Sunday, March 29, 2009

Another costly lesson learn’t… Update for 30 Mar 09

… costly because every time I go wrong I stake the greatest asset of mine – the reputation. I would not have suffered so badly had I not started the blog and contribution to two three other sites. But now that I do it – the pressure of accuracy weighs heavy. It is not that this rally was not anticipated – nor were the levels we are jumping to every day now. I had mentioned that this can be a surprise rally taking us to 3400 levels and higher. What I obviously did not get that the rally will be with so much vigour and non stop. Ever since I saw the first indicator go overbought – I anticipated the markets to take a breather – stay there for a day or so or perhaps come down on a 50% retracement – and that has not happened. As of now we have three indicators I study are either deeply overbought or just about there. There has been no recent precedent of these indicators wherein we have stayed for so long in these conditions. Now seeing these indicators overbought I ignored a very important indicator – the violation of the Bollinger band. When the upper Bollinger band was violated – I should have taken this as a strong indication of the trend continuation and if we see the charts now we see that the violations continue even now. All the same the lesson is that – do not oppose the trend – do not over anticipate the happening and do not read the charts with preconceived ideas as to where we are heading. In due course the charts tell were we they intend going.5 year chart

Where are we going now? We have also violated the 100 EMA that was attempted to be taken out in April end, May end, Aug and Sep. This time however we have crossed the 100 EMA more than any of the earlier attempts. The volumes continue to be marginally better than before. So? is the worst over – It may be for the time being atleast. We may correct some and then continue our journey upper – the pitfalls? elections! - markets do not like the uncertainty – and that is close at hands. okay before I finish with the 100 EMA – let us see the last 5 year charts. see the blue EMA line trailing across the chart – see the 100 EMA has remained well above the markets and this time we are above. If this is the continuation of the bear market then expect a sharp fall. see every time it has retracted it has done so with vengeance. if it does not – then a slow journey north wards can begin.

Before I come down to the charts – once again I think we should look at the Global cues. Asia is showing reluctance in carrying forward this rally – Nikkei was down 0.11% and Hang Seng up marginally 0.07% and Strait Times down 0.75%. Europe was all red inspite of opening flat. FTSE  was red 0.67%, Dax down 1.31% and CAC down 1.78%. US markets have overall surged forward 6% plus this week even after ending the week with a small correction. Dow was down 1.87%, Nasdaq down 2.63% and S&P 500 2.03%.Daily 27 Mar 09

The daily charts show the Bollinger band upper limit being violated by the candles. That has broadened the Bollinger bands also. You can see Put call ratioin this chart once again that the 100 EMA is now below the 5 EMA and that has been quite an achievement. Infact the other landmark has been the crossover of 50 EMA by the 20 EMA. These definitely signal a short term run up. Volumes were 142% the last 50 day average. ADX is giving strength to run up. MACD is bullish like hell. RSI is overbought and so is Slow Stochastic. Most important of all we have violated the upper band drawn and if we continue to sustain up then there woption painill be a fresh band to define. All in all? in immediate future – we are overbought and a correction is due. considering a few weeks period we are bullish and in mid term we are again bearish or so I think.

Seeing the Put Call ratio – the puts are nearly twice that of calls, the option pain is also showing interesting chart have a look below. Option writers are in trouble this time over as the call writing below the bottom most point (2900) and put writing above the 2900 mark is quite hefty. Going from the present reading of the option pain – we should have the session finishing around 2850 - 2950 level but this graph changes rapidly and calculation of monthly ending in beginning of the month by seeing option pain is not proven fact scientifically though it has happened in the past.  

38.2% Fibonacci retracement is at 2903 and 50% Fibonacci retracement is at 2840. So in the coming week we should see the markets touching atleast these points.

To end this session let us see the Pivot data for tomorrow.

R3 3191
R2 3163
R1 3135
Pivot 3095
S1 3067
S2 3027
S3 2999
Projected High Range 3115 to 3149
Projected Low Range 3096 to 3062
Fib Projected High 3141
Fib Projected Low 3036

Hope that all of you make a tons of money.



Uma said...

good post...thank you for the bollinger bands + candlestick analysis

S S Cheema said...

you are welcome as always Uma.

geniusjaggu said...

paaji,good mrng.. :)

S S Cheema said...

Hi Jaggu!