Wednesday, August 26, 2009

Hangman Candlestick! – so what?? Update for 26 Aug 09…

image I personally feel that we are now bullish to the point of being stupid – but then what? The markets never listened to me. The day will come when retail will be caught up in a web of self induced enthusiasm – the enthusiasm that will blind them and they will then grope in the dark while the markets will play out something unexpected. All the same till the time the party is on – remain on a edge and play out. The candle stick made yesterday was a Hangman Candlestick. Basically it comes after a trend up and has a potential to change the trend. It is perhaps not correct to use this as we are not in a typical trend and upswing (or for that matter of downswing) is of 3 or 4 candles. But all the same it can signal a reversal.

The Global cues are mixed at the best with positive vibes and some caution. The Asia had closed in the red after making attempts to go green. Nikkei was 0.79% down, Hang Seng down 0.49% and Strait Times was up 0.25%. Europe took cues from Asia and opened in red then sensing good day in US closed in green – almost at the days highest. FTSE was up 0.42%, DAX up 0.68% and CAC up 0.78%. The US opened in green and then quickly went up almost a percent plus. Thereafter it dropped to close at the levels of opening – not really flat but somewhere there. Dow was up 0.32%, Nasdaq was up 0.31% and S&P up 0.24%.

daily 25 Aug 09 As far as the candles are concerned – the markets are now pushing the bullish envelope. We are just a tick short of upper Bollinger band. On 315 we are comfortably on a – buy. But the markets have crisscrossed this lines four times earlier so a typical breakout has not happened. Like I said yesterday we can test the upper Bollinger band limit at 4747 and for the time being that should be it. The volumes increased somewhat with nifty logging average 50 day volumes. Ofcourse this is expiry week so activity increases as there are rollovers to consider, new positions to open or old ones to close. Absolutely surprisingly – ADX does not budge a bit – trailing at 14 (I hope my software is not struck) Weak – it shouts on top of its voice. Typical divergence with markets going to new highs without support of ADX. RSI is rocking and bullish at 58. Slow Stochastic is bullish  but with %k line in overbought territory. MACD has given its first bullish tick. I do have to agree that most of the indications are bullish.

The Broadband is not playing up so the options data is not loading. Pardon me for that so we go on without the options data. The global cues are still bullish and so are most of the indications on the candlesticks. Only words of caution in the winds are the candle itself – the Hangman and ADX that is not showing this upswing as a trend. The ideal strategy is to remain long with a stoploss of 4507 on closing and if short a strict stoploss of closing above 4623. For the day be long above 4591 and short below this.

Best of luck to everyone for the trades today.



SPH said...

On the daily chart it does not look like a hangman, though it is close. there is a slight nose ahead and taking the three days of consolidation around 4350-70, then the 2 days of rise, then the so called hangman (it is not perfect)?, it is confusing, cannot be conclusively read as a warning sign, though may turn out. more bullish perhaps, in my view. Another minor bullish signal is money supply which showed a slight up swing

S S Cheema said...

I agree with you - and I have mentioned that a hangman should ideally be read as a reversal if we have had a trend in place and you are right that 2-3 days do not make a trend.
Secondly - the money supply that seems to have spiked may be because of rollovers. In any case the Option data will not let you expire too much above the 4700 level.

SPH said...

As you say that options data may not expire too much above the 4700 level. True. expiry should be above 4700, making the bulls (market movers? (manipulators??) a winner.

Also, in current market conditions, I guess we can take 2 to 3 days uni-directional movement or close as a trend. Even this range bound movement is 200 points plus in breadth, which is considerable for many and allows for the money to be made.

In that sense, the appearance of hangman, if it would have been perfectly formed, could have signaled a reversal or atleast would have made me very, very cautious.
Just putting my foot in the mouth. Market, as you said in one of your last posts, is patiently waiting to prove me wrong.

S S Cheema said...

LOL - point given to you gracefully!