(W) denotes a weekly event.
© 2018 Recognia Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Recognia and/or its content providers; (2) may not be copied or distributed; (3) is not warranted to be accurate, complete or timely; and, (4) does not constitute advice or a recommendation by ShareKhan, Recognia Inc. or its content providers in respect of the investment in financial instruments. Neither ShareKhan nor Recognia Inc. nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.
Pricing, historical chart data, real-time and fundamental company data are provided by Morningstar Research Inc.
Technical Event® and Recognia® are registered trademarks of Recognia Inc.
Recognia products and services are protected under U.S. Patent Nos.: 6,801,201; 7,469,226; 7,469,238; 7,835,966; and 7,853,506; and corresponding foreign patents.
In the science of Technical Analysis, Volume plays a role which is as important as any other basic indicator. An increase in the volume in conjunction with Stock price moves adds strength and momentum in the direction of the move. It reflects the market’s confidence that the uptrend will continue in force or its pessimism that the downtrend will.
For the market, declining volumes as the market rises are supposed to warn the end of a BULL MARKET.
Likewise, a sharp increase in volumes resulting in Selling Climax signals the end of a BEAR MARKET.
An increase in abnormal volume can alert investors to coming price movements, Up or Down before it becomes obvious to the overall market. Therefore, the market axiom “Volumes Precedes Price.”
Historically, the majority of BULL MARKETS have originated with at least two days within the two-month period where upside volume is at least nine times greater than the downside volume. Investors who track volume and spot the two-day Exceptional Upside Indicator can out-maneuver other investors and earn excess returns by positioning themselves for the coming Bull Market.
Basic Volume theory includes the following maxims:
* Increasing Volume with an advance is Bullish
* Decreasing Volume with a decline is Bullish
* Increasing Volume with a decline is Bearish
* Decreasing Volume with an advance is Bearish
* A Market Top is imminent when heavy volumes occur with little or No Gain in the averages.
* Heavy Volume confirms the direction of price breakouts from a Support or Resistance Zones.
* An increase on heavy volumes after a previous substantial rally signals a “Blow Off” with an impending top and
* Heavy Volumes accompanied by an accelerating drop in prices confirms a “Selling Climax” and impending price
reversal after the panic selling subsides.
* Low volume periods after upward price reversals reflect a Consolidation Phase before the resumption of the Upward
The Daily Volume Indicator measures extremes in the Supply/ Demand relationship. If a Stock closes at the midpoint of its trading range for the day, the indicator reflects no change. Closing Price above or below the trading range midpoint show an increase or decrease in the Daily Volume Indicator, respectively.
In constructing the Daily Volume Indicators, Technical Analysts take into account the day’s volume, closing price, Distance between closing Price and the midpoint, and the Trading Range.
These are just the basic characteristics of the Volumes, these must be read in conjunction with other commonly used indicators before drawing up any conclusion.
|Head & Shoulder (Inverted)||Head & Shoulder|
|Rounding Bottoms (Saucer)||Rounding Tops|
|Descending Triangle||Ascending Triangle|
|Double/ Triple Bottoms||Double/ Triple Tops|
|Falling Wedge/ Channel||Rising Wedge/ Channel|
|V- Formations||V- Formations|
|Continuation Patterns||Continuation Patterns|
|Flags & Pennants||Flags & Pennants|
|Head & Shoulder (Continuation)||Head & Shoulder (Continuation)|
Many Traders are taking position for Intra-Day / Short Term or Medium Term depending upon the periodicity of charts if it is 5 Min/ 30 Min/ 60 Min/ Daily/ Weekly or Monthly Charts on confirmation of Breakout from any important pattern or Support or Resistance but often traders/ investors are faced with a dilemma of taking a position in
1. anticipation of a breakout,
2. taking a position on breakout itself, or
3. Waiting for the pullback or reaction after the break out occurs.
Although the arguments can be in favor of each approach or all combined, If a trader buys in anticipation of an upside break out, the profits are better if break out takes place. But at the same time, the chances of losing increase if the break out fails to materialize.
If the trader waits for the actual breaks out, the chances of success increase but at the cost of entry at a higher price. Waiting for a pullback after the break out may be a sensible approach provided the pullback occurs. Unfortunately, in many bull markets, traders don’t get a second chance. The risk involved in waiting for the pullback is an increased chance of missing the move.
The best strategy under the circumstances of a trader is to trade multiple positions. The traders should take a small position in anticipation of a break out buy some more on the breakout and add a little more on the pullback move after the breakout.
Trading at the breaking of trend lines
This is one of the most useful early entries of exit signals. If the trader is looking to enter a new position on a technical sign of a trend change or a reason to exist an old position, the break of the tight trend line is often an excellent action signal. Other technical factors must, of course, also be considered to arrive at a conclusive approach. Trend lines can also be used as entry and exit points when they are made to act as support and resistance levels.
Trading at support and resistance level
Support and resistance are the most effective chart rules to use for entry and exit points. The breaking of resistance can be a good signal. Enter into a buy position and the stop loss can be placed under the nearest support point. Rallies to resistance in a downtrend or declines to support in an uptrend can be used to initiate new positions or add to old profitable ones. For purpose of placing stop losses support and resistance levels are most valuable.
How to read and act on Daily Newsletters
In the following paragraphs, we shall explain you as to how to read the figures to arrive at any Trading/ Investment Strategies.
First of all, be clear that we believe in Charts and figures than long stories with tens of ‘ifs’ and ‘buts’. With little knowledge of Technical Analysis, one can see the Basic Trend, Patterns, Support/ Resistance Levels, Breakouts, Gaps, Overbought/ Oversold Zones, Short/Long Term Moving averages crossovers and much more. Just a glance at any chart can give you a hint of possible market action in near to long term.
1. Support/ Resistance Levels (Daily/ Weekly/ Monthly Trading Strategy)
As the name suggests, there are many traders who trade only on support & Resistance levels. The table contains following details i.e. Name of Scrip/ Last Close/ 5-Period Low/ Support 2/ Support 1/ Trend Level/ Resistance 1/ Resistance 2/ 5-Period High.
In Conjunction with other indicators & tools, this table can use for:
1. Fresh Longs or Shorts on Trend Change Levels.
2. Booking Part/ Full Profit in Long/ Short Positions
3. For Quick gains of 1 to 5 Rupees on breaking of previous High or Low
Every Newsletter (i.e. Daily/ Weekly and Monthly) has a similar table to decide Daily/ Weekly/ Monthly Trading Strategy. The Support / Resistance levels are different in every table based on the Open / High/ Low / Closing of price in Daily/ Weekly/ Monthly Charts.
The table is in order of Bullish to Bearish on the basis of last closing Price vis a vis Trend Level. If the Scrip price is trading Higher than Trend Level, it is a positive sign for bulls and vice a versa. Traders can hunt for the scrips, which are on verge of crossovers to bullish to bearish or otherwise. Above Trend Level, scrip is likely to face resistance at ‘Res-1’ then ‘Res-2’. High of last 5-Periods also acts as resistance. Traders can make an entry for few Quick Bucks if scrip breaks 5-Period high to make a new High. The same rule shall apply on Downside below Trend Level.
2. Overbought/ Oversold Scrips in (5-ROC/ 12-ROC/ 9-RSI/ 14-RSI/ William%14R)
Similar to Support/ Resistance Table, this can also be used by Daily/ Weekly and Monthly Traders and Investors to decide their strategy. The figures 5/ 12/ 9/ 14/ 14, are the Period of Charts like in Hourly Charts it is 5-Hour ROC/ 12-Hour ROC/ 9-Hour RSI/ 14-Hours RSI etc. In Table of Daily/ Weekly/ Monthly, this Period will change to Days/ Week & Months respectively.
In Conjunction with other indicators & tools, this table can use for:
a. Profit Booking (in Full or Part)
b. Fresh Entry in full or part
c. Extending Trailing Stop Loss
d. Sign of Caution in Long or Short Positions
The table contains 8-10 most Highly Overbought/ Oversold scrips in each category. Suppose a Scrip is overbought in more than 2 tables, it warrants caution in Long Positions through any script can continue to remain in Overbought Zones for many periods part profit booking is always advisable. Similarly, Highly Oversold scrips in more than 2 tables suggest that trend is likely to change from bearish to bullish. If other indicators support, gradual buying can be started but with Stop Loss.
3. Bar Reversal (Up/Down), Candlestick Engulfing Patterns (Bullish / Bearish), Doji Pattern, Volatile
a. Bar Reversal (Up/ Down): It is a very good indicator for Day & Swing Trading particularly after a significant rise or fall over a number of periods. Bar Reversal in Weekly/ Monthly Charts is very useful as ‘Advance Indicators’ to catch short-term moves on either side. For Example in the case of Upward Weekly Bar-Reversal, Investor can buy gradually on declines or Panic selling for an impending short-term up move. Same equation applies in case of Downward Bar reversal. Weekly/ Monthly Bar Reversals after a reasonably long Bull/ Bear phase indicate Trend Reversal if supported by other indicators. (IMP: This indicator should be used in conjunction with other indicators with use of Stop Loss mechanism)
b. Japanese Candlestick Engulfing Bullish/ Bearish Pattern: It is a Japanese Candlestick Reversal which is refined and more powerful form of Bar Reversal. When a ‘White’ candle engulfs a preceding ‘Black Candle’ it is called Bullish Engulfing and when a long Black Candle engulfs preceding ‘White’ candle it is termed as the Bearish Engulfing pattern. It can be used for Quick Trading if a stock is moving up/down for many periods and other indicators like Overbought/ Oversold Zones are in favor of decline/ recovery. Weekly/ Monthly Engulfing Patterns after a reasonably long Bull/ Bear phase indicate Trend Reversal if supported by other indicators
c. Doji Star (Japanese Candlestick Pattern): It is again a Japanese Candlestick Pattern in which Stock Price closes near its opening level after a reasonable High/ Low. A Doji Pattern gaps above or below a While or Black Candlestick. It is a Reversal signal, confirmation of which comes during next Trading Day. ‘Smart Traders can keep a watch on such stocks and trade Long/ Short on confirmation with the help of other indicators like Overbought/ Oversold, market sentiments etc.
d. Volatile Stocks: As commonly known volatile stocks provide the better opportunity for Day and Swing Trading. This column gives the list of stock in which the gap between High & Low of the last 3 periods in comparison to close is too high. This is just for guidance purpose. Traders must see support/ resistance and other tools before entering any trade on the basis of this table.
4. Gaps (Upward/ Downward > 0.50%):
Gaps are spaces left on the Bar Chart where no trading has taken place. An Upward Gap is formed when the Lowest price of the day is higher than the highest of the previous day.
Downward gap is formed when the Highest Price of the day is lower than the lowest price of the previous day. There are 3 type of Gaps i.e. Breakout Gap (When price moves out of any important Pattern), Continuation Gap and Exhaustion Gap (indicating termination of an upward or downward move). We have given a filter of 0.5% of the stock price to avoid any whipsaw movements.
5. Bullish & Bearish Stocks (For Intra-Day):
Based on Technical Analysis of Extreme Short Term Charts i.e. 5 Min/ 30 Min & 60 Min, we short list a few stocks which are on verge of Bullish/ Bearish breakouts, at Crucial Support /Resistance or in highly Overbought/Oversold zones or stocks which have broken any chart pattern The Stocks can be put under ‘Watch List’ during Market hours for possible move on either side for Quick Profits by Day traders.
6. What the Charts Foretell Now : (In Detailed Newsletter, Part – B, Only)
Based on Technical Analysis of Extreme Short Term/ Medium Term Charts i.e. 60 Min/ Daily & Weekly, in short, we give our views about certain Stocks (15 to 25). Targets of such observations are generally achieved in next few days until and unless stated otherwise.
7. Bulls & Bears (Technical Charts): (In Detailed Newsletter, Part – B, Only)
One Charts can say much more than words. We give minmum 2 Charts on week days and 4 charts in weekly Newsletters, about select stocks with important chart patterns with other indicators like Volume, RSI, ROC, Momentum, MACD, OBV, Moving Averages etc, with tentative targets for Short or Medium or Long Term. Very Useful for those having little knowledge about Technical Analysis or for experts who need confirmation of their opinion.
8. General Buy/ Sell Recommendations: (In Detailed Newsletter, Part – B, Only)
Based on Daily/ Weekly Charts, we prepare a list of Bullish and Bearish stocks with their tentative targets for Extreme Short Term, Short Term or Medium Term. Investors and Traders can create their positions or Book profit gradually for the recommended time frame. For Example, If any stock is giving bullish indications for medium term, investors can gradually pick up this stock on every decline with major support as Stop Loss Level. Similarly, if any stock is giving bearish indications for extreme Short Term, one can book part profit on every rise and wait for the decline to re-enter the stock.
9. If I were a Trader (Similar to Rs10 Lac Portfolio): (In Detailed Newsletter, Part – B, Only)
This is just a Model Portfolio for the guidance of investors who do not want to put their efforts or time to decide their Short Term Portfolio, we suggest the stocks under ‘If I were a Trader’. It is not necessary to follow this Model Portfolio. Investors/ Traders can use their own research and arrive at trading decisions by taking help of our Newsletters.
The keys to successful Trading or Investing in the Stock Market are knowledge, discipline, and patience. Assuming that, you have some knowledge, the best way to achieve discipline and patience is doing your homework and having a plan of action ready before putting that plan to work. Though it may not guarantee success it will definitely increase the odds of winning in any financial market. When it comes to applying those technical principles, the most difficult part of the process is the actual purchase or sale in the trading. The final decision as to when to trade, how to trade and how much to trade and the type of trading orders to imply.
Day Trading has also the same principles of any financial market. The only real difference is the timing as it covers the very short term. The time frame that concerns us here is measured in hours, minutes and seconds as opposed to days, weeks and months but the technical tools implied remains the same.
(i) Trading on the break out from Patterns
(ii) Trading in overbought/ oversold zone
(iii) Trading at support and resistance level
(iv) Trading at the breaking of trend lines
(v) Trading at the percentage replacement
(vi) Trading while making the use of gaps
(vii) Trading on negative and positive divergences
The most effective way to formulate a trading strategy is to combine all of them. After the initial decision to buy or sell has already been made the above concepts can be used to fine-tune entry or exit points. Use of Stop Loss and applying of strict discipline will definitely help one become a successful trader.