observed with a gap up of 50-60 points today which left the shorts open and trapped them whole day relentlessly.Also few traders could have entered with a 50-60 gap up and watched the run up thinking how take entry now and may have missed out the rally as well. An opportunity lost is lost but never regret it as markets provides it every day to those  who are un-baised on markets and are able to catch the trend early.Now where from here is the question.Now above this run up the resistance level is 4928 where one can safely book profits if long.(positional traders).Above 4929 we have next target of 5019 for positional traders.Intraday traders can buy above 4869 on spot nifty with target of 4909.Above 4909 will be breakout on spot which can be traded as per levels given below.On gap up on spot nifty above do not enter.Enter only above 4909 with stop loss of  4886 and trail profits as per given levels above it.
Spot Nifty levels for intra-day trade on 29.11.2011
No trade between 4834 and 4869(to avoid whipsaws)
Buy above 4869 with SL of 4849  for targets of 4886-4904-4921-4939-4956-4974-4992-5009.
Sell below 4834 with SL of 4854 for targets of 4817-4799-4782-4765-4747-4730-4713-4696.
Happy Trading !

Saturday, November 26, 2011

Nifty View for 28.11.2011


Looks like some accumulation is on in markets. We made a double bottom in two consecutive days and we have closed above 4700 level.
On daily we have a range of 4605 to 4828.Above 4828 we have a breakout and below 4605 breakdown.
On weekly we have a range of 4373 to 5077.We are safe above 4741 and breakout will be above 4843.Above which we can try to touch 4975 and 5077.
Monthly trend has been down and unless and until we do not close above 4982 we are susceptible to touch the downside levels of 4457-4204-3769.
The momentum of FII selling ,Dollar/Rupee equation and VIX (Volatility Index) are the key to the trend so we need to keep watch on those.
Personally I think we have made a bottom and we may see strong recovery above 4786 my target is 4928 next week. My stop loss for longs is 4690.
Astrologically we had 25 Nov turn date with the partial solar eclipse and new moon occurring on that day.We may open gap up if the same is true.Fibo symmetry chart is given above which marks the current upper boundary of the move expected.Once again this an personal observation(I may be wrong and bold  but trying to put my view honestly) my stop loss is 4690 and at most can be lowered down to 4650.All would agree here that this week will decide the trend for short term as we hovering around the bottom of channel and we had an inside day on friday so whichever way we move it will identify the trend.Should  we get ready for the Christmas rally after the Thanksgiving Holiday in US?

Spot Nifty levels for intra-day trade on 28.11.2011
No trade between 4693 and 4727(to avoid whipsaws)
Buy above 4727 with SL of 4707  for targets of 4744-4762-4779-4796-4814-4831-4848-4866.
Sell below 4693 with SL of 4713 for targets of 4676-4659-4642-4625-4608-4591-4574-4557.
Happy Trading !




Thursday, November 24, 2011

Nifty View for 25.11.2011

The expiry was eventful as always and with positive close.Also the low made yesterday was not broken.So on daily charts we have made an higher low.Friday's close will be important and trend deciding.From today onwards additional levels are being provided as many a times it happens all targets are achieved either on the downside or upsides.The second level in the levels given is resistance for buy signal and similarly the second level is support for sell signal.Always trail the stop loss after achieving level targets.On cross of second level on both sides can be considered as intraday breakout where you can look to add positions in the direction of trend.Trailing stop loss is an excellent tool to lock in profits.
Spot Nifty levels for intra-day trade on 25.11.2011
No trade between 4739 and 4779(to avoid whipsaws)
Buy above 4779 with SL of 4759  for targets of 4791-4808-4826-4844-4862-4890-4908-4926.
Sell below 4739 with SL of 4759 for targets of 4721-4703-4685-4668-4650-4632-4614-4596.
Happy Trading !

Wednesday, November 23, 2011

NIFTY PERCENTAGE CORRECTION


Nifty View for 24.11.2011

Above daily charts show the various combinations of the fibonacci retracements on the spot nifty.First chart shows we have made a significant at today's low at an fibo support.Second chart shows we have some supports at 4610-4541-4485-4429.Third chart(most preferred view) shows we have supports at 4591 and below it 4453.Money Flow Index show an near about level of earlier lows.Avoid bottom fishing as we have closed below the earlier low.
Spot Nifty levels for intra-day trade on 24.11.2011
No trade between 4689 and 4724(to avoid whipsaws)
Buy above 4724 with SL of 4714  for targets of 4741-4758-4775-4793
Sell below 4689 with SL of 4709 for targets of 4672-4655-4638-4621
Happy Trading !

Nifty View for 23.11.2011

Spot Nifty levels for intra-day trade on 23.11.2011
No trade between 4795 and 4830(to avoid whipsaws)
Buy above 4830 with SL of 4810 for targets of 4847-4865-4882-4906
Sell below 4795 with SL of 4815 for targets of 4778-4760-4743-4726
Happy Trading !

Monday, November 21, 2011

Nifty View for 22.11.2011.

On the  daily chart we can see the trend is down with the price action from November 2010 is depicted by a falling channel.All the price action is between the channel so those who followed simple technicals have profited immensely for the last year.(Life can be simple if don't make it complicated).Now this upside corrective move felt short of the channel top by some margin.Whenever such things happens its a weak trend and prices retrace the move very fast.All the earlier corrective retracements have been (78.6% of earlier move) but this time we fell short of it(another indication of weakness).As per the levels marked on the chart we have moving in the top two quadrants vertically and 3 quadrants horizontally.This price action is very near the base of this quadrant at 4685.If we don't find support here then the next vertical quadrant is between 4685 to 3922 a new range.Also the annual channel bottom is at 4450 level.The internal channel support is at current level(ealier we had bounce back from these level) .If we find support here a move to 4880 and above it upto 4990 can be expected).Astrologically these are testing times with mercury retrograde(refer repeat post) and mistakes are bound to happen in markets as this creates confusion and panic.Also this year after many many year we have a combo of Solar Eclipse(25 th Nove) with the mercury retrograde(24 th Nov) which makes it highly volatile and unpredictable.So keeping this in mind trading is to be kept light with strict stop losses or suitable hedging for cover in opposite direction.The effect of eclipse lasts for 2 months or so and affect the trend before it also.On the nifty we are witnessing Solar Return action with the fall starting in both successive muhurat sessions.Be cautious because markets are there for eternity but same may not be true for the trading capital.
Spot Nifty levels for intra-day trade on 22.11.2011
No trade between 4761 and 4796(to avoid whipsaws)
Buy above 4796 with SL of 4776 for targets of 4813-4830-4848-4865
Sell below 4761 with SL of 4781 for targets of 4744-4724-4709-4692
Happy Trading !

Sunday, November 20, 2011

Nifty View 21.11.2011

Spot Nifty levels for intra-day trade on 21.11.2011
No trade between 4889 and 4924(to avoid whipsaws)
Buy above 4924 with SL of 4904  for targets of 4941-4959-4976-4994
Sell below 4889 with SL of 4909 for targets of 4871-4854-4836-4819
Happy Trading !

PLANETARY EFFECT ON NIFTY

This is an repeat post of August 2011 put up again on blog for its significance currently.
In 2011, Mercury retrogrades three times, as the Mercury retrograde will have shifted situations about at the end of 2010, with Mercury turning direct on December 30, 2010. We will move into 2011 with transitions fresh in our minds, ready to begin the FOUR year of 2011. The first Mercury retrograde in 2011 will be in the fire sign of Aries, March 30th through April 23rd. This Mercury retrograde becomes important because of the fact that Jupiter and Uranus have transitioned into Aries as well, requiring that we make major transitions to set up our focus during this important phase. All of the Mercury retrogrades in 2011 are in fire signs, which emphasizes the energy, enthusiasm, innovation and spark we put into our activities. We are changing and adjusting our thinking and thought process regarding the activities that we are involved in and especially as the Aries energy sets the pace for the year, we will move our true self into the directions that are the appropriate reflection of the true self. Because 2011 is universally a FOUR year (in numerology), this Mercury retrograde process becomes important in the major adjustments as we move our efforts to organize, plan and launch our innovative resourcefulness into new directions. Mercury retrograde provides the opportunity to adjust our thoughts, attitudes and communications about our direction. The adjustments that are slated to occur in 2011 are in fire signs, Aries (in March/April), Leo (in August), and Sagittarius (in November/December). These same signs, same degrees were the Mercury retrogrades experienced in 1932, as the cycle of Mercury retrograde repeats with an incredible exactness, along with Mars, which activates the thoughts, ideas and communication.
Mercury turns retrograde March 30 2011
Mercury turns direct April 23 2011
Mercury turns retrograde August 02 2011
Mercury turns direct August 26 2011
Mercury turns retrograde November 24 2011
Mercury turns direct December 13 2011
Mercury turns retrograde Dec 26 2009
Mercury turns direct Jan 13 2010
Mercury turns retrograde Apr 18 2010
Mercury turns direct May 18 2010
Mercury turns retrograde Aug 20 2010
Mercury turns direct Sept 12 2010
My observations for last two years are shown in the two charts.For this year the dates that should be on short term traders radar for change in trend are the period between 24 Nov and 13 Dec.
Happy Trading !
(P.S. Info for above cycle is taken from http://www.astrologyweekly.com/astrological-information/planetary-stations.php)

Saturday, November 19, 2011

Nifty Weekly View 21.11.2011



This Friday has been kind to us with a weekly close above 4900 level. The weekly support proved very strong and was held for the day. Some relief rally is expected on Nifty keeping the expiry in mind. But the momentum of the fall is showing down direction. As shown in the chart the weekly support proved vital and the relief rally is to be believed above 4933 on Monday. Any shorts covered on Fridays can be initiated again below the stop loss of 4870 level. Weekly loss of 400 points has created some panic in the minds of traders. But this was to be expected below the 5160 level the low of last week.Also after making an high of 5400 and low of 5252 we retraced up to 5352 an lower high.So break of 5252(higher low) was clear indication to short by Dow theory signal with a suitable stop loss.
A small personal observation I always have felt 10.10.2010 high was the actual high on Nifty and the next move was Bull Trap seeing the ADX  and Stochastic Indicators.(Watch the Vertical red Line)
On the ADX indicator we can see the momentum divergence. The Nifty price rising and the yellow line momentum has a declining slope. Also currently the green line(+DI) is below the red line(-DI) stating still we are not out of woods..The ADX is an excellent indicator if observed minutely. Watch all the moves on the upside from the start of the fall on Nifty from Nov 2010 has not been supported on weekly charts. Positional  traders can watch this for some clues.
Now for weekly close of 4921 we resistances of 4970-5036-5075 and 5141. It will be very volatile move with some wild ups and down in this expiry week. Above 4933 we have to watch 4956 above which we are open to the given targets. Also above 5141(which i doubt seeing the ride in Dollar against the Rupee) if we get there the levels to be watch are 5166-5212 and 5238.Also above 5252 we open for challenging the recent high of 5400.If we consider bottoms made we two higher bottoms made yet from the low of 4720 till bottom of 18.09.2011 and yesterday(if considered) we are yet in uptrend.We need to be cautious here as we are bottom fishing but within striking distance of breaking earlier bottoms.
Some info for those interested in learning about Gann Theory, I would request them to join Yahoo Group http://finance.groups.yahoo.com/group/Time-Price-Research-I/  
In all there are 5 groups and they free and open to all. It is a treasure of knowledge available freely with regular interaction among its members but you need to devout some time to improve your trading.
Happy Trading!

Thursday, November 17, 2011

Nifty View for 18.11.2011

                     As we have moved down and broken every support we now need to see the big picture higher than daily and hourly.So lets see the weekly chart from the fall of Nov 2010 on Nifty.Watch the pattern of fall which is somewhat similar as we seem to be repeating it.The rectangle shows similar move and the triangle following it.If this pattern holds expect bounce from 4820-4800 levels.
                     Now for the top on Nov 2010 we went near the red band of +BB3 then came all the way to 20 SMA  and bounce back to +BB1(top) level.From +BB1 level(top) another fall started we went down to -BB3 level a panic bottom.So we completed a cyclic move from +BB3 to -BB3 on the bollinger bands.
                      We bounced back from this bottom to + BB1 level(top) were we were resisted.The fall from +BB1 level went to support at -BB1(bottom) level.Again from -BB1 level we moved up to +BB1 level(top) were we resisted as earlier pattern.From this +BB1 level we moved down to make another panic bottom at -BB3(panic botom) level.
                       We again moved upto +BB1(top) level(nearly but not exactly) and the fall started (some similarity!).Now again we are near the -BB1 level(bottom?).We may find support here but the bollinger bands are expanding soI have kept space below it to turn sideways.So the level of 4820-4800 level looks ideal for bounce back as per both the pattern and bollinger bands.Lets see how it materialises on Nifty.
                        Fridays have never been good for Nifty in recent times so it may be very volatile close for the week be cautious for both sides moves.
Spot Nifty levels for intra-day trade on 18.11.2011
No trade between 4917 and 4952(to avoid whipsaws)
Buy above 4952 with SL of 4932 for targets of 4970-4988-5005-5023 

Sell below 4917 with SL of 4937 for targets of 4900-4882-4865-4847
Happy Trading !

Intraday Update 17.11.2011

On the daily charts we are coming to the bottom of the rising channel which is a significant move of correction.Expect some bounce back at the bottom of the channel 4980 level.Break of this rising channel will be bad for the Nifty in the medium term.Break of this channel will form a new downward channel.On the hourly charts we are the bottom of the downward channel which portrays a downtrend.Some consolidation or sideways move is observed here which depicts indecision or lack of commitment on part of traders.The break out on whichever side will be significant.On the upside 5118-5150-5202 seems the resistance.Above 5202 we may move to 5300-5350 levels.Below this channel on the hourly charts we have supports as per daily charts channel around 4980-4960 levels which very important level to watch.the more time taken by traders in this indecision will create a strong upside bias.Still we need to be cautious around the current levels with light commitments or suitable hedges for the open positions.Shorts are to be booked around this levels to open again below 4960 levels or on new lows are made for the day with suitable stop loss.
Happy Trading ! 

Wednesday, November 16, 2011

NIFTY POLYGON UPDATE 16.11.2011

This is update of Nifty Polygon Chart(28.10.2011).The break of the polygon will mark down trend for Nifty.

Nifty View for 17.11.2011

Today we opened with gap down and went down to make new low of 4997.50 on Nifty futures.We had some short covering happening in two tranches which looks as a temporary bottom of this fall.The fag end was dramatic and we recovered all lost ground to post a gain of one point on Nifty future.The daily trend is still down below the 20 SMA of 5202.The move if it crosses the -BB1 level of 5097 we may try to reach the 20 SMA depending on the strength of recovery.The fibo retracement levels of this move from 5350 are 5112.5(23.6%),5158(38.2%) and 5194(50%) which is coinciding the 20 SMA level of 5202.Also the wave structure shows three waves for the down move.wave 1 from 5400 to 5252(148 points,3 days),wave 2 from 5252 to 5350(98 points,3 days) and wave3(assuming its completed) 5350 to 4997.50(352 points,5 days).If the third wave is completed we may see recovery for 2 days atleast with pretty sideways action with a minimum retracement upto 5158(38.2%).
Spot Nifty levels for intra-day trade on 17.11.2011
No trade between 5013 and 5048(to avoid whipsaws)
Buy above 5048 with SL of 5028 for targets of 5066-5084-5102-5119
Sell below 5013 with SL of 5033 for targets of 4995-4977-4960-4942
Happy Trading !

Intraday Update for 16.11.2011


Tuesday, November 15, 2011

Nifty View for 16.11.2011

Nifty trend is down and accelerating the down momentum both on daily and hourly charts.On daily supports are at 5006(-BB2),4968(channel bottom) and below it 4903(-BB3).On hourly charts the momentum and -DI lines are rising in sync on the ADX indicator signifying the strength of the down move.On hourly charts the -BB3 levels is at 5034 which is the last support  currently seen.But the bands are expanding.In such scenario, always look for the price to touch or move out of the bands and pop-in to cover your shorts.One needs to be cautious also when the bands are expanding as the prices will push them further down with it.In all shorts are on as per trend and need to be covered as per the trend on intraday. Also we have retraced 50% of the current rise so watch out for some countertrend move at this levels or 61.8% levels at 4980 odd on Nifty future.
Spot Nifty levels for intra-day trade on 16.11.2011
No trade between 5051 and 5086(to avoid whipsaws)
Buy above 5086 with SL of 5066 for targets of 5104-5122-5140-5158
Sell below 5051 with SL of 5071 for targets of 5033-5015-4998-4980
Happy Trading !

Monday, November 14, 2011

Nifty View for 15.11.2011

Today Nifty opened with a gap but could not sustain it and closed at the lower end of the channel as shown in hourly chart.As per daily chart for futures the trend is down below 20 SMA.The daily charts are in down trend after being resisted at +BB2 levels on 04.11.2011. Nifty showed some resilience around the +BB1 levels but is moving down.Supports on daily will be -BB1,-BB2and -BB3 levels.Expect some support around -BB1 levels.If Nifty futures find support around this -BB1 level expect rise upto 20 SMA.Now for all intraday traders the hourly chart is vital.On hourly we have broken the 20 SMA on 09.11.2011 so the trend is down here also and yet to recover it.Todays gap up move also could not cross the 20 SMA level.Whenever such move occurs its a chance to be taken for shorts around the 20 SMA levls by intraday traders.Hourly supports are at -BB2 and -BB3 levels as shown in charts.Expect some support around -BB2 level for futures.If its supported then -BB1 level is the initial resistance and 20 SMA level next.If we open gap down tomorrow then we may touch the -BB3 level where the shorts can be covered for futures.In such scenario we may see some sideways move on the futures for the day.

Spot Nifty levels for intra-day trade on 15.11.2011
No trade between 5130 and 5166(to avoid whipsaws)
Buy above 5166 with SL of 5146 for targets of 5184-5202-5220-5238
Sell below 5130 with SL of 5150 for targets of 5113-5095-5077-5059
Happy Trading !

Nifty Hourly 11.11.2011


Nifty Daily 11.11.2011


Nifty Weekly 11.11.2011


Nifty Monthly 11.11.2011


Sunday, November 13, 2011

Nifty View for 14.11.2011


Spot Nifty levels for intra-day trade on 14.11.2011



No trade between 5151 and 5187(to avoid whipsaws)
Buy above 5187 with SL of 5167 for targets of 5205-5223-5241-5259
Sell below 5151 with SL of 5171 for targets of 5133-5115-5097-5079
Happy Trading !

Saturday, November 12, 2011

Average Directional Index on NIFTY


Average Directional Index (ADX)
Introduction
 The Average Directional Index (ADX), Minus Directional Indicator (-DI) and Plus Directional Indicator (+DI) represent a group of directional movement indicators that form a trading system developed by Welles Wilder. Wilder designed ADX with commodities and daily prices in mind, but these indicators can also be applied to stocks. The Average Directional Index (ADX) measures trend strength without regard to trend direction. The other two indicators, Plus Directional Indicator (+DI) and Minus Directional Indicator (-DI), complement ADX by defining trend direction. Used together, chartists can determine both the direction and strength of the trend.
 Wilder features the Directional Movement indicators in his 1978 book, New Concepts in Technical Trading Systems. This book also includes details on Average True Range (ATR), the Parabolic SAR system and RSI. Despite being developed before the computer age, Wilder's indicators are incredible detailed in their calculation and have stood the test of time.
Directional Movement
 Plus Directional Movement (+DM) and Minus Directional Movement (-DM) form the backbone of the Average Directional Index (ADX). Wilder determined directional movement by comparing the difference between two consecutive lows with the difference between the highs.

Directional movement is positive (plus) when the current high minus the prior high is greater than the prior low minus the current low. This so-called Plus Directional Movement (+DM) then equals the current high minus the prior high, provided it is positive. A negative value would simply be entered as zero.
 Directional movement is negative (minus) when the prior low minus the current low is greater than the current high minus the prior high. This so-called Minus Directional Movement (-DM) equals the prior low minus the current low, provided it is positive. A negative value would simply be entered as zero.
 The chart above shows four calculation examples for directional movement. The first pairing shows a big positive difference between the highs for a strong Plus Directional Movement (+DM). The second pairing shows an outside day with Minus Directional Movement (-DM) getting the edge. The third pairing shows a big difference between the lows for a strong Minus Directional Movement (-DM). The final pairing shows an inside day, which amounts to no directional movement (zero). Both Plus Directional Movement (+DM) and Minus Directional Movement (-DM) are negative and cancel out each other. Negative values revert to zero. All inside days will have zero directional movement.
Calculation
 The calculation steps for the Average Directional Index (ADX) are detailed in each step. Average True Range (ATR) is not detailed because there is an entire ChartSchool article for this. Basically, ATR is Wilder's version of the two period trading range. Smoothed versions of Plus Directional Movement (+DM) and Minus Directional Movement (-DM) are divided by a smoothed version Average True Range (ATR) to reflect the true magnitude of a move. The example below is based on a 14-day ADX calculation.
 1. Calculate the True Range (TR), Plus Directional Movement (+DM) and Minus Directional Movement (-DM) for each period.
 2. Smooth these periodic values using the Wilder's smoothing techniques. These are explained in detail in the next section.
 3. Divide the 14-day smoothed Plus Directional Movement (+DM) by the 14-day smoothed True Range to find the 14-day Plus Directional Indicator (+DI14). Multiply by 100 to move the decimal point two places. This +DI14 is the Plus Directional Indicator (green line) that is plotted along with ADX.
 4. Divide the 14-day smoothed Minus Directional Movement (-DM) by the 14-day smoothed True Range to find the 14-day Minus Directional Indicator (-DI14). Multiply by 100 to move the decimal point two places. This -DI14 is the Minus Directional Indicator (red line) that is plotted along with ADX.
 5. The Directional Movement Index (DX) equals the absolute value of +DI14 less - DI14 divided by the sum of +DI14 and - DI14.
 6. After all these steps, it is time to calculate the Average Directional Index (ADX). The first ADX value is simply a 14-day average of DX. Subsequent ADX values are smoothed by multiplying the previous 14-day ADX value by 13, adding the most recent DX value and dividing this total by 14.
 Below is a spreadsheet example with all steps involved. There is a 119 day calculation gap because around 150 periods are required to absorb the smoothing techniques. ADX enthusiasts can click here to download this spreadsheet and see the gory details. The chart below shows an example of ADX using the Nasdaq 100 ETF (QQQQ).

Wilder's Smoothing
 As seen in the ADX calculation, there is a lot of smoothing involved and it is important to understand the effects. Because of Wilder's smoothing techniques, it can take around 150 periods of data to get true ADX values. Wilder uses similar smoothing techniques with his RSI and Average True Range calculations. ADX values using only 30 periods of historical data will not match ADX values using 150 periods of historical data. ADX values with 150 days or more of data will remain consistent.
 The first technique is used to smooth each period's +DM1, -DM1 and TR1 values over 14 periods. As with an exponential moving average, the calculation has to start somewhere so the first value is simply the sum of the first 14 periods. As shown below, smoothing starts with the second 14-period calculation and continues throughout.
First TR14 = Sum of first 14 periods of TR1
Second TR14 = First TR14 - (First TR14/14) + Current TR1
Subsequent Values = Prior TR14 - (Prior TR14/14) + Current TR14
 The second technique is used to smooth each period's DX value to finish with the Average Directional Index (ADX). First, calculate an average for the first 14 days as a starting point. The second and subsequent calculations use the smoothing technique below:
First ADX14 = 14 period Average of DX
Second ADX14 = (First ADX14 x 13) + Current DX Value
Subsequent ADX14 = (Prior ADX14 x 13) + Current DX Value

Interpretation
 The Average Directional Index (ADX) is used to measure the strength or weakness of a trend, not the actual direction. Directional movement is defined by +DI and -DI. In general, the bulls have the edge when +DI is greater than - DI, while the bears have the edge when - DI is greater. Crosses of these directional indicators can be combined with ADX for a complete trading system.
 Before looking at some signals with examples, keep in mind that Wilder was a commodity and currency trader. The examples in his books are based on these instruments, not stocks. This does not mean his indicators cannot be used with stocks. Some stocks have price characteristics similar to commodities, which tend to be more volatile with short and strong trends. Stocks with low volatility may not generate signals based on Wilder's parameters. Chartists will likely need to adjust the indicator settings or the signal parameters according to the characteristics of the security.
Trend Strength
 At its most basic the Average Directional Index (ADX) can be used to determine if a security is trending or not. This determination helps traders choose between a trend following system or a non-trend following system. Wilder suggests that a strong trend is present when ADX is above 25 and no trend is present when below 20. There appears to be a gray zone between 20 and 25. As noted above, chartists may need to adjust the settings to increase sensitivity and signals. ADX also has a fair amount of lag because of all the smoothing techniques. Many technical analysts use 20 as the key level for ADX.

The chart above shows Nordstrom (JWN) with the 50-day SMA and 14-day Average Directional Index (ADX). The stock moved from a strong uptrend to a strong downtrend in April-May, but ADX remained above 20 because the strong uptrend quickly changed into a strong downtrend. There were two non-trending periods as the stock formed a bottom in February and August. A strong trend emerged after the August bottom as ADX moved above 20 and remained above 20.

DI Crossover System
 Wilder put forth a simple system for trading with these directional movement indicators. The first requirement is for ADX to be trading above 25. This insures that prices are trending. A buy signal occurs when +DI crosses above - DI. Wilder based the initial stop on the low of the signal day. The signal remains in force as long as this low holds, even if +DI crosses back below - DI. Wait for this low to be penetrated before abandoning the signal. This bullish signal is reinforced if/when ADX turns up and the trend strengthens. Once the trend develops and becomes profitable, traders will have to incorporate a stop-loss and trailing stop should the trend continue. A sell signal triggers when - DI crosses above +DI. The high on the day of the sell signal becomes the initial stop-loss.


The chart above shows Medco Health Solutions with the three directional movement indicators. The green dotted lines show the buy signals and the red dotted lines shows the sell signals. Wilders initial stops were not incorporated in order to focus on the indicator signals. As the chart clearly shows, there are plenty of +DI and - DI crosses. Some occur with ADX above 20 validate signals. Others occur to invalidate signals signals. As with most such systems, there will be whipsaws, great signals and bad signals. The key, as always, is to incorporate other aspects of technical analysis. For example, the first group of whipsaws in September 2009 occurred during a consolidation. Moreover, this consolidation looked like a flag, which is a bullish consolidation that forms after an advance. It would have been prudent to ignore bearish signals with a bullish continuation pattern taking shape. The June 2010 buy signal occurred near a resistance zone marked by broken support and the 50-62% retracement zone. It would have been prudent to ignore a buy signal so close to this resistance zone.

The chart above shows AT&T (T) with three signals over a 12 month period. These three signals were pretty good, provided profits were taken and trailing stops were used. Wilders Parabolic SAR could have been used to set a trailing stop-loss. Notice that there was no sell signal between the March and July buy signals. This is because ADX never moved below 20 to make the signals possible.
Conclusions
 The directional movement indicator calculations are complex, interpretation is straight-forward and successful implementation takes practice. +DI and - DI crossovers are quite frequent and chartists need to filter these signals with complementary analysis. Setting an ADX requirement will reduce signals, but this uber-smoothed indicator tends to filter as many good signals as bad. In other words, chartists might consider moving ADX to the back burner and focusing on the Directional Indicators to generate signals. These crossover signals will be similar to those generated using momentum oscillators. Therefore, chartists need to look elsewhere for confirmation help. Volume-based indicators, basic trend analysis and chart patterns can help distinguish strong crossover signals from weak crossover signals. For example, chartists can focus on +DI buy signals when the bigger trend is up and - DI sell signals when the bigger trend is down.
SharpCharts

 SharpCharts users can plot the directional movement indicators by selecting Average Directional Index (ADX) from the indicator drop-down list. By default, ADX will be in black, the Plus Directional Indicator (+DI) in green and the Minus Directional Indicator (-DI) in red. This makes it easy to identify directional indicator crosses. While ADX can be plotted above, below or behind the main price plot, it is recommended to plot above or below because there are three lines involved. A horizontal line can be added to help indentify ADX moves. The chart example below also shows the 50-day SMA and Parabolic SAR plotted behind the price plot. The moving average is used to filter signals. Only buy signals are used when trading above the 50-day moving average. Once initiated, the Parabolic SAR can be used to set stops. Click here for a live example of ADX.

Suggested Scans

Overall Uptrend with +DI Crossing above -DI: This scan starts with stocks that average 100,000 shares daily volume and have an average closing price above 10. An uptrend is present when trading above the 50-day SMA. A buy signal is possible when ADX is above 20. This signal materializes when +DI moves above - DI.
Overall Downtrend with - DI Crossing above +DI: This scan starts with stocks that average 100,000 shares daily volume and have an average closing price above 10. An downtrend is present when trading below the 50-day SMA. A sell signal is possible when ADX is above 20. This signal materializes when -DI moves above +DI.
(Courtesy www.stockcharts.com)

ADX on Nifty Daily Charts



Now let us watch it on Nifty Daily Charts for trading signals. On 24.06.2011 watch the green line(+DI) cross the red(-DI) line setting the uptrend for Nifty. Also watch the yellow line(for momentum) of the uptrend. The momentum then turned sideways and the green line(+DI) turned downwards early before the downtrend on Nifty(divergence).We got a huge spike on 07.07.2011 with a low reading on green line(+DI) which was our signal for change in trend. After that the price action on Nifty is sideways as indicated by the green(+DI) and red(-DI) lines and the yellow line(momentum) coming down. On 27.10.2011 we see the red(-DI) cross the green(+DI) which was the signal to short the Nifty or ad to earlier positions. Watch the yellow line (momentum) and red line(-DI) both moving sync with each other depicting the strength of the move& correspondingly the green line(+DI) moving down also signifying the down move. In all good 1000 points move very rarely seen. On 22.08.2011 the momentum yellow line was signaling the move losing its strength(cover the additional position of shorts on Nifty).On 29.08.2011 it signaled the end of the move(cover all shorts on Nifty) with the green line(+DI) touching the red line(-DI) first time( on 02.09.2011) after a gap of 21 trading days. The price action is pretty side ways after that on Nifty  the momentum yellow line shows it clearly by decreasing in value. On 07.10.2011 we see the green line(+DI) cross the red(-DI) a buy signal with gap up on Nifty. On 10.10.2011 the yellow line starts rising & the red line is declining in value confirming the trend.On 28.10.2011 the high marks the end of the move. After which the momentum line starts decreasing in value & green line is in sync with it. So longs On Nifty were to be sold on 31.10.2011.The move on Nifty was from  4900(open on 10.10.2011) to 5344(close on 31.10.2011) i.e.  444 points of Nifty.
Happy Trading!

Friday, November 11, 2011

Nifty View for 11.11.11 at 11 A.M.


Nifty View for 11.11.2011

Spot Nifty levels for intra-day trade on 11.11.2011

Levels as per SGX Nifty close of 5153 on 10.11.2011


Nifty was resisted at 5403(45 degree) and had support at 5257(225 degree) which is broken.Below this the levels are 5221(180 degree),5185(135 degree),5149(90 degree),5113(45 degree),5077(0 degree),5041(315 degree),5006(270 degree) and 4971(225 degree).the move from 4720 to 5400 was 680 points so the 50% level of 5060 is important to watch break of which will turn the medium term to bearish.If 5060 is sustained then we may see recovery up to 5230 levels.
No trade between 5135 and 5171(to avoid whipsaws)
Buy above 5171 with SL of 5151 for targets of 5189-5207-5225-5243
Sell below 5135 with SL of 5155 for targets of 5117-5099-5081-5064
Happy Trading !

Wednesday, November 9, 2011

Nifty Channel 08.11.2011

For the trend to continue remaining in this rising channel is important.The break of this channel will be the first signal for reversal in Nifty.Happy Trading!

Tuesday, November 8, 2011

Nifty View for 09.11.2011

Spot Nifty levels for intra-day trade on 09.11.2011

No trade between 5271 and 5308(to avoid whipsaws)
Buy above 5308 with SL of 5288 for targets of 5326-5344-5362-5381
Sell below 5271 with SL of 5291 for targets of 5253-5235-5217-5199
Happy Trading !

Monday, November 7, 2011

Nifty View for 08.11.2011


Spot Nifty levels for intra-day trade on 08.11.2011

No trade between 5266 and 5302(to avoid whipsaws)
Buy above 5302 with SL of 5282 for targets of 5321-5339-5357-5375
Sell below 5266 with SL of 5286 for targets of 5248-5230-5212-5194
Happy Trading !

Sunday, November 6, 2011

Nifty Fibo Fans 04.11.2011

Watch how Nifty has been moving up by closing the gaps and consolidation.The level of 5223 is critical for this uptrend.Next target looks at 5441 levels as per Fibo fans.
Happy Trading !

Saturday, November 5, 2011

NIFTY SYMMETRY 04.11.2011

At the end of a year from 05.11.2010 to 04.11.2011 when the fall started for Nifty at the Muhurat Session of 2010 we are roughly a 1000 points down on the Nifty.As per Gann's Decinnal Cycle this was a bear year.Please refer the article dated 10 September 2011 on this blog. It quotes 
No. 1 in a new decade is a year in which a bear market ends and a bull market begins. Look up 1901, 1911, 1921, 1931, 1941, 1951, 1961, 1971, 1981, 1991, 2001, and watch for 2011, and 2021. So far this year we are in a bearish trend. It’s important to note that yearly cycles within the overall scheme of Gann cycles are not a big factor, and you need to do further analysis. You don’t want to buy into October if major Gann angles or supports have been broken, and I stress the importance of considering many factors in making your decisions.
Now lets compare 2001 year for Nifty :
Nifty opened at 1276.15 made a high of 1422.95 on 16.02.2001 and low of 877.00 on 26.09.2001 and closed the year at 1059.05.
Lets see 2011 year for Nifty till today 
Nifty opened at 6177.45 made a high of 6181.05 on 04.01.2011 and low of 4720 on 26.08.2011 and we are yet to close the year 2011.
Can you see any similarities in this 10 year cycle of 2001 to 2011.The high came one month(actual one and half months) earlier in January 2011 so corresponding the low has one month(same date what a coincidence) earlier that is in August 2011.Have we made a low for the year as per this observation?Well time will tell us!
Happy Trading !

Thursday, November 3, 2011

Nifty View for 04.11.2011

Spot Nifty levels for intra-day trade on 04.11.2011

No trade between 5248 and 5284(to avoid whipsaws)
Buy above 5284 with SL of 5264 for targets of 5302-5320-5339-5357
Sell below 5248 with SL of 5268 for targets of 5230-5211-5193-5175
Happy Trading !

Nifty Trading with Bollinger Bands,RSI and ADX

Nifty Channel Target Achieved as per shown Trading System.
Happy Trading !

Nifty Trading with Bollinger Bands,RSI and ADX

Look at the Red Arrows marked on Chart,RSI and ADX.Its a complete trading system.
Wow! What a break-out on Charts.Watch the acceleration of the move on cross-over of the 20 day moving average,which lagging all day below it.
Happy Trading !


Wednesday, November 2, 2011

Nifty Ellipse?


Nifty Targets--- Is a Possibility ?


Nifty View for 03.11.2011



Today Nifty intraday updates were provided for blog readers.I hope those who were online and could find time to login here should have benefited with atleast 50 points on the Nifty.We are back to yesterday's close so nothing new to write.On the hourly chart the trend is down as we are below the 20 day moving average of 5312.80.
+BB3 = 5396.6(R3), +BB2 = 5368.80(R2), +BB1 = 5340.80(R1) , 20 Day mov. avg = 5312.80(Pivot above it positive)
-BB1 = 5289.40 (S1), -BB2 = 5256.70(S2), -BB3 = 5228.70(S3).

Spot Nifty levels for intra-day trade on 03.11.2011

No trade between 5240 and 5277(to avoid whipsaws)
Buy above 5277 with SL of 5257 for targets of 5295-5313-5331-5349
Sell below 5240 with SL of 5260 for targets of 5222-5204-5186-5168
Happy Trading !

NIFTY TRADING WITH BOLLINGER BANDS----INTRDAY MOVES 3

Nifty touched 61.8% retracement after nice consolidation between 50% retracement level.Target achieved for intraday.Call closed.
Happy Trading!

NIFTY TRADING WITH BOLLINGER BANDS----INTRDAY MOVES 2

Crossed the hurdle of 38.2 % retracement and resisted at 50% retracement if it crosses will go to 61.8 % retracement.
Happy Trading !

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