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Wednesday, October 29, 2014

How Charting Could've Saved You From DLF Crash (Oct2014)

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.

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.

All posts related to DLF

DLF Daily Historical Candlestick Chart Technical Analysis

Sunday, September 21, 2014

NIFTY Ends Week at Range Resistance (21 Sep 2014)



NIFTY Weekly Market Index Chart Analysis

The S&P CNX NIFTY traveled a range of 235 points during the week, but finally closed at 8121.45, a marginal 51 points higher than its open.

As visible on the chart, the range in which NIFTY is traveling since mid-May 2014 still remains valid, and the market closed on the line of resistance, after falling to the middle of the range during the week.

The weekly candlestick is a Hanging Man.  After last week's Doji at the market top, a Hanging Man is not a very positive signal.  The RSI has remained stationery as well and the divergence is not yet cured.  Higher volume shows improving interest trading in the market.

Will NIFTY breakout from the point of Resistance and jump above, or will it dive back into the range?  This should be observed during the week.

8145 is the resistance level for this week.  This keeps going higher each week as the resistance is a slant and not horizontal.

Unfortunately, NIFTY has fallen below the 6-week steep-diagonal support line.  This isn't a heartening signal.

(1) A strong upward move pulling the index high from the resistance point (8145 is the resistance level for the week) ; &(2) the index closing above the resistance line for 2-3 consecutive days can lead to positive signal if other indicators agree. Unless this happens, do not go in for long positions.


All posts related to NIFTY

NIFTY Weekly Market Index Chart Analysis

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