Beginners' Point : Daily Pivot

 Whenever a newbie starts trading , the question top-most in his/her mind is,"whether to play long or short during the day?"

And technical analysts have a straight answer for that:"Use Day's pivot as a reference point ! "

What is this "Day's pivot?!"

Previous day's (High+Low+Close)/3 is considered Current Day's Pivot.

Above Pivot=Bullish Bias

Below Pivot=Bearish Bias

Lets take example of Nifty: On EOD 11.5.2023 we know that Days High=18390 ; Days Low= 18270 and Days Close=18297

So Days Pivot on 12.5.2023 =(18390+18270+18297)/3=18319

Now if you are a 5min time-frame trader, wait till 9.20am

If you are a 15 min time-frame trader, wait till 9.30am

Depending upon where the price closes at 9.20am or 9.30am with reference to this Days Pivot, it becomes easy to decide the day's bias. 

If price has closed above Days Pivot :Look for opportunities to go long !

 If price has closed below Day's Pivot : Look for opportunities to go short !

Point to note: Some people use Days Pivot = Previous Day (Open+High+Low+Close)/4

Once the Days Pivot gets known, other important numbers of considerable interest are Day's Resistance and Day's Support levels. These are ,then calculated using following formulae:

Resistance1=(Pivot x 2)-Low

Resistance 2=(Pivot +(High-Low)

Support 1=(Pivot x 2)-High

Support 2=Pivot -(High-Low) 

And to make every wannabie traders job easy, every charting software has built the above indicater

So on EOD 11.5.2023, one can mark the above points in advance (for trading on 12.5.2023) as illustrated below

And see how the price behaved on 12.5.2023

Are you not impressed that Price took support at previously mentioned level (Support 2) and then moved up to test Daily Pivot ??

But then how to trade it ??

How to develop a process for it ??

Should one Short at the open itself when price opened below the Daily Pivot??

How would one know whether Price would take support at at Support 1 or Support 2 ??

Actually it is the answer to above questions that brings in focus points like

Defining Risk,

Defining position size accordingly,

When to book out,

How to trail 

etc etc.

And to give answers to above questions (which wouldnot even arise till you start actual trading), further trading systems like CPR, PEMA etc were developed from the above concept of Daily Pivot. 

Limitations of Daily Pivot Based trading: 

Major limitation comes from the fact that larger market play-out is not taken into account and each day is taken as an independent trading unit.

To compensate the above point, in addition to Daily Pivot, Weekly/Monthly/Yearly Pivot points and Support/Resistance points are calculated (using Previous Week/Month/Year High,Low,Close) and various processes have been defined based on it. For Example

High of Year 2022= 18888

Low of Year 2022= 15183

Close of Year 2022= 18105

Pivot for Year 2023= 17392=(18888+15183+18105)/3

Support 1 for the year 2023 = 17392 x 2 - 18888= 15896 

Resistance 1 for the Year 2023 = 17392 x 2 - 15183 = 19601

All of us know that price during current year did go below the Yearly Pivot of 17392 and as per above logic should have taken support only around 15896 , but it reveresed from 16828 itself and currently trading above Yearly Pivot.

How could it take support from 16828 and not dip to 15896 ???

Important point here is : these are just some reference points, at times these work, At other times , they donot work. No one should approach them as some guidelines written in stone.

Markets are always in flux. Always factoring in different informations -- geo-political, social , economical and keeps reacting/discounting them.

Anyone who claims to predict them correctly is either God or Liar !!!

Dreams & Regrets !

 They say greed & fear are the most potent driving  forces  for a human being.

And all stock-market entrants  are  "lured" by fanning the greed  element:

"Make 1 lac in a day !"

"Trading strategy that would lay a golden egg daily !!"

And many more ----

And I donot know why, but there is a general perception among people that stock-markets are the  easiest platform to make money (of late SEBI report has dented this perception by highlighting that 89% of F&O traders are actually losing money but  still....).

And  hordes of people come to  this  platform --- driven  by greed  and  mostly  a  belief  in their luck .

“But,then,success is a mixture of preparation and luck.” 

Starting this week-end, I would start a series of blog-posts illustrating in detail a good  number  of  strategies that "can" prepare any discerning aspirant  to know how price-action, momentum and volume can be studies together to understand different market phases and prepare better.

आख़िरी पन्ना

 आख़िरी पन्ना

स्टाक मार्केट में घुसने से पहले किसी को ये अंदाज़ा नहीं होता कि यहाँ पैसा कमाना इतना कठिन है । शुरु में अकाउंट खोलते हुए रिलेशनशिप मैनेजर की मानें तो उनके एडवाइज़री सर्विसेज़ ही काफ़ी हैं पैसा बनाने को ! आदमी को लगता है कि बस यहाँ अकाउंट खोला और एडीशनल इनकम चालू ! फिर दुनिया भर के अख़बार और टीवी चैनल क्या यूँ ही पूरा दिन टें- टें करते रहते हैं?
आँखों के सितारे टूटने में साल भर तो लगता ही है और नौजवान ट्रेडर फिर भी घाटे को पीछे छोड़, ज़िंदगी की होड़ और दौड़ में आगे व्यस्त हो जाता है, पर अधेड़ावस्था की ओर जा रहे व्यक्ति जो इसे रिटायरमेंट के बाद की व्यवस्था के रूप में देख रहे होते हैं, वे इसके जाल से नहीं निकल पाते और अलग-अलग टीवी चैनल तथा एडवाइज़री सर्विसेज़ से उदासीन हो कर ट्रेनर्स और मेन्टर्स की ओर रूख करते हैं!
ज़्यादातर ट्रेनर्स अपने आप को एक्सपोज़ करने से डरते हैं और उनका यह डर उनके इन्टरैक्टिव स्टाइल से झलक ही जाता है!
और इनट्रोडकट्री मीट- अप्स में अगर कोई मार्केट का अनुभवी व्यक्ति शामिल हो जाए तो ये ट्रेनर्स जल्दी ही असहज हो जाते हैं ।
मैं अक्सर इन मीट-अप्स में जाता हूँ, शुरू में मैं अपना प्वाइंट पूछते हुए काफ़ी अग्रेसिव हो जाता था क्यूँकि किसी भी ट्रेनर का जो “नॉन- फेलिंग “ स्टैटजी सुझाने का एटिट्यूट होता है, वो मुझसे बर्दाश्त नहीं होता!
इस बाज़ार में ऐसी कोई स्ट्रेटेजी नहीं है जो हमेशा सटीक बैठती हो पर अपनी स्ट्रेटेजी की कमियाँ बताने का साहस कोई ट्रेनर नहीं कर पाता — हाँ कुछ लोग रिस्क मैनेजमेंट की ज़िक्र ज़रूर करते हैं पर अपनी स्ट्रेटेजी के रिस्क की बात पूछने पर बहुत अॉफेन्ड हो जाते हैं क्यूँकि ऐसा करने से उनका सेल्स एजेन्डा प्रभावित होता है!
ऐसी ही एक मीट ( वर्कशॉप कह लीजिए) , की घटना का ज़िक्र यहाँ कर रहा हूँ!
अधेड़ उम्र के यह दारजी मीटिंग के बीच में अधीर हो उठे और उचक कर बोले कि “ कोई ऐसा तरीक़ा बताइये जिसमें हर महीने एक निश्चित राशि प्राप्त हो सके ! “
उनकी उद्वलित अधीरता को पहचानते हुए मैं ने कहा “ भाई साहब, अभी तो किताब आधी ही हुई है और आप सीधा आख़िरी पन्ना पढ़ने को बेचैन हो उठे ?!”
उस वक़्त तो ये भाई सा’ब बैठ गये पर मैंने देखा कि वे धीरे-धीरे उचाट हो गए और ऊँघने लगे , जैसे कह रहे हों कि “ भाई बहुत मीटिंगों में हो लिया, बस ये आख़िरी पन्ना ही नहीं मिला!! “
अच्छा हो अगर सभी पार्टिसिपेन्ट्स को यह जानकारी रहे कि मीट-अप्स एक मेल- जोल का ज़रिया है—- बस !
और ट्रेनर्स वर्क-शाप्स से आपको कुछ डॉट्स हासिल हो जाते हैं पर इन डॉट्स को जोड़कर पूरी पिक्चर आपको ख़ुद ही बनानी होगी!
यानि आख़िरी पन्ना आपको ख़ुद ही लिखना होगा— इसकी तलाश मे भटकना छोड़ दीजिए!! 

Multi-timeframe Analysis of DR REDDY'S

 

It was in the month of July 2020 that Dr Reddy's had broken out into new All-Time Highs

At these points, as we donot have any historical data to mark resistance/target, we have to look at Fibonacci Extensions to derive at probable break-out targets in following manner                          

Now that we have retested the break-out point,and shown initial signs of Bounce, let us see what we can observe in different time-frames.

 As all of us know,in Technical Analysis, previous Resistances,once broken, are treated as current supports and the demand zone from where the spurt to breach previous resistance originated becomes a good DEMAND ZONE (DZ). So in Monthly Charts, 3800-4075 zone had become an important DZ

In Weekly Charts, we can further fine-tune this DZ as lying in 3950-4140 zone . And price has shown a bounce from this very zone only. Only problem is === VOLUME which is not very convincing.

On Daily Charts, a copy-book trade-set-up of positive Divergence and Breakout from Demand Zone has occurred 

BEST -BUY= 4350-4400

STOP-LOSS = 4100

FIRST TARGET = 4900

And if in the meanwhile, volume support becomes visble, one may hold it for new All-Time High as well.

     

Planning a Break-out Trade

So you did your EOD analysis and zeroed in a couple of Stocks where the price-volume action suggested that price is likely to break out of a range or has seemingly broken out of range and you decide to take position in the stock first thing in the morning.
And as the fresh trading session starts you take a trade mostly on "market order" as you donot want to miss the breakout. (FOMO).
But,then you start wondering ----
Why price is not moving in my desired direction?
Was my analysis wrong??
Is this EOD analysis a sheer waste of time???
Are people who say Technical analysis doesnot work,correct????
Or is it my bad luck--- may be these markets donot suit me ?????

And with all the above thoughts clouding your mind,you see the price drifting down,below the day's pivot/S1/S2 or at times previous day's low --- and with very heavy heart, you take a deep breath,and cut your positon,booking loss and wondering what went wrong.
Worse happens,when you notice the same stock having gone up more that 10% in next couple of days. It again draws you to markets, to commit the same mistake again.

Let me illustrate the above with a Couple of recent examples:
BEFORE

AFTER

BEFORE

AFTER

BEFORE

AFTER

The most popular advice that one gets to counter the above scenario is "Instead of trading the break-out,trade the retest of the break-out as most of the time,the break-out point gets revisited"
The problem with the above advice is that when price is revisiting the break-out point,it mostly looks like a falling knife and one wonders whether to catch it or not. Although there are methods to look at the volume at the time of revisit and formation of reversal candlestick patterns at the time of revisit,but currently our issue is whether we can handle the break-out trade in a better way or not.

First of all, check the move from where the break-out move got started,use it for your position sizing and Stop-loss.

Second, and more important point (particularly when you wish to trade the break-out Intraday and not on short term positional basis), is using first 15 minutes candle on the day of purported break-out. In two of the three examples above, the first 15 minutes candle was enough to tell that the break-out is not happening. And in the third, the fake break-out could be told within first few candles.

Summing up :
Step-1 : Identify the proper stop-loss point,depending upon nature of trade (Intraday/short term position).
Step-2: Based upon Stoploss, decide upon the position size.

Step-3: Make proper use of 15min Opening Range Break-out to initiate the trade. All intraday traders have to see the break-out trade as an ORB trade only.

Approaching the break-out trades with abovementioned steps will not only prevent you from rushing into the trade but also help you to plan your trade better.

Trade No.1

Category of Trade: Pullback

VinatiOrganics (INE410B01037)

Why Shortlisted:

1. Uptrend: Note the HH-HL swings
2. ADX: Above 25, +DI crossed above -DI
3. RSI: Hidden Bullish Divergence noticed
4. Volume: Spurt in Volume noticed
5. Candlestick: Spinning Top,Outside Bar Daily Candle

Trade-Plan:

Risk Amount (fixed for all Trades)=5000/-

Stop-loss: @919

LongTrade Entry: @1004 (Closing Price on Friday dt 19.6.2020

Stop-loss Amount: 1004-919=85

Position Size: 5000/85= 60 shares (Approx)

Target : 1111 and above

Agressive Traders can keep their SL at 964 and then position size would come to 

5000/(1004-964)=125 shares.

Disclaimer: 

1. I am not a SEBI certified Advisor/Analyst
2. This bolg post is for keeping record of my trades
3. One may use this post for educational purpose but no trades should be taken without cosulting your authorised financial advisors.

Planning a Pull-back Trade

I have been categorizing my trades as

• Pullback Trades
• Range break-out Trades
• Reversal Trades

Let's discuss Pull-back trades today.
To illustrate, I am taking the most recent example of Jindalpoly
On EOD 9.6.2020

And on 10.6.2020

Now lets take a Probable Trade example--- Trades About to Happen: 

Step1: Locating a trending Stock:

Trend is time-frame specicific. There are different ways to define it,but the simplest is to look at the plain chart and see if it is making  Higher-Highs and Higher-Lows on the selected t/f. If yes then we can call it an Uptrending Stock. Vice-versa for downtrending Stocks.

Steeper the Incline/Decline , stronger would be the trend.

If you have difficulty in doing it through bar/candlestick charts,do it with the help of line chart.

I have picked up Britannia for today's illustration

Step-2: Locating a Pullback

As price never moves in a straight line because of periodic booking of profits,all stocks tend to show dips while moving in an Uptrend. Ideas is to locate these dips and catch it on that point where it is ready to resume its original trend. 

For it,following points can be marked:

•  Previous Resistances which would act as Support now 
• Trendlines
• Preferred EMA/SMA-- usually 34/50
• Divergence in lower t/f RSI/MACD

Step-3: Locating Entry point & Stop-loss:

One way of entry is through the following bullish Candlestick set-ups in Daily Chart

However, Entry and Stop-loss are best defined through Bullish Candle-stick set-ups in one t/f lower, i.e. if we have chosen Daily t/f for locating trend & pull-back then after Step-2,we have to look for Bullish Candlestick set-ups in 75min chart. If this bullish candlestick set-up occurs after positive divergence,it adds to strength as it confirms that the pull-back has lost its strength and the stock is ready to move in higher t/f trend direction.
So lets look into 75min chart

This chart tells me that if on Monday,follow-up buying fails to take price above Friday high then there is a chance of pullback continuing upto 3175 where we shall have to revisit the charts to look for positive divergence and bullish candlestick set-up for best entries.

Weekly Chart:

Price has broken-out into all-time-high territory and revisting/retesting previous resistances. RSI has yet to break-out of previous swing high --- once that happens,very fast upmove would be seen. Till that time, depending upon overall market environment, some consolidation at curent levels may take place for a couple of days.

Other stocks with similar set-ups: