IPO India Information (BSE / NSE)

Wednesday, April 24, 2013

Sleeping Triangle: An Research and Findings by Sangamesh.K.S Part 1

Sleeping Triangles
The name may be fascinating, interesting, curious sometimes weird. The main myth with this pattern has stimulated my need towards understanding pattern at a higher level.  When we go into, what is it all about? How this pattern emerged?  We come to know there are 2 major parts in Sleeping Triangle.  One is body and other is the sleeping body of the triangle. I call it as real body and sleeping body.

Real Body
 As per my observation the real body will be lengthiest price action before breakout. The real body get into new resistance. It will touch the higher price, the price action of the real body will be very high and sometimes it take a short time duration (it may be formed within couple of days). As the price action with real body is very high. We normally tend to see RSI and other Oscillators going to a overbought zone.

Sleeping Body
The sleeping body is the essential part which differs from a regular triangle. The price action will never tend touch the support (it will touch only once before giving a breakout) instead try to be at a higher level but the sentiments of the market drag the price action lower such that it from a channel.  The volume will be much lower compared to real body.
 The price action of the sleeping body can be seen sticking to the upper level. And show the sentiments to be bullish.

Premature breakouts
Sometimes we may see the price giving premature breakouts which will say the future breakout (intension of bullish/bearish breakout) and price action.

 The breakout will be formed when the price hit the support and when the support is good the price rebound which cause a breakout.
*T&C Apply

Strategy: Trading using Sleeping Triangle   
When we see a bullish breakout it is the only level where we can buy. As the price level is low it is the best opportunity to buy at a breakout and sell at a higher high. The triangles need to be traded opposite of a triangle. In the figure above, we can see a triangle which resembles as a descending triangle.  In a descending triangle we normally place a stop loss above the trend line but here in this sleeping we need to place a stop opposite to the descending triangle

Types of Sleeping Triangle
These triangle are of 2 types namely an
·         Ascending  Sleeping Triangle(Bearish)
·         Descending Sleeping Triangle(Bullish)
An example of descending triangle forming in Tata Coffee

Descending Triangle
 For More details

Tuesday, April 23, 2013

RIL: An Analysis for 25/4/13

After one cycle swing seen in reliance I am looking a reversal. The stock has a powerful resistance at 850. If it able to cross then we can see the stock going up to 920.

Indicators:  we are seeing a bullish divergence which is been building from long days. We see this divergence in MACD. We have even seen a good crossover as most of the stock has been in a bearish mode. It is been a hotspot for many of the investors.

Fib Levels:  As I had told above this stock may find resistance at 50%. If it manages to cross that level, it will reach to 920. Which will lead to 920 levels; the stock is looks potential and we may even see the stock moving more than 940 as the divergence is strong.

Moving Average: I have been looking for a long time. The stock is more sentimental towards 20 DMA. After confirmation of a breakout in 20 DMA this stock is found to be bullish.

Sunday, April 14, 2013

A Falling Wedge in Sensex

We have seen market consolidating, these days. The cocktail of negative news have driven market near to 18000 levels. Before it reach 18000 we are seeing falling wedge pattern forming. 
A Falling Wedge

A Divergence Building up 

Simultaneously, we are seeing a Bullish Divergence forming in market. As we are seeing a gap filling have started up in Sensex. We may see a reversal @18000 level after filling up of gap; which will eventually lead to a bullish breakout in Falling wedge.

Important SAR

Sunday, March 24, 2013

A Story of Turtles; History of Trend Following

Richard J. Dennis, a man who made a history in the world of trend following. Many of us use trend following in their investments & trading practice. But most of the people are not aware of this person and his contribution to Trend and Trend analysis.
Richard Dennis

It was the year of 1970’s when a 17 year old student of philosophy Richard J. Dennis; started this career as a floor trader at Chicago Mercantile Exchange. Soon after his education he returned to trading. He borrowed $1,600 from his family, which after spending $1,200 on a seat at the Mid-American Exchange left him $400 in trading capital. In 1970, his trading increased this to $3,000, which he described as "compared to $400 ... a real grubstake", and in 1973 his capital was over $100,000. He made a profit of $500,000 trading soybeans in 1974, and by the end of that year was a millionaire, just short of twenty-six years of age. Today he is well known as a commodity speculator once known as the "Prince of the Pit".

The story of turtles
Dennis believed that successful trading could be taught. So, along with William Eckhardt, a friend and fellow trader, Dennis recruited and trained 21 men and 2 women, in two groups, one from December 1983, and the other from December 1984. In January 1984, after the two-week training period was ended, Dennis gave each of the Turtles a trading account and had them trade the systems they had been taught . During this one-month trading period, they were allowed to trade a maximum of 12 contracts per market. After the trial-period ended, he gave the few of them who had successfully traded the system during the one-month trial, accounts ranging from $250,000 to $2 million of his own money to manage.
An advertisement by Richard Dennis

Selection of Turtles
 Dennis placed an ad in The Wall Street Journal and thousands applied to learn trading at the feet of widely acknowledged masters in the world of commodity trading.
In the selection process he asked basic question like
1.     The big money in trading is made when one can get long at lows after a big downtrend.
2.     It is not helpful to watch every quote in the markets one trades.
3.     Others' opinions of the market are good to follow.
4.     If one has $10,000 to risk, one ought to risk $2,500 on every trade.
5.     On initiation one should know precisely where to liquidate if a loss occurs.

Trading Strategy
Dennis trained this group, known as Turtles, for only two weeks introduction about a simple trend-following system, trading a range of commodities, currencies, and bond markets, buying when prices increased above their recent range, and selling when they fell below their recent range. They were taught to cut position size during losing periods and to pyramid aggressively—up to a third or a half of total exposure, although only 24% of total capital would be exposed at any one time. This type of trading system will generate losses in periods when the market is range-bound, often for months at a time, and profits during large market moves.

In "The Complete TurtleTrader: The Legend, the Lessons, the Results" (2007), author Michael Covel offers some insights into the specific rules:

  • Look at prices rather than relying on information from television or newspaper commentators to make your trading decisions.
  • Have some flexibility in setting the parameters for your buy and sell signals. Test different parameters for different markets to find out what works best from your personal perspective.
  • Plan your exit as you plan your entry. Know when you will take profits and when you will cut losses.
  • Use the average true range (ATR-an indicator) to calculate volatility and use this to vary your position size. Take larger positions in less volatile markets and lessen your exposure to the most volatile markets.
  • Don't ever risk more than 2% of your account on a single trade.
  • If you want to make big returns, you need to get comfortable with large drawdowns.

Outcome of Turtles
The story of how a group of non-traders learned to trade for big profits is one of the great stock market legends. Dennis earned more than $175 million in only five years. He also proved that, beginners can learn to trade successfully. Number of turtles (e.g. Jerry Parker of Chesapeake Capital, Liz Cheval of EMC, Paul Rabar of  Rabar Market Research) began and continued careers as successful commodity trading managers, using techniques similar, but not identical, to the Turtle System.

Tuesday, February 19, 2013

Bajaj Auto Ltd, A Analysis

After a corrective wave from 2223 the stock fell upto 12% causing a bullish divergence. MADC is below 0 line and making the stock more attractive and RSI is showing a strong bullishness. The stock have a potential to go upto 2220.