NIFTY- Failure Pennant

NIFTY & NIFTY Futures are demonstrating the failed pennant pattern like some of its heavyweight constituent.

But one needs to be careful, Sensex has still to give a breakout from similar pattern. However, if sensex closes above yesterday's high today, it will confirm the breakout.

Further, resistence may be expected around 13000 level being both a psychological level as well as values of 20DMA & 20EMA.

A couple of Longs in Indecisive Markets

Failure Patterns in Reliance and Jetairways

Caution:

-Be religious with your stop-losses.

Symmetrical Triangle Vs. Pennant

The differentiators are:

1. Shape: A pennant may also look like a wedge in addition to a triangle like appearance.

2. Pivot formations: IN a symmetrical triangle, atleast two minor pivotal lows and two minor pivotal highs are required. A pennant can form even by convergence of straight lines matching the highs and lows of intervening bars irrespective of the factor whether the bars made pivotal highs/lows are not.

3. Duration: There is a consensus among writers that triangles forming with 3 weeks are pennants and those taking more time are symmetrical triangles.

4. Volume Charateristic: In a pennant, activity must fall to unusually low levels and keep on falling during formation phase. Though falling volume is also an essential ingredient of a symmetrical triangle, a symmetrical triangle may have high volume on days when it's making pivots.

NIFTY/Sensex-- Is it a pennant?

If we just check the price action, the answer is a big yes with support coming from similar pattern in a number of frontline stocks like Reliance, Infosys, M&M, LT, etc. Some people may argue about triangles vs. pennants but then duration of pattern may provide the answer. But IMHO none of the these two patterns should be accepted as valid.

Fall in activity level is the first and formost criteria for a pennant/flag to be successfu. High or zig-zag volume during the pattern formation of such kinds may even cause reversal of trend. If we look at the NIFTY Futures volume, we can see that instead of decrease in activity, volume has gone up.

So the question is how do we trade if Nifty continues its downward journey. The answer lies in Fibonicci Extensions.

For charts click here.

Confirmed Double Bottom--NIFTY Hourly

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Descending Triangle - GESHIP

Shorting Candidates-05th Mar

Revised target for IFCI--Rs. 18 (07th March)
Please read the targets on RCOM as 335-330-325.

IDFC-Roof

Dabur-Channel

Bharat Electronics Ltd. - Double Top & Pullback

Sesa Goa- Hourly Time Frame

On Hourly Charts, SesaGoa has broken out from a Cup & Handle Pattern within a bigger Cup (On which handle is yet to be formed). The patterns are bullish. For EOD traders, it's time to move SL to Rs. 1845.

Shorting Candidates-23rd Feb

Maruti & NIcolasPiramal

Trading The Channel

Usually, In pattern trading, we focus upon breakouts from te pattern. But there is one method to earn a bit of small profit with good R:R and that is trading the channel itself. It may be a horizontal channel,i.e., rectangle or a upward or downward sloping channel. It may also be a triangle.

The idea is to go long on every dip when the price touches the lower trendline,make pivot and starts moving upward. Stock should be shorted at upper trendline. The only caveat is that one needs to find stocks where channel is wide to accomodate the entries and exists.

Today's examples of trading the channel are.

More Patterns-15th Feb

Triangles-15th Feb '07

Negative Breakouts- 09th Feb '07

Positive Breakouts--09th Feb '07

Nagarjun Construction-- Failed Descending Triangle

KEC- Ascending Triangle

CrewBow- Rectangle

HDFC Bank- Ascending Triangle

Thesestocks hold against the falling market. Shows their strength.

ITI - Symmetrical Triangle

Pattern Breakouts - 8th Feb '07

Cummins - Ascending Triangle

Ind Swift Lab - Rounding Bottom

Hind Motor- Trendline

TNPL, SEAMEC Ltd. - Triangle