Saturday, February 27, 2010

weekly outlook

  1. Looking back, last week played out according to my expectations.(so what's new, huh, you must be gazing at that tic tac toe and predicting future)
  2. Although people are talking about a breakout, change of trend, etc., I tell you it's all rubbish, (you always belittle other people's haaaard work, where is your chart?)
  3. I don't have a chart, but figures downloaded courtesy bseindia.com and their associated partners, which reveal what DII said to FII in January and February, "Jehanpanah, tussi great ho..tohfa kabool karo", FIIs were selling and DIIs were buying, essentially to let FIIs exit at good price! And now FIIs are not buying, so how would the Indian bourses move north?(You always make things look scandalous.)
  4. Coming back to the next week, the Phantom Price Line is at 4880. The high is at 4990 and low (BSAR)is at 4809. If Nifty breaks out and closes beyond, either high or low, then it could be said that a break out has occurred.
  5. The VHF (29) is at 21, signifying that a change in trend is at hand
  6. The ADX (14) is 18, signifying a lack of an undercurrent
  7. There is a remarkable Reverse Bullish Divergence in W%R (29), and RSI (14); good news for people who invest in non leveraged products. Expect zero to hero within next one year.
  8. Volume Indicators: Double Bottom in MFI (14)
  9. Options Data suggest height of indecision among big players
  10. The breadth indicators suggest that Nifty has made a feeble effort to recover from the Oversold state.
  11. To sum up: Go long, Go Fishing for 6 months, come back and be rich
Comments:
  1. Sir, Do u see market to cross 5485 and turn bullish this time? The other day, u told below 5485 market is bearish. Please clear the doubts. n.b. : i have no intention to hurt u in referring to above facts.
  2. Javed Sir, Do you mean market will again go down before making a new high? Please comment as I am new learner, finding it difficult to understand tech language. Thanks Sachin
  3. Javed bhai I am becoming your chamcha and feeling proud about it too. Wishing you and your family a very happy holy and accept my best regards. Sandy
  4. Vvvvv ji, why don't you admit that you are short? Read Sachin ji's remark and drink some Rose Sharbat, if a newcomer could understand it why can't you? Sachin ji, you got me, 100%. Sandy ji, no need to become my Chamcha, feel free over here and express your doubts and concerns whatever they are.
  5. Mr vvvvv writes, "sir, Confusion came from the phrase "Go long, Go Fishing for 6 months". It mismatched with foregoing paragraphs in your article. If some body is unable to understand a conclusion which is contrary to the whole article, can he not request for clarity? Why do u reply in that way when i ask in such humble way? Again, request, sir, do not take it otherwise, please. "
  6. And on one other blog he wrote..." vvvvv said... Sir, I am an avid follower of yor blog. But sir, I face one problem as is below: Suppose one fresh white candle has been formed above red line and stochastics crossed as desired but RSI @ overbought zone. What to do here? Buy? If yes, what will the stop loss be? Sometimes, I take position (say buy) as per chart and book profit/loss as per RSI. But market keeps tanking. How to avoid this? Moreover, as I live at Bandel,WEST BENGAL, I wish to get your course TRADING physically instead of ONLINE. My cell no. is 9432001628. EMAIL ID : konchati@yahoo.co.in Awaiting reply Thanking you in advance." http://www.stockmaniacs.net/2009/06/you-can-earn-your-living-using-this.html
  7. And the last and the best....(On Sudershan Sukhani's Blog),"vvvvv said... sir, Being a layman, I am scared. What should my target in NIFTY be - 9465 or 550? Expecting a simple one word(number) answer. Please, come to our rescue. June 7, 2009 7:03 AM " http://www.sudarshanonline.com/2009/06/cup-and-handle-in-nifty-examined-again.html
  8. That's why I always maintain, Stock Market is full of Hypocrites, they are laymen on one blog and use Connor's RSI with Stochastic Pops on the other, and write indignantly on another. Please I humbly request vvvvv ji, with folded hands, go elsewhere, and please don't feel as if you have been kicked out. Could I not request that, Konchati?

Wednesday, February 24, 2010

point of no return





Thanks Dinesh ji, Dharmesh ji, Rajiv ji, Sureela ji, and all the others. I came to the forum in search of more knowledge. But more than knowledge I discovered politics, which was meaningless. I am not an internet personality, nor do I intend to become one. At a certain point of time this blog has also clocked 1000 hits per day, if I would want it I could get it. But again my objective is to share what could be useful to somebody else. Because I am indebted to all those strangers who have shared rare and original materials over the internet, whom I don't know, and may be could never even say thanks to. So I wish to continue that same tradition. As Jesus of Nazarene is reported to have said, "Freely you have received, freely give,'" in Matthew 10:8. I would continue giving freely, I promise, as I continue to receive freely! So Let my Spirit Flow freely, from now onwards.

Monday, February 22, 2010

fun

  1. Buy Nifty at 4850 Spot, SL 4825 Spot, Target 4876, 4889, 4909 Spot
  2. Done three times, +78 points. Range bound, did somebody say? Profits-abound I say. It's how you trade non-trading zones! No More Trades on this call.

questions

  1. Vvvvv ji asked, "If one follows BSAR, what should be the target in that direction?"
  2. Shekhar ji asked, "Will you plz clarify the Stop-loss if we follow BSAR then where should we put the Stop-loss according to BSAR while entering a Fresh Trade"
  3. Any Stop and Reverse Technique, is a trend following method, meaning you are in trade as long as your trailing Stop Loss is not hit, once hit you take positions in Opposite direction
  4. For example, if your BSAR Daily is at 4817, you remain Long as long as you are above 4817, and once Nifty Closes below 4817, you come back next day, and close your Long position and initiate your Short position.
  5. 85% of the times you get the same prices the next day, where your Biased Stop and Reverse Point was, so no need to panic
  6. For targets you could keep 3% or 7% of the entering value as your target from the BSAR point. For example, suppose you entered the trade Long at 5000, your target is 5150 (3% of 5000 is 150, add to 5000 = 5150). This is for trading options. In options, the SL is always the 50% of the total amount invested. I strongly discourage beginners to take exposure in Options. If you are trading futures you could go for 7% target, in our example it would be 5350 (7% of 5000 is 350, add it to 5000, the point of trade, we get 5350). The SL for trading futures is always 10% of your entire capital. For example if you have a capital of 10,00,000. And further suppose that you buy 10 contracts of Nifty. So 10% of 10 Lacs is 1 lac, so the maximum, that you wanna lose is 200 points. because if you divide 1,00,000 by 50 X 10 => 1,00,000 / 500 = 200 points. Future traders never use more than 40% of their capitals in margins, and rest 60% is always idle! If you are trading Stocks, you could keep a target of 10% of the value of the stock, and write a covered call for a strike price which is 10% higher than your entry price of the stock, every month.
  7. I hope I have been able to clarify this. Further Questions are welcome

Saturday, February 20, 2010

weekly outlook

  1. In the name of Allah, the Beneficent, the Merciful. Say : I seek refuge in the Lord of the dawn, From the evil of that which He has created, And from the evil of intense darkness, when it comes, And from the evil of those who cast (evil suggestions) in firm resolutions, And from the evil of the envious when he envies." ( Holy Quran 113:1-5)
  2. The Nifty would be overbought above 5101, and Oversold below 4666
  3. The important pivots could be 4398.2 4449.5 4507.7 4532.5 4576.8 4607.7 4642.4 4666.7 4713.2 4749.7 4801.0 4832.7 4884.0 4935.2 4967.0 5018.2 5054.7 5101.2 5125.5 5160.3 5191.2 5235.5 5260.2 5318.4 5369.7
  4. The attached PNF chart for Nifty, exhibits a classic congestion formation and targets 2700 points in either direction,(6600 OR 2600) using the horizontal count for deriving Price Objective
  5. This target is very unlikely to happen in a week
  6. If I were a gambler, I would be buying Nifty at all levels
  7. Volume indicators suggest a range bound market with positive bias
  8. Trend Indicators suggest, absence of any underlying current
  9. Breadth Indicators suggest that if Nifty were to fall say, about 300 or so, points then it could bottom out.
  10. Momentum Indicators suggest positive reverse (hidden) divergences.
  11. The 14 period TRIX Weekly, is at 5022, Nifty might give it a shot.
  12. The Index Options PCR suggest some interest in Put Writing.

Wednesday, February 17, 2010

for the kind attention of rahul rathi - ob os revisited

  1. Q:How do you trade in the market?
  2. A:There are mainly two ways of trading, one is to follow the trend, another is to exploit the reaction, or retraces that come from time to time in a trending or rangebound market;
  3. Q:How is one different from the other?
  4. A:In following a trend, firstly, one has to identify a trend, then one has to keep a trailing Stop Loss, for safeguarding profits and for the fear of sudden reversal, and secondly, one has to calculate the targets which could be the points of Resistance or some levels.

    In reactionary trading, you try to determine the levels at and around which the market would be Overbought or Oversold, and a retrace would happen. These are very short term reversals, or corrections. They happen fast, and present with two opportunities, viz, opportunity to trade it contra trend, and opportunity to enter in the direction of the trend;
  5. Q:How would I calculate such points, and what kind of charts do I require?
  6. A:The calculation is complex, since it requires the entire database of quotes to know the precise levels, but I have been publishing the same here for quite some time now, and would continue to do so, as long as possible. And Graphical depiction of the quotes is not needed, hence no charts required;
  7. Q:Which OB OS Levels do you use?
  8. A:Weekly;
  9. Q:How do I Calculate Stop Loss?
  10. A:Very difficult Question...I have nearly forgotten that Stop Loss is something to be used! I thought it was something to discuss when you met strangers apart from the weather! Anyway Keep a 3% SL of the Nifty Value, like if you short at 5000 3% of 5000 would be, 150 points, so your SL should be 5150, if you go long at 4500 3% of 4500 would be 135 points, so your SL should be 4365, but this is only for your own amusement, I assure you, I had my last SL hit in August 2009, while trying to go after a trend, and with Allah's grace, it was also my last order till date to have gone in loss! HE IS INDEED THE MOST MERCIFUL AND THE MOST BENEFICENT.
  11. Q:What is your success rate?
  12. A:I started looking at this concept starting from 5th June 2009, since then, using this method, I have had, ummm let me invent, 2 SL hits, (I am lying, there weren't any) and the success rate is ummm, okay 95% looks good, ( I have developed this bad habit, following in the steps of that bird keeper, Success Rate is much higher, almost highest).
  13. Q:Is there something else that you use apart from the OB OS Levels in your trading?
  14. A:Yes, I like Point and Figure charts, they remind me of my childhood when I would play tic tac toe with my cousin sister;
  15. Q: Anything else apart from that?
  16. A:Divergences in two dozen indicators,half a dozen price overlays, Elliott wave theory with my own modifications, All kinds of charts etc.,
  17. Q:Are you lying again?
  18. A:God damn that bird keeper

Sunday, February 14, 2010

weekly outlook

  1. The 5 EMA Low is at 4804, and Nifty closed at 4826, on the last trading day of the week, so it's in uptrend
  2. Swing traders are best advised to keep 4804 as Stop and Reverse point for their trades for the forthcoming week
  3. The Oversold level is at 4680, it seems unlikely that we would get to see this level in the following week
  4. Some important Pivots could be, 4728,4765, 4818, 4850,4903,4956,4988,5041
  5. The VHF for 29 weeks continues at very low level of 0.23, suggesting range-bound conditions in the following week, or a pause in the trend in either direction. The ADX for 14 weeks at 19 also suggests that Nifty is uncomfortably quiet these days
  6. The RSI 14 and W%R 29 hover around their median values
  7. MFI at 58 probably points to the fact that DIIs and retail has been active on the long side in the market
  8. Looking at Volume Indicators it seems that Nifty is in a state of indecision, such times are not good for the novices to expose their capitals to seasoned speculators in the markets
  9. Looking at Index Options PCR, call writing is the order of the day, one possibility which most analyst overlook in such cases could be that it might look Nifty would cross certain levels but unlikely to do within the time-frame (might even do after-wards!) of a week or so, so that option writers could bite into the time decay!

Friday, February 5, 2010

weekly outlook

  1. Nifty continued it's downtrend for the second consecutive week
  2. No fresh longs should be initiated unless the weekly close happens above the BSAR point(Weekly), which now stands at 4868
  3. The Weekly Oversold Level is at 4714, any close below this on the first three days of the next week would see a nice bounce of 100 - 150 points, which could be traded
  4. The Weekly VHF is at 0.22 almost 2 sd away from the median, signifying that a reversal is at hand
  5. The weekly ADX stands at 19, almost one sd away from it's median value, signifying that Nifty is lacking in strong trending oscillations
  6. For some strange reason NSE is not publishing the Advance Decline Data for January, so we look at PCR, Put writing is not as feverish as it should be near market bottoms, so there is a possibility that nifty might test Monthly BSAR or Quarterly Mean which is at 4546
  7. Some Important Pivots could be, 4920,4883,4861,4790,4766,4742,4719,4695,4671,4647,4620,4576,4554,4517
  8. Gold has touched 1050, now the target is 1320.

Thursday, February 4, 2010

So where are we?

The FIIs are selling relentlessly, while DII buying is declining. The Nifty is Oversold in weekly charts, there are indications of a possible reversal in longer term charts, but short term reversal signals are absent. A lot of volatility, as noted earlier could be expected, FII, DII data appears courtesy bseindia.com

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Wednesday, February 3, 2010

fibonacci analysis

  1. Nifty made a high of 5310 on 6th Jan 2010, and subsequently made a low of 4766 on 29th of Jan 2010.
  2. The difference comes out to be 544 points
  3. => 61.8% of 544=336
  4. Add 336 to 4766 = 5102
  5. As long as Nifty is below 5102, it could be a correction of the 5310 -> 4766 move
  6. The ideal corrective target is 4973 (38.2% of 544 added to 4766)
  7. If it closes above 5102 the target could be 5457 (127.2% of 544 added to 4766)
  8. If it closes below 4766 the target could be 4618 (127.2% of 544 subtracted from 5310)
  9. 4894 is a major support now (23.6%), below which nifty would be bearish

Tuesday, February 2, 2010

Chebyshev’s Inequality (Oh Those Russians)

  1. Introduction

    Chebyshev's inequality

    In probability theory, a theorem that characterizes the dispersion of data away from its mean (average). The general theorem is attributed to the 19th-century Russian mathematician Pafnuty Chebyshev, though credit for it should be shared with the French mathematician Irénée-Jules Bienaymé, whose (less general) 1853 proof predated Chebyshev’s by 14 years. An observation is rarely more than a few standard deviations away from the mean. Chebyshev's inequality entails the following bounds for all distributions for which the standard deviation is defined. At least 50% of the values are within √2 standard deviations from the mean. At least 75% of the values are within 2 standard deviations from the mean. At least 89% of the values are within 3 standard deviations from the mean. At least 94% of the values are within 4 standard deviations from the mean. At least 96% of the values are within 5 standard deviations from the mean. At least 97% of the values are within 6 standard deviations from the mean. And in general: At least (1 − 1/k²) × 100% of the values are within k standard deviations from the mean

  2. Proof

    Chebyshev's Inequalities Chebyshev's inequality and its descendants allow you to place an upper bound on the probability that some random variable is >= a set value, given only the mean and variance of that variable. No other information about that variable's distribution is required. Some of the descendants exist to make use of information about higher moments, though.

    This web page was sparked off by a web page from Henry Bottomley, at http://www.btinternet.com/~se16/hgb/cheb.htm. He gives proofs for the standard two-tailed inequality and for a one-tailed variant, and shows examples where the inequality is exactly satisified. Herman Rubin responded in usenet, linking this to the 'problem of moments'. This result is also Question 9 in Problems 7.11 of 'Probability and Random Processes', by Grimmett and Stirzaker, published by Oxford Science Publications, ISBN 0 19 853665 8 - page 327 of my copy, which is the 1993 reprinting. The main contribution of this page is to give a slightly different proof for the one-tailed case, which I find easier to follow than Henry's.

    The main use for Chebyshev's inequality is in proving theorems, such as laws of large numbers. The existence of cases where it is exact shows that it is as strong as it can be, given its total lack of assumptions on the distribution of the variable involved. Despite this, you can usually get very much stronger bounds by assuming, for instance, that the variable in question is normally distributed - so most people do. It would be nice to use Chebyshev's inequalities as a defence against variables in real life where outliers are expected, but in such cases the variance of the variable in question may not be known - and judging the error of estimates of variance will probably involve you in distributional assumptions anyway.

    The standard two-tailed inequality

    We are given a variable X with known mean and variance. For convenience, add a constant to ensure that the mean of X is zero. P(|X| >= t) = E([X² >= t²]), where [condition] has the value 1 if condition holds and 0 otherwise. E([X^2 >= t^2]) <= E(X²/t²) = Var(X)/t² (since we made sure E(X) = 0). So P(|X| >= t) <= Var(X)/t². If you remove the constant added you find that P(|X - E(X)| >= t) <= Var(X)/t². This equality can be exact for rather degenerate distributions where X can takes two possible values.

    A proof of a one-tailed inequality

    This proof will use the well-known equality Var(X) = E(Var(X|A)) + Var(E(X|A)). One proof of this is:

    Var(X)=E(X2) - E(X)2
    =E(E(X2|A)) - E(E(X|A))2
    =E(Var(X|A) + E(X|A)2) - E(E(X|A))2
    =E(Var(X|A)) + E(E(X|A)2) - E(E(X|A))2
    =E(Var(X|A)) + Var(E(X|A))

    We first of all subtract a constant as necessary to ensure that E(X) = 0. Now, let p, q, and r be the probabilities that X is > t, = t, and < 0 =" pE(X|X"> t) + qt + rE(X|X < s =" 1"> t, 0 if X = t, and -1 if X <>2) = E(Var(X|S)) + Var(E(X|S)) And we ignore the term E(Var(X|S)) - which will be zero when our inequality is exact. So we are concerned only with Var(E(X|S)). It's easy to see that E(X|S >= 0) >= t. We can get an idea of E(X|S = -1) from the equality E(X) = 0. Note also that E(E(X|S)) = 0.

    Var(X)>=pt2 + qt2 + r[(-pt - qt)/r]2
    Var(X)>=(1-r)t2 + t2((1-r)/r)2r
    >=t2(1-r) + t2(1-r)2/r
    >=t2(1-r)(r+1-r)/r
    >=t2s/(1-s)

  3. Where s is the prob of X >= t. So Var(X) - sVar(X) >= t2s. or Var(X) >= s(t2 + Var(X)), from which we work out that (adding in our constant again)..

    Prob(X - E(X) >= t) <= Var(X)/(t2 + Var(X))

    Proof in answer book

    The proof in the answer book is neater, and doesn't need as much inspiration as you might think. Here we assume E(X)=0. Now give yourself an extra degree of freedom by noticing that P(X >= t) = P(X + c > = t + c). Since t + c >= 0, P(X >= t) <= E((X + c)2/(t + c)2) = (Var(X) + c2)/(t + c)2.

    If you minimise the rhs over c, you will find that it occurs at c = Var(x)/t. I need only pluck this figure from the air and work out that P(X >= t) <= (Var(X) + Var(X)2/t2)/(t+Var(x)/t)2 = Var(X)(t + Var(X)/t)/(t(t+Var(X)/t)2) = Var(X)/(t2 + Var(x)).

    Proof in Feller

    Another proof of this appears in Volume II of "An introduction to Probability Theory and its Applications", by Feller, section V.7, example (a). This is similar to the proof in the answer book (but no doubt precedes it, at least if you judge by the date of the respective copyrights.

    Connection with the Median

    The first proof above was based on a proof in Bartoszynski and Niewiadomska-Bugaj that the median is no more than one standard deviation away from the mean, so it is fitting that Henry Bottomley pointed out that you can derive that fact from this inequality. Without loss of generality suppose that the median is greater than the mean. The probablity of X being at least the median value is at least one half. If the median was more than one standard deviation away from the mean, that would contradict the one-tailed Chebyshev inequality.(notes from A.G.McDowell)

  4. *****This Topic is Incomplete, would be reposted*****