DLF Daily Historical Candlestick Chart Technical Analysis
I'm writing a different kind of post today. This is not a future-prediction; it's a historical analysis.
The share is DLF, which has crashed in recent times. A lot of negative news is floating around for DLF, hammering the share price.
A lot of investors have gotten stuck in DLF, as the fall was huge and happened before people could exit.
The question is, Could knowledge of Charting have saved an investor from losing money? Did the chart give exit signals before the crash? Let's see.
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| DLF Price Movement May13 to Oct14 |
This is a Daily Candlestick Chart of DLF from May 2013 to October 2014.
The price topped on 9th June 2014 at Rs. 242.95. Then price fell to 205, found support for a while, attempted to rise but lost near 223 and fell from there like a waterfall.
We'll assume we have no news about DLF and are simply looking at the chart and taking positions. The following is spotted on 9th June:
1) There was a sudden bull run from 9th May 2014, with price rising almost vertically. The volume also spurted. This was an alert signal. It could mean both bullish and bearish, but its an alert nevertheless.
2) The Fibonacci sequence shows achieving an extension level which provides natural resistance to price.
3) On 9th June, the price made a bearsih divergence with its oscillator (compared to previous high on 26th May 2014). This, coupled with Fibonacci resistance, is reason enough to exit or take a short position.
4) If an investor had not exited DLF on divergence, then in the next few days the RSI fell below 70 and failed to reclaim the bullish levels till end of July even though price had risen. This is obviously another case of divergence, giving a reason to exit anytime between 205 and 223.
5) Finally, as the price fell below Rs. 195, it formed a Head-and-Shoulders pattern (not drawn on the chart). After all the negative signals, this one would be a very-definite exit signal.
6) There are candlestick patterns as well, but I think you understand by now that they provide additional information indicating an oncoming bearish market.
The price is currently (29Oct2014) trading Rs. 100 - Rs. 120 levels. Any investor could have saved the loss by exiting DLF at the right time, as the chart was showing exit warnings again and again.
How much money could we have saved (considering current price of Rs. 111)?
1) If exited at Bearish Divergence, then Rs. 130 per share loss could be saved.
2) If exited at RSI falling below 70 inspite of price rise, then Rs. 100 per share loss could be saved.
3) If exited at Head & Shoulders formation, then Rs. 85 per share could be saved.
That's quite a lot of money!
Why people depending only on news, would lose money in such times?
News is tricky - It can be incorrect, it can be late, and it can be incomplete. We never know what the real story is. Frauds have become commonplace. Also, its obvious that many people get important information before the retail investor - and they use it even though there are laws against such trading. Many institutional investors have access to direct news feeds, and they officially get quicker news than retail investors do.
However, a change in price movement usually shows up on the chart in form of many different alert signals. This can be useful to protect from losses, as we see on the DLF chart above.
Cirrently, DLF is at completion of an AB=CD projection. This is providing support to price as Rs. 109, as is visible on the chart.
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DLF Daily Historical Candlestick Chart Technical Analysis
