Readers of this blog can read about how arbitrary decisions of putting funds into tax-saving ELSS schemes without due-diligence and proper analysis can adversely affect their financial status going forward. Below is the link where readers can read my Guest article posted on Trak.in:
http://trak.in/tags/business/2010/02/17/is-arbitrary-investment-in-tax-saving-elss-mf-scheme-before-the-year-end-justified/
The article aims at educating the readers about the fact that the objective of tax-saving should not hinder the cause of capital appreciation. Both should go hand-in-hand and with proper planning. It explains in detail how ELSS schemes are differs from Diversified equity schemes in its nature of operation and yielding returns.
Interested readers can place their relevant comments with respect to their views on the subject and other tax-planning method to their knowledge.
Disclaimer: All data, content and/or reports posted by Viral Rajnikant Dholakia on this site are only for information and educational purpose of visitor/readers of this blog. It does not constitute to be a recommendation/offer/advice to buy or sell assets/securities in any form. Individuals/organizations are requested to take an informed call by consulting their Financial Advisor before acting on any matter/data published on this blog. This blog does not warrant of any kind of accuracy, adequacy and completeness of data, ideas or thoughts published in it. This site and Viral Rajnikant Dholakia assumes no responsibility or liability or loss or damage of any kind/nature for your trading and investment decisions and its consequent results.
Wednesday, February 17, 2010
Thursday, February 11, 2010
The Power Of Doji
Most of the ardent followers of chart patterns must have come across the term 'Doji' either on business news channels or Internet. Doji is a chart pattern which signifies indecision in the market. It is a candlestick in which opening and closing prices for the period under consideration are same. It is a major trend reversal signal especially at market tops or even at market bottoms.
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Wikipedia describes Doji as, "The doji is a commonly found pattern in a candlestick chart of financially traded assets (stocks, bonds, futures, etc). It is characterized by being small in length -- meaning a small trading range -- with an opening and closing price that are equal."
It further interprets a Doji as, "The doji represents indecision in the market. A doji is not as significant if the market is not clearly trending, as non-trending markets are inherently indicative of indecision. If the doji forms in an uptrend or downtrend, this is normally seen as significant, as it is a signal that the buyers are losing conviction when formed in an uptrend and a signal that sellers are losing conviction if seen in a downtrend. Most traders will place greater significance on the doji when it forms in a market that is in overbought or oversold territory as noted by oscillators like relative strength index or MACD."
Doji: A Potent Top Reversal Indicator
It must be noted that a Doji is more potent towards its formation at the top of the rally or at the bottom of the downward correction, rather than in between the up or down journey of the markets. A Doji at the upper end of the rally is a sign of exhaustion of the power of the bulls to further pull the market higher. As soon as the bears get a sniff of this lack of conviction among bulls, the charge swaps hands from bulls to bears at least for some time to come.
Doji: To be Coupled with Confirmation
A Doji in itself is not a confirmation of the prevailing trend's reversal. It needs to be coupled and confirmed by the follow-up reversing move with in next few candlestick patterns. As such, a Doji at a market top could be a warning for the bulls to cover longs and remain neutral only to further initiate shorts once the bearish confirmation is received. A bearish confirmation is much needed before initiating any short position as a trend reversal could also mean change of trend to 'lateral' consolidation and not necessarily a complete reversal of trend.
Nifty & Doji
In the below given charts, we will see how a couple of Dojis stalled the market rally around Nifty 5300 level during first week of January 2010 which led markets to consolidate & further correct on witnessing one more doji around January 20, 2010.
Charts Courtesy: www.icharts.in
In the above Daily charts of Nifty, we see how the rally in the benchmark index, which was in an up trend since December 22 starting from Nifty 4950 level, got stalled by the emergence of 'twin' doji on January 05 and 06. The existence of Doji after the rally indicated exhaustion of the up trend. However, bulls were in no mood to completely give up just yet nor were bears in any mood to let bulls continue their charge. This ensured that the Nifty moved in a congestion band of 5200 to 5300 range. At least, we can say that the sudden emergence of Doji at higher levels ensured a trend 'Change' from bullish to lateral movement.
It was only after the existence of the third Doji on January 20, that the bears were able to take a complete charge of the situation in favour of a correction in the trend. A long bearish candlestick formed on the follow-up session of the Doji day (January 21) was enough confirmation evidence for the bears that the up trend is over at least for some time to come.
So, in effect, for a market which was powerfully in hands of bulls since quite some time needed 3 occurrences of Doji (read indecisive attempts) in order to turn the trend over head in favour of bears. The first two doji led to Trend 'Change' and the third was a final coup to start a Trend 'Reversal'. But the change was inevitable as doji at market tops indicated lack of certainty and vigour amongst bulls to carry market higher. Just have a look at the Resistance line as defined by the Doji formed on January 06, which proved to be a stiff market top ever since then.
Doji in the Midst of a Trend
Again, on January 28, we witnessed a Doji at the midst of a down trend. This doji indicated lack of vigour amongst bears to drag market further down at least for the time being. The doji was followed twin hammers on January 29 and February 01. The doji led the markets to consolidate for the next 5 sessions as can be seen from above charts. However, the doji which appeared in the midst of the downtrend was not so successful in reversing the trend as it was at the higher band of the market. This shows that Doji is highly effective and most potent at market tops than during the midst of the up or down trend.
So, it is very crucial to determine as to where the Doji occurs and during which stage of market. Doji in midst of the trend transition need not be as potent as at market top or bottom. At the same time, a Doji indication is best served when coupled with other confirmation evidences of trend change.
Variations of Doji
1) Gravestone Doji: Lows, Opening & Closing are Same.
2) Dragonfly Doji: Highs, Opening & Closing are Same.
3) Long-Legged Doji: Volatile Highs or Lows, but Same Closing and Opening.
Disclaimer: All data, content and/or reports posted by Viral Rajnikant Dholakia on this site are only for information and educational purpose of visitor/readers of this blog. It does not constitute to be a recommendation/offer/advice to buy or sell assets/securities in any form. Individuals/organizations are requested to take an informed call by consulting their Financial Advisor before acting on any matter/data published on this blog. This blog does not warrant of any kind of accuracy, adequacy and completeness of data, ideas or thoughts published in it. This site and Viral Rajnikant Dholakia assumes no responsibility or liability or loss or damage of any kind/nature for your trading and investment decisions and its consequent results.
Saturday, January 30, 2010
Trend Changer: Has Nifty Hammered A Near-term Bottom?
Firstly, to inform the readers over here that this post and the discussion of the chart pattern herein pertains only to the 'Near term' trend of the market. The Candle stick chart pattern as depicted in the below attached chart relates to a 'Trend Reversal' Pattern which could signify either a reversal in the prevailing down trend or simply a trend bottom/changer.
Nifty has been in a short-term down trend after witnessing stiff Resistance around 5280 level. The 5 day short term RSI has climbed down from 70 to 15 during the downward journey of markets, yet another hint of market in over-sold zone in near term horizon.
Charts Courtesy: www.icharts.in
Hammering Out A Bottom
Investopedia.com defines a Hammer as, "A price pattern in candlestick charting that occurs when a security trades significantly lower than its opening, but rallies later in the day to close either above or close to its opening price. This pattern forms a hammer-shaped candlestick."
It further adds, "A hammer occurs after a security has been declining, possibly suggesting the market is attempting to determine a bottom.The signal does not mean bullish investors have taken full control of a security, it simply indicates that the bulls are strengthening."
A Hammer is a Bottom Reversal Pattern. The rationale behind the analysis and logic of this pattern formulation is explained as under:
1) The market is in a pronounced downtrend.
2) A candle stick with small real body but a large lower shadow appears at the end of the downtrend indicating some sort of reversal in prevailing downtrend.
3) The bulls took charge of the situation after bears tested the lower waters but could not sustain/hold their short positions with conviction.
4) Taking note of the situation, the bulls took the lead from the front and closed near the day's high with little or no shadow at all.
5) The primary idea from here is that further downward slide could come for a halt atleast for very near term & at best- a trend reversal towards up side could be seen.
6) In very near term, bears can recoup the control over markets only if the lows tested on the hammer forming day is breached.
The pattern is typically characterized by a long lower shadow with a small real body on the top. The color of the real body (white or red) is not of greater significance while studying the pattern. However, a white body gets a first preference as it signifies that markets sold off as a last leg of the near term down trend and bulls were good enough to bounce back to ensure that markets closed near to the highs of the session. The waters at the lower levels were tested and found good enough for a reversal. The pattern signifies that bulls are eager to gain some lost ground in days to come.
Another study that goes into the Hammer pattern is that the lower shadow should be at least twice the size of the small real body on the top. It signifies that bulls attempted a significant come back from the lows to prove it's dominance. However, even without the fulfillment of above condition a Hammer is a hammer, but its effectiveness could be questionable and uncertain. A smaller real body coupled with longer lower shadow will give the hammer a more complete look and meaning. After all, the chart patterns are nothing but the mirror image of a trader/investor's psychology and their collective action put on paper.
Further, it is desirable for traders who want to bet on this reversal chart pattern to confirm the effectiveness of this bullish hammer pattern by checking the follow-up chart signals (of next 2-3 sessions) in look-out for bullish White Candles or even bullish Continuation patterns.
Nifty & Hammer
On January 29, 2009, Nifty established a low at 4765 and from there on bounced back to close at 4880, a little above the day's opening at 4825. This led to emergence of a small real body with a long lower shadow and a very minute upper shadow. Add to it, on the preceding day of witnessing the hammer pattern, the Nifty witnessed a 'Doji' day which is also a trend reversal signal indicating an equal tug-of-war between the bulls and the bears. A Doji followed by a Hammer could be hinting towards a dissipation of prior (short term down trend) trend's force possibly with a last attempt to test lower waters on a Hammering day. Hence, a doji followed by a hammer pattern is a stronger clue of trend change, in direction of the original bullish trend.
Further, if Nifty closes below the low hammered by Nifty at 4765 on January 29, the analysis and prediction of the bullish reversal pattern can be termed as failed/void and could act as a significant stop loss level for Traders.
Note: Quite often, it may also happen that the reversal patterns may play out well in the near term, but the effectiveness of the trend fizzles out eventually over medium term horizon. So, it is necessary to check and update the view in light of changing market times and environment periodically. Like, for example, a bullish reversal pattern in 'Hammer' ensures that markets move up. But, over a period of time, markets may develop yet another reversal pattern but this time in bearish bias in form of a 'Hanging-Man' pattern which signifies a Top, eventually pulling the markets down. So, it is necessary to review chart patterns in the light of passage of time and development of various chart patterns.
Disclaimer: All data, content and/or reports posted by Viral Rajnikant Dholakia on this site are only for information and educational purpose of visitor/readers of this blog. It does not constitute to be a recommendation/offer/advice to buy or sell assets/securities in any form. Individuals/organizations are requested to take an informed call by consulting their Financial Advisor before acting on any matter/data published on this blog. This blog does not warrant of any kind of accuracy, adequacy and completeness of data, ideas or thoughts published in it. This site and Viral Rajnikant Dholakia assumes no responsibility or liability or loss or damage of any kind/nature for your trading and investment decisions and its consequent results.
Nifty has been in a short-term down trend after witnessing stiff Resistance around 5280 level. The 5 day short term RSI has climbed down from 70 to 15 during the downward journey of markets, yet another hint of market in over-sold zone in near term horizon.
Charts Courtesy: www.icharts.in
Hammering Out A Bottom
Investopedia.com defines a Hammer as, "A price pattern in candlestick charting that occurs when a security trades significantly lower than its opening, but rallies later in the day to close either above or close to its opening price. This pattern forms a hammer-shaped candlestick."
It further adds, "A hammer occurs after a security has been declining, possibly suggesting the market is attempting to determine a bottom.The signal does not mean bullish investors have taken full control of a security, it simply indicates that the bulls are strengthening."
A Hammer is a Bottom Reversal Pattern. The rationale behind the analysis and logic of this pattern formulation is explained as under:
1) The market is in a pronounced downtrend.
2) A candle stick with small real body but a large lower shadow appears at the end of the downtrend indicating some sort of reversal in prevailing downtrend.
3) The bulls took charge of the situation after bears tested the lower waters but could not sustain/hold their short positions with conviction.
4) Taking note of the situation, the bulls took the lead from the front and closed near the day's high with little or no shadow at all.
5) The primary idea from here is that further downward slide could come for a halt atleast for very near term & at best- a trend reversal towards up side could be seen.
6) In very near term, bears can recoup the control over markets only if the lows tested on the hammer forming day is breached.
The pattern is typically characterized by a long lower shadow with a small real body on the top. The color of the real body (white or red) is not of greater significance while studying the pattern. However, a white body gets a first preference as it signifies that markets sold off as a last leg of the near term down trend and bulls were good enough to bounce back to ensure that markets closed near to the highs of the session. The waters at the lower levels were tested and found good enough for a reversal. The pattern signifies that bulls are eager to gain some lost ground in days to come.
Another study that goes into the Hammer pattern is that the lower shadow should be at least twice the size of the small real body on the top. It signifies that bulls attempted a significant come back from the lows to prove it's dominance. However, even without the fulfillment of above condition a Hammer is a hammer, but its effectiveness could be questionable and uncertain. A smaller real body coupled with longer lower shadow will give the hammer a more complete look and meaning. After all, the chart patterns are nothing but the mirror image of a trader/investor's psychology and their collective action put on paper.
Further, it is desirable for traders who want to bet on this reversal chart pattern to confirm the effectiveness of this bullish hammer pattern by checking the follow-up chart signals (of next 2-3 sessions) in look-out for bullish White Candles or even bullish Continuation patterns.
Nifty & Hammer
On January 29, 2009, Nifty established a low at 4765 and from there on bounced back to close at 4880, a little above the day's opening at 4825. This led to emergence of a small real body with a long lower shadow and a very minute upper shadow. Add to it, on the preceding day of witnessing the hammer pattern, the Nifty witnessed a 'Doji' day which is also a trend reversal signal indicating an equal tug-of-war between the bulls and the bears. A Doji followed by a Hammer could be hinting towards a dissipation of prior (short term down trend) trend's force possibly with a last attempt to test lower waters on a Hammering day. Hence, a doji followed by a hammer pattern is a stronger clue of trend change, in direction of the original bullish trend.
Further, if Nifty closes below the low hammered by Nifty at 4765 on January 29, the analysis and prediction of the bullish reversal pattern can be termed as failed/void and could act as a significant stop loss level for Traders.
Note: Quite often, it may also happen that the reversal patterns may play out well in the near term, but the effectiveness of the trend fizzles out eventually over medium term horizon. So, it is necessary to check and update the view in light of changing market times and environment periodically. Like, for example, a bullish reversal pattern in 'Hammer' ensures that markets move up. But, over a period of time, markets may develop yet another reversal pattern but this time in bearish bias in form of a 'Hanging-Man' pattern which signifies a Top, eventually pulling the markets down. So, it is necessary to review chart patterns in the light of passage of time and development of various chart patterns.
Disclaimer: All data, content and/or reports posted by Viral Rajnikant Dholakia on this site are only for information and educational purpose of visitor/readers of this blog. It does not constitute to be a recommendation/offer/advice to buy or sell assets/securities in any form. Individuals/organizations are requested to take an informed call by consulting their Financial Advisor before acting on any matter/data published on this blog. This blog does not warrant of any kind of accuracy, adequacy and completeness of data, ideas or thoughts published in it. This site and Viral Rajnikant Dholakia assumes no responsibility or liability or loss or damage of any kind/nature for your trading and investment decisions and its consequent results.
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