Thursday, May 7, 2009

Beginning of an end?… Update for 07 May 09

Those of who used to look at the chart I post they would find a small and subtle difference in the chart I post. I have done away with the 5 and 20 EMA and introduced 3 and 15 EMA. Daily 06 May 09The reason was – perhaps I wanted to see how accurate the 315 trading strategy is. I came across many people who are all out swearing with this Strategy – so I said to myself – what goes out of my pocket to try it for some time. In any case before I decided to try and follow it – I went back almost two years plotting how well it worked and I must say that it did show a lot of promise. So for all who are interested the 3 EMA and 15 EMA will be part of the charts that I put forward every day.

On the Global cues front the Asia was mixed and Europe was perhaps cautiously  positive. FTSE started the day deep red and that was the lowest it reached. It kept recovering reaching the peak just about 2 hours before closing. Then it came down to close 1.37% in green. DAX and CAC followed almost the same trend to close 0.57% and 1.81% in green. In US the Tech related Nasdaq is lagging other indices and DOW closed the day after good amount of volatility 1.21% in green, Nasdaq up 0.28% and S&P up 1.74%. The fear of the bank ‘Stress Tests’ seems to be dying down. Now Nikkei and Strait Times have opened strong Nikkei up 4.18% and Strait Times 2.15%.

On the charts – once again referring to the 315 strategy yesterdays Doji said ‘book profits on longs’. In 315 – the sell longs does not necessarily say that you have to go short – so whenever that signal is generated I will announce it here. The candle has barely left the upper Bollinger band and unlike the earlier two times – this time the candles are not violating the bands. Se there is no clear signal as to where we are going. The volumes seem good. ADX is bullish – and the kind of doubts it was generating are over for the time being. MACD has given Bullish divergence again. RSI remains bullish  and is just a wee bit out of the  overbought zone. The slow Stochastic are bullish but in the overbought territory. Yesterday on Stockezy there was a remarks – watch out for 17th May and I have a couple of mails too posting the caution about the approaching 15/17 May – hey guys I know that the elections will be terminating and the horse trading may just begin in Indian political scene – but the threat to watch out for? let us see.

Let us see the Pivot data…

R3 3826
R2 3759
R1 3692
Pivot 3650
S1 3583
S2 3541
S3 3474
Projected High Range 3671 to 3725
Projected Low Range 3708 to 3654
Fib Projected High 3746
Fib Projected Low 3578

Optain Pain 06 May 09The Put call ratio is 1.385… meaning puts still are being written more than the calls – the ratio is not as high as it was last month but still in favour of the puts. Please see the graphs of Option pain and Put call ratio.Put call ratio 06 May 09

I am Trying hard to complete another Options lesson. I do not want to discuss any strategy before we are all at par at understand the basics. What has happened is that I have been posed some very basic questions regarding options on mail – all of which I have not been able to answer. So if you plan to touch the options – get your basics right.



Nikesh Goyal said...

I respect your blog much as you atleast giving some of your understanding on the market with some sort of technical analysis which seems some valid. Although trading on technical (MACD, RSI, AM, STOCH) and that too on nifty is most daunting task in the world.


The reason i worte this comments is that I think you understand how to test any strategy. You have put here 315 strategy and that's looking very awesome on last 2 months.. :) But have you tested the result on 10 years horizon? What are the result on those 10 years horizon?

S S Cheema said...

Nikesh: Hi and thanks for the compliments. Nikesh I have tested is on last two years charts - took me better part of two hours to go over the charts.

You must understand that technicals by nature is looking for the patterns in the past and thereafter waiting or expecting to replicate themselves in the present conditions. So technicals - whatever one may say are backward looking. That said the in the past the success rate of this strategy was impressive. Low false indications and fairly good returns by finding trends.

I presume that you know what 315 is, after that see when it generated a buy signal on let us say nifty... If generated that signal on 16th march and a sell signal day before... that is a crazy 900 point run on nifty. If you go further and believe in pyramids then you would have collected another one lot en route- a crazy 60k you should have made - take out 10 k for hedging (I am shit scared of naked positions) 50 k is not bad is it?

And sorry there can be nothing that peaks in future - otherwise I would have bought my dream car - benz a long time back