MARKET MATHS

MARKET  MATHS

Market participants always believe the stock markets to be quite random and are always perplexed about its movements.  For a trader, any idea that helps to find swing top/bottom is always welcome.

In a book by W D Gann, titled “How to make profits in Commodities” he has mentioned the following (on page 34):

“If we wish to avert failure in speculation, we must deal with causes. Everything in existence is based on exact proportion and perfect relation. There is no chance in nature, because mathematical principles of the highest order are at the foundation of all things. Faraday said: `There is nothing in the Universe but mathematical points of force`.

Every Commodity makes a TOP or BOTTOM on some exact mathematical point in proportion of some previous high or low level.”

This article  is an attempt to illustrate, what the legendary trader W D Gann has stated above.

NIFTY FUTURE

NIFTY FUTURE MONTHLY  CHART AS ON 16.12.2014

In the above chart, I have marked the major swing high & low levels on a monthly chart that are relevant for the purpose of this exercise.

The arithmetic works as follows:

                        Nov ’10 High  -  6349   (B)

             Less:   Oct  ’08  Low -  2228   (A)

                                               -----------

                                                  4121

             Add :   Dec ’11 Low      4538  (C)

                                                -----------

                                                  8659 

As against the arithmetical target of 8659, Nifty Future made a  high of 8668 (D). The overrun of just 9 points can well be explained as – what W D Gann referred to as Lost Motion – the effect of momentum that carries prices slightly past its target in a volatile market.

While this idea by itself does not indicate that it is a final  top, but considering that we have used Monthly chart – the significance of this top should not be undermined.

As regards the BSE Sensex, the recent top is not as accurate as in the case of Nifty Future. However, I have given below the levels for comparison purpose.

                        Nov ’10 High  - 21108

             Less:   Oct  ’08  Low -   7697

                                               -----------

                                                 13411

             Add :   Dec ’11 Low    15135 

                                                -----------

                                                 28546 

As against the recent high of   28822.      

In my experience of using this  idea, I have found that it works quite well on stocks/commodities chart of different  time frames.

Keep Learning!

CA Ketan  Asher.

17.12.2014.

BANK NIFTY FUTURE WEEKLY

BANK NIFTY FUTURE WEEKLY





In the above chart, I have drawn Andrew's Pitchfork with starting point A as Jul 2006,  point B as High of 13320 and point C at low of 7750. When doing so, the median line has provided perfect resistance at the recent all time high of 13348.

While making a new high at 13348, it has also made a double top and corrected sharply to make a recent low of  8349 at 50% level. In the last three days, Bank Nifty future has gone up over 19% from the recent low of 8349. This sharp up move has given an impression that the worst is over for this sector. In the week ahead, it may find strong resistance around 10200 being the lower parallel line as well as 0.382 Fib level of 10250.

 

Secondly, on the attached chart I have marked the time (in weeks) it has taken for each of the major moves. You will observe that the fall has lasted for 59 weeks where as the up move has been for 88 & 73 weeks. This shows that the sharp up move may just be a correction to the sharp fall as we are just into the 15th week of the fall.

 

Keep Learning!

Ketan Asher.
 

NIFTY FUTURE MONTHLY CHART

NIFTY FUTURE MONTHLY CHART

 

 

In the attached monthly chart of Nifty Future, I have drawn Andrew's Pitchfork, wherein you will observe that lower parallel line was providing support on many occasions in the past.

Current month candle is now decisively out of the lower parallel line and had a free fall yesterday. As shown on the chart, we can expect it to take support around @ 5380 being 50% level and thereafter @ 5180 being 0.618 fib level as well as trend line support. This can go down till 5100 being the open = low level shown on the chart on 3.8.2012. In achieving this level, Nifty Future will fill two more gaps (of the many more yet to be filled further down).

Investors and Traders, both need to be cautious as we may have just begun the down move.

With Best Wishes,

Ketan Asher.