August 26, 2019

Market outlook

Daily charts:
- trend is down on daily charts
- I will call trend as up once it closes above 11200 (swing high)
- this is for sake of consistency

- Friday was a bullish piercing pattern
- this called up for a big gap up which happened today
- the following sell off caused a 300 points wild swing
- the close near day's high
- very good chances of 11200 being taken out

- I am already hearing talks of 12000 being taken out!

- only problem is nifty OI shows short covering and not long buildup.

- the swing gave an excellent opportunity for bulls and bears to profit
- sadly, it also would have caused huge losses to the disciplined trader
- I know people who were long on the first bar and some others who shorted after 100/ 150 points fall

- today's pattern is "hanging man" ... this is bearish
- this pattern is important only after a strong rally last 8-10 or 10-15 days
- this is not the case this time so we can safely assume rally will continue

- today's close was at 11057 (2% positive)
- AD was 2:1

3 min charts:
- big gap up but markets see selling from first bar
- took short position on break 10900
- covered half between 10800 and 10750
- exited rest around 10810 F
- traded long on break above 10900 F and then at 11000 F
- covered around 11040 F

- first short signal as per kplswing was a breakeven trade (this trade should be ignored)
- next long signal was immensely profitable

NOTE when using indicators
- do not use same indicator setting for covering an existing position
- so if you use N=20 for buying (kplswing), then use N=5 or 10 for exit
- and if any SL is too deep, then wait for markets to consolidate (the SL will automatically move up)
- or use some ATR based SL (this will be big in volatile markets and small in steady markets)
- for example, at 10 am the ATR was 26 points and at market close it dropped to 12 points
- lastly ignore any buy signal where candlestick does not close near the high and if a buy signal happens at a known resistance level.
- this means you should also not short near a known support.
- and most important: if volatility scares you, stay out and do nothing

15 min chart:

30 min chart:

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