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Nifty Technical Story

The Stock Market is Beautiful!
 The market is a place where money is made when points of view differ. The market speaks to us in the universal language of numbers. These numbers represent price action (plotted on the y - axis) which when measured over time (plotted on the x - axis) forms a 2-dimensional chart.
 Repeated plotting of thousands of securities across multiple indices across geographies over a considerable period of time has shown familiar patterns which confirms that people tend to react the same way in a situation and that the human behavioural trend, which in the Stock Market is represented through price action, can be predicted. This fact attracts people who believe they are behavioural psychologists, philosophers, statisticians, mathematicians, artists, speculators or a bit of all to analyse these behavioural trends and to form a point of view.
 Technical analysts tend to use certain tools such indicators, oscillators and/or chart overlays to gauge the market better. These indicators could range from simple moving averages to complex calculations to determine the strength of a trend. While many such indicators exist - let me give you an example of one such indicator  "The Coppock Curve".
 The Coppock Curve is a commonly used Technical Indicator, developed by Edwin Coppock, which is used to determine a buy signal on fundamentally up-trending securities. This indicator draws inputs by analysing behaviour after a fall over a 11 and a 14 month period WMA and ROC.
 Question : Why only the 11 and 14 period and not say 15-19 period?
Answer :  Coppock based his premise per inputs of an Episcopal priest who studied that the average period of mourning when grieving the loss of a loved one is usually between 11-14 periods (months).
 Question : So how did he develop and use this input ?
Answer : It seemed that Mr. Coppock first identified an uptrending stock with good fundamentals which in the recent 11-14 periods has shown a major correction.
Note : Correction is a fancy word to say that someone in the market is losing serious money
Step 1 - Coppock considered the sentiment associated with loss of money akin to grieving over a loved one and then proceeded to analyse the security price pattern during this period of mourning
Step 2 - He analysed how the underlying security behaved after recovering from this loss (after the 14 month period)
Step 3 - He then proceeded towards analysing this behaviour for multiple securities to determine a trend or a pattern
Step 4 - He then mathematically represented this recovery behaviour
Step 5 - He then plotted his calculations on a graph which later, in a bid to go down in history, he named it as "The Coppock Curve".
Step 6 - Implementation!
Mr. Coppock then finally proceeded to buy securities whose behaviours were consistent with his analysis - made money - and now other traders use this input.
Question : So how do we benefit from Mr. Coppock`s research while analysing our favourite Index (:P) - The Indian National Stock Exchange (NSE/Nifty)
Answer : To understand this let us consider Nifty's historical movement.
 Nifty experienced a serious fall in Jan 2008 - where it fell from an awesome value of 6300 points and reduced to a third of its value (1x/3) hitting rock bottom at 2252 in Nov 2008 (11 months - Remember the conversation between Mr. Coppock and the priest on the subject of mourning).
Question : What happened after that?
Answer :  After this crushing fall Nifty stabilized and showed first signs of bullish behaviour in March/April 2009 (14 months after the devastating fall began in Jan 2008 - Again remember Mr. Coppock :P) and made a full recovery hitting 6300, a growth of 3x in valuation in 11 months i.e. Jan-Feb 2010 (Mr. Coppock is dominating now!! )
Question : OK - So what happened after that?
Answer : Remember the saying Resistance? - Its another concept (an important one) - but it basically means that sellers get super pumped around this value and usually it is equal to the previous high (there are precise formulas and theory around this - but more on that may be sometime later).
Now, as expected, there was serious resistance in Jan 2008 at 6300 and since this resistance was not broken therefore at this point it continues to remain intact. After hitting a high of 6300 Nifty then repeated its tendency to fall back again from this value but this time it could not reach 2250 - instead stopped at 4530! falling to 2x/3 and in the process formed a significant higher low (Remember pivot theory they taught you in school? if not then go to baby pips website to learn) 
Trivia :  Can you guess how many months after testing the 6300 top did Nifty reach this new bottom value? 
Answer : If you guessed 11 months i.e. Jan 2011 then you nailed it!!  (Clearly Mr. Coppocks is now on a God Like streak now!! :P)
OK now this low of 4350 also coincided with 50% Fibonacci Retracement Value.
Note : The above example shows that Nifty in the past has previously shown a tendency to correct till 50% Fib retracement value.
Question : What is this Fibonacci Retracement?
Answer : Fibonacci was a mad scientist and a super genius. More on him and how to calculate his values may be sometime later, but just remember this 50% Retracement Value bit for now.
Question : So far Mr. Coppock Values have held good - but what happened after the market reached a new low on Jan 2011?
Answer : Market went ahead and retested the 6300 levels and fell again - but this time only to 5119! in Aug 2013  in the process forming a new higher low. These lows of 2250 - 4530 - 5119 when factored in with time form a trend line (a different concept which was discovered even before Mr. Coppock was potentially born) and this formation is surely sending shivers in the bear camp who will now be forced to atleast give potential market recovery atleast some consideration.
Now despite consistently forming higher lows Nifty so far has not yet been able to cross the 6300 barrier strongly.
Trivia : Any guesses at which values all the bears in the market will come to short Nifty again?
Answer :6300!! If you guessed this then you have just understood what resistance means!
Now if you were a follower of the market back then you will be expecting a serious blood bath fight between the bulls and the bears at the 6300 value and hence the obvious questions during this time were will bears triumph again? or will bulls slap them the Rajni/Chuck style? No one really knows whats going to happen now - but the one thing is sure who ever wins is going to dominate!!
The answer was realized by Jan/Feb 2013 - when talks of a business favourable election result began to surface - this was all the incentive the bulls needed who then owned the bears and thus began one of the most powerful bull rallies India has seen! Our favourite index rallied 50% in the next year and rest as they say is history and 14 months after the bloody fight between the bulls and the bears was over -  after a well fought battle for over half a decade - the bulls were victorious after a street brawl which lasted for almost 4 months during the period and Nifty finally formed a Higher Top at 9119! in March 2015 an all time high.
 Remember Fib 50% retracement level we spoke about earlier - this value is now coinciding with approx 7000 - 7100 Nifty levels.
 Sum and Substance of all this : 
The Fib 50% retracement was the previous major support back in Jan 2011 - and this time corresponds to 7000 - (low of 5119 to a high of 9119). Now if we are to believe Mr. Coppock and the 11-14 period principle then this from March 2015 high terminates in Feb 2016 - April/May 2016.

So this understanding now creates certain targets for Nifty :
1. Nifty likely to test lows of 7000 by Jan-Feb 2016 therfore be bearish atleast till then. Gradually shift bias towards the 14 month period
2. The bull run is intact at these values (Elliot Wave confirmation - another crazy concept - sometime later maybe) and based on that premise we must go long on Nifty at those values
3. Expect a positive breakout by April 2016 - Invest heavily in Mutual Funds at this time
4. Remember 6300? the previous major resistance - this is now the most critical support value for Nifty, therefore if you enter at 7000 levels then keep a SL of 6100-6300 approximate 10-12% risk and invest accordingly.
Exit the market if Nifty falls below this value. Shift all - and I mean all funds in secured instruments not in equity.
5. Expect the next major fight in March/April 2017 at the 9119 value ( Nifty will meet the inverted head and shoulders target at this point - separate concept) 
6. If Nifty breaks the 9119 value by March 2017 expect Indian traders going long on the market getting seriously richer for the next few years
7. Remember anything is possible therefore trade/invest with technique because only the Market knows the future and the Market is always correct. Nothing ever is a carving on stone. 
 Please note :
This article only summarizes my general view on the market move. To make money I will continue to analyse daily trends which will be bullish and bearish from time to time depending on my time frame for trading
 The market is all about timing and to time my entries and exit better I use many many more parameters for my analysis. This blog is aimed at timing your mutual fund entry better, and in case the readers are already long on Mutual Fund then maximum capital entry is recommended at the 7000 Nifty Level.
 The blog aims to give the readers a general perspective of the potential market direction, for more precise action continue following my blogs to factor in daily and weekly trade positions. Therefore please dont go and short Nifty on Monday - lol - as the short term trend is still up - I have long positions carried forward for Monday.
 Conclusion :
I will conclude now hoping that the readers are better informed about the market. Remember security is everything and do not underestimate the importance of Retirement funds or long term maturity plans like PPF or the Gold Bonds (if you are Indian) in creating significant wealth over a long term. Also this is an analysis of the Nifty 50 alone - the details of midcap and other sectoral indices BNF, CNX Auto,Pharma,IT etc will be significantly different therefore please keep that in mind.
 Anyways looking forward to your continued love and support.
 With warmest regards on this festive season.
Still Bullish
 We have been in long position since 10.12.15. I would encourage the readers to visit my previous post titled "Bears Beware" posted during end of Dec 2nd Week. In that post I listed my position for this wave trade as 6 Lots 7900 CE bought at an average price of 23.6 with a SL of 14.15 and targets at Nifty close at 7670 - 7760 - 7835 - 7921 and today these options are officially In The Money :). Capital invested was approx 150 points with approx 60 points risk in position.
 During the subsequent trading session we have sold 5/6 lots at 30,45,55,35,35 recovering 200 points from the position i.e. 33% profit booked so far. We still carry 1 lot. My position confirms my view that the market is still bullish on the short term.   
 Today Nifty has closed strongly above its Monthly Pivot - 7921.
 RSI has just given a break out on the daily and the day recorded almost highest volumes in a relatively low volume trading week. 
 Stochastics on weekly has given a bullish cross.
  With volume play it is safe to assume that there is definitely some buying momentum behind Nifty given that on days of slightly higher volume the Market is still trending up.
 The next real battle between bulls and bears likely on or near the 7979 values which was the Low Top Nifty formed earlier and break of this value confirms Nifty on short term bullish trend by Pivot theory. Looks like Nifty could form a top around these values for the week. 
 So the question for the week trading is :
Q. Will Nifty form a new high top by breach of the previous high of 7979
Q. Nifty traded for almost a week in a 100-150 point range of 7850 - 7730. Will a break out from this range start a mid term bullish trend also? 
Q. Which pattern is Nifty going to play? Double top with 8350 and low of 7550? or a break out of an inverted head and shoulders? 
 And many more questions. Different traders different views.
 So while it is clear there are several near and midterm resistances well in sight and that there will always be bulls with doubts about the strength of the trend given that Nifty has moved up almost 350 points since Dec 2nd week (after the post "Bears Beware") - Still one can maintain that it is just simpler and safer to be with the bulls at the moment. Nifty so far has not shown any signs of reversal - So stay calm and enjoy the wave.  
 Carry Forward :
1 Lot 7900 CE @ 23.6. SL 7797.18 (or 14.15) (SAR Value for current trade
 Trade Plan :
There are days to work - days to play and days to rest. This week we Rest. 
Trade light - dont sell dont add as expiry of options near and premiums wont fetch value. 
Volumes have been super low. 
Nothing favouring trading at the moment. Only play on Nifty downside but reversal sign yet. 
Only to look to exit out of the current long position gracefully (:P) in a day or so.
 Hope the input here will help the readers plan there Nifty trades for tomorrow.
First Sign of Reversal
Premise : Candle stick 
The day end candlestick has formed a near doji - and doji`s are deadly at picking market tops after a confirmation. 
What could be the confirmations tomorrow
A red candle stick. Or more specifically the following red candlesticks : 
1. Gap up shooting star 2. Gap up gravestone doji 3. Gravestone doji or a Rickshaw Man 4. Gap up doji or 
5. Another doji              6. Hanging man                7. Shooting star 
Any one of the candle sticks listed above seems to happen and I will strongly consider adding short positions as early as tomorrow by 2 pm. 

My thoughts...
Evening Star Configuration: Look for a tall white candle in an upward price trend. Following that, a small bodied candle of any color should gap above the bodies of the two adjacent candles (ignore the shadows). The last day is a tall black candle that opens below the prior candle, and closes at least midway down the body of the first day (following Bulkowski...)
If Nifty opens below 7929 and closes red...this is valid! Opening above 7929; no, no to this!
Tomorrow we get a confirmation! Now DOW is 200+

"Look for a tall white candle" - The CS on 28.12.15 qualifies.
If a gap up doji happened despite yesterdays close it could still lay the foundations of a evening star pattern. To support my argument I would recommend you having a look at the Nifty CS on the following dates : 
10.11.15 - Big red CS 
11.11.15 - Dhanteras and super low volumes 
12.11.15 - Holiday
13.11.15 - Doji
14.11.15 - Big green CS 
Now this is not a perfect morning start - since by definition the market did not gap down on the 13.11.15 - but still very similar. To consider this as a potential reversal sign is subjective and I agree this is not strict theory, but it still works! Dojis gain alot more significance in a market where its occurence is not very high. 
 "an upward price trend" - A very very critical point. The trend from 11.12.15 to date qualifies
"ignore the shadows" - This will be specifically ONLY in case of looking for a evening/morning star pattern. Shadows in case of rickshaw man or a long legged doji are super critical. They indicate that the market is confused and has temporarily lost its sense of direction. 
"The last day is a tall black candle that opens below the prior candle, and closes at least midway down the body of the first day" - Yes, this is correct. But this is ONLY anticipating/defining a evening star pattern. 
I would recommend you have a look at what did Nifty do the last time it was approaching 7980 the last week of November. The reversal was caught by the doji - doji - without the star patterns. 
Security Call or Put is a function of your understanding of the direction - The lot sizing or position is a function of your confidence.  A star pattern simply raises my confidence to such an extent that I will go in aggressively - i.e. if I normally trade with 1 lot I might increase lot size to almost 90% of my capital.
Courtesy: SAHIL