Sunday, February 6, 2011

Key to Trade the Market

This post is an objective analysis of the Points of Invalidation of the current Downtrend in different Time frames. 'Follow the Trend' should be the basic mantra of any form of trading or the trading system,which will result in the Market blessings and money following your bank account.

We know that Trend in all Time frames is down . The calls for bottom forming , prebudget rally , big % correction , important support area approaching , highly oversold markets , +ve diversions in some indicators etc are flying around . What one should do is , sit tight on the positions that are with the Trend and wait for the signs of Markets reversing direction . I will try and analyze  these Points of Invalidation that will render the current Trend invalid and let one know the change approaching.

1. Volume Action:

The last few days of Volume Profile shows 5465 as an area from where the downfall in the immediate term has accelerated .So for Tmrw's trading this can be an SAR point.
The high volume node is at 5515 level in the 10d profile ,signifying it's importance in the short term ,any close above it will be a sign of reversal in the short term .

2. Price Action :

The Weekly close above 5550 level will signify a Weekly reversal and one may go long over close of this level if  it happens next week.
One should wait for the price to close over the 5d high ema for the signal to go long.A bullish alignment of the 5-20 ema will be added confirmation.
Also Trading above 38.2% Fibo . level of 5700 will change the market outlook.

3. Pattern / Trendlines:

The Hourly chart should be followed to see the change in the Daily TF. One may keep following the Trendline in the Hourly chart ,the break of which will signify weakening downtrend in the Daily TF.

On the Daily chart we can see the importance of the 5750 level ,where markets have taken support and then resisted in last three months .Close above this level will signal the change in the Medium term .One may go long above it positionally for targets of 6000+ levels.

4. EW Count:

 As per the preferred EW count followed , 5700 level will invalidate the current count . This may signify reversal or simply the wrong count of the waves.

Conclusions :

So, the Game Changer levels are: (These levels are as of today's data ,the short term data will be dynamic and has to be followed daily to keep tab)

In Short Term -     Close above 5525 level (for next week only)
In Medium Term - Close above 5750 level
In Long Term -      Close above the recent top of 6338 .

One may follow these levels to manage the trades in respective time frames . Part booking , following a Trailing s/l & proper Money Management will help increase the profits and curb anxiety .

For further details of Analysis and Targets , Pl check-

For Long Term -

For Medium Term -

For Short Term -


mynac said...

Nothing special but just want to share my understanding with you.As per my very little understanding the current correction is "Combination Wave Pattern " of Bear Market,though it is too early to say so.Because after many months later the Month MACD has turned Negative so from here it shall be not very easy for Bulls to hold market here only as they were doing this from last two years.The best policy from here until concrete confirmation of uptrend is that .........wait for Bulls to get exhaust at certain xyz level from low and then go short.The reward ratio shall be very nice.
Thanks for your very valuable analysis/guidance.

alphabet1 said...

Hi Aar-Vee,

Yr other sites are blocked for viewing ?

How to access ?

TA has to be simple like the charts you put up, not complex.

Thank You

Tryin2Trade said...


Nice title to the post..and the KEY is your blog...

Good analysis almost a road-map for one to follow!

Hope your readers make the most out it!!!


AAR VEE said...

Hi mynac,

I know all people analyzing and interpreting different aspects of the markets will have their own views.what i tried to do is plain obejective .no bias ,no supports ,no resistances,no pivots ,no indicators etc ,only price telling us what to do .but then each has its own unique way and should be respected.

ur observations are always with ur ears to ground .Thanks for sharing .keep coming with them

AAR VEE said...

Hi alpha 1,

'My trading diary's link is now on the top of the side bar ,(Resources @ ),It has been turned to a compilation of useful links to be upraded regulary .I am writing EOD notes here itself almost daily .Also all the posts/notes have been shifted here itself.(there were only a few there)
'Money never sleeps'had some widgets ,the popular ones have been added as links to the resources .i am doing some experimenting /backtesting /paper trading some methods there ,will share them once i am satisfied.

Sorry for the inconvenience.

Please let me know if u have some problem viewing 'm trading diary'

AAR VEE said...

Hi Manoj,

Thanks for the Nice words.I too hope it's of some help to friends.


alphabet1 said...

Thanks Aar Vee.
I though found earlier horizontal display to links more convenient.
Market Matrix charts with adjustable settings option was nice.
So was Sameer oscillator on TheMoneyMatrix.

More simpler and fewer the better, i feel so.

AAR VEE said...

alpha 1,

Sorry that i coudn't manage the settings horizontally ,though i preferred it too,due to this tempelate setting .
The chart u are mentioning may be under the eod subhead of 'interactive sensex chart' check and let me know if u can view it.
I will try to add sammer's chart later today.

alphabet1 said...

AarVee you may appreciate this longer perspective.

Still, with so much consensus on bear-hug, will market oblige all the analysts ? Que Sera Sera

PS. Will look up and let you know.

AAR VEE said...

Nice article alpha 1.

Just a little smile came to my lips seeing the 11 year chart,pl. see my long term analysis post and the ew chart having my preferred view. :))

Market being the sum total of the emotions of all the players (,which i am certain are induced by few deep pockets) ,will never oblige the majority ,but it's the million dollar question ,what is the majority doing ??,it seems buying on dips still for the elusive 200 dma and the new top.
If its so then the people trading on the short side are less or the few with deep pockets so they will distribute their goodies here to buy back again at much lower rates from the same majority.
when this balance changes which will after a major support breaks and panic sets in ,they will be on the buy side and majority will again doing the opposite ,selling short for new lows which will not be made:))
same old story ,centuries old but still packeged in new covers to new players.

Sujeet said...

This means that their are chances for the new top:) then again new low...I will be most happy to see that TOP:)