Tuesday, 21 February 2012

3-15 Analysis of NIFTY


3d-15d CHART READER

3-15 stands for 3 Day and 15 Day EMA.
  • ENTRY

    Simple 3d EMA and 15d EMA crossover (3d EMA cutting 15d EMA from below) on daily charts.
  • PROFIT BOOKING

    3d EMA not touching rule - This applies only when a gap up or gap down has happened in the favour of our 315 trade. Exit on day open and re-enter whenever 3d EMA is touched.
  • 3 EMA moves adversely for two consecutive day - We exit shorts if 3 EMA has moved up on two consecutive days. Re-enter shorts on the day when 3 EMA starts moving down. Positions to be exited or entered at 3.25 PM
  • 315 opposite crossover - This is the basic entry rule. book profits if opposite crossover happens and open opposite position

RSI(14) - RELATIVE STRENGTH INDEX (14D)

  • Momentum Leading Indicator. RSI turns ahead of the Price Action
  • Rising Indicator signifies strength the market. RSI above 70, market is OVER BOUGHT
  • Falling Indicator signifies weakness in the market. RSI below 30, market is OVER SOLD
  • Draw support and resistance on RSI indicator
  • Watch for very reliable Positive and Negative Divergences b/w RSI and Price Movement
    • Negative Divergence : A new High in Price fails to take the RSI indicator above the previous High (or makes a Lower High)
    • Positive Divergence : When the Price fails to a new Low, RSI indicator does not go below the previous Low (or makes a Higher Low). Refer Price/RSI on Nov 23, 2011 and Dec 20, 2011. Price moved to a new LOW but RSI made a Higher LOW

SLOW STOCHASTIC (%K 15d, %D 5d)

  • Consist of two momentum oscillators %K and %D. %K being more sensitive of the two  
  • Oscillator above 80 signifies that the market is OVER BOUGHT, below 20 means the market is OVER SOLD
  • Watch for the divergence between Price action and %D oscillator
  • BUY signal is triggered at Market Bottom when %K line crosses at the right side of the %D-Low-Point. Reliable Signal
  • Hinge, which refers to the slowing down in the velocity of either %K or %D signals reversal in next trading period

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