This chart has to be read with below explained strategy of price channels. The plotted items are:1. Nifty Spot EOD prices for last 18 months
2. Red line - 100 EMA
3. Grey line - 22 EMA
4. Blue envelope is the price channel
5. Green circles are buy trades
6. Red circle are sell trades
Please note while 100 EMA is going up long trades are entered at green circle (22EMA) and booked at red circles (price channel wall). Similarly when 100EMA is coming down short trades are entered at red circles (22EMA) and booked at green circles (price channel wall)
Cheers
SH
Wonderful Article SH...one doubt: you had mentioned that we are not to go long in a bear market... is there any way to decisively make use of the upturns in a bear markets.. ie, the small upswings after the price hits the lower price channel?? If I am to trade this, how would I decide my target/exit ?? Your suggestions would be welcome :)
ReplyDeleteRegards
Tarun
Btw, excellent Blog!
ReplyDeleteYou articles are well written, concise and informative. Keep up the good work!
Thanks Tarun... as I said in my article, you can do that no doubt and it will work 8 out of 10 times. The target is simply the 22 EMA. However when the current trend is strong sometimes price wont retrace to 22EMA and would just touch 11EMA and return...so you can book profits at 11EMA as well.
ReplyDeleteHowever its a very risky trade since you are betting that the current hysteria ends here and mkts will revert of the composure state again. However sometimes markets tend to go in hyper-hysteria and when you long near price channel next morning you wake upto to 150 point gap down.. and next morning another 200 point gap down (example see Oct 08 when actually price comepletely fell out of the price channel).... The only thing which can save you in this scenario is if you keep buying with every 100-150 fall and keep averaging becuase untilmately it will spring back to your 22EMA washing off all M2M losses and probably giving you some profits as well..
But requires a lot of capital, balls and patience .. it happened to me in October and I am talking out of my experience here !!
Cheers SH
Hi this is MAHA, excellent article!
ReplyDeleteSome queries- 1) in strategy u mentioned that we should consider 22 & 103 ema but actual chart is showing 22 sma, so which is correct 22 sma or 22 ema?
2) right now 22 sma is 2813 and spot 2843 so whether we shuold initiate short? if yes what should b stop loss?
PLEASE REPLY
Hi MAHA.
ReplyDeleteYes you are right, I have incorrectly plotted 22 SMA instead of 22 EMA.
Right now since Nifty is above 22EMA its not a good place to short, I would rather short if Nifty rallies and hits the upper channel. Or if Nifty falls below 22EMA in which case target can be the lower channel.
Cheers
SH