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Jan
13, 2003
NIFTY:
POSSIBLE SUPPORT LEVELS with FIBONACCI
Retracement
from 1 and 3 give convergence at 1062. (Chart not shown here).
A third set of
retracements can be drawn from 1 and a point maked as ??. This
?? represents hidden ‘D-Levels’© (copyrights by Joe
DiNapoli). Napoli’s book explains how such hidden levels can
be identified. Convergence comes in at 1035. This level also
happens to be the start of point 3. Chart given below:
Summary:
IF the Nifty continues its down move, we can expect support to
come in the area between 1062 to 1069. In case this support
breaks, the next level is 1035. AN uptrend is confirmed only
if the Nifty were to close above 1105.
The obvious
Question is: Should we buy or sell? This question MUST be
answered by each trader for his own use. Just as the rules of
driving a car are universal, yet each driver drives according
to his own style, so also, the rules for trading are
universal, but actual decisions must be taken by the trader
herself.
The Universal
Rules are simple: Trade with low volumes, Risk money that you
can afford to lose, always trade with stop losses, keep losses
small, let profits run, understand that it is our job to
follow these rules, it is the market’s job to reward us.
Sometimes the rewards come early, sometimes they come late.
Dec
03, 2002
Some
more Fibonacci
We
also have a GANN target for momentum waves, that comes to
1076.
The
next zone of resistance is around the 1090-1100 band.
How
can these ‘levels’ help us?
If we reach any of these levels, we should get careful, and
ensure that we should not forget to activate our stops. The
stops are based on exit techniques such as 5 period moving
average, Parabolic SAR.
We
may also take partial profits (on some of our positions)
around these levels.
It
also means: If the resistance is crossed, we can expect the
next resistance to come around 1090-1100. With this band as
the target, we can go long with our stop below the last Fib
resistance at 1067 (shown in chart).
Nov
28, 2002
How
do we draw Fibonacci retacements?
First,
we identify two significant extreme points on the Nifty chart.
How
do we define ‘significant’? Well, you look at a chart, and
when a high or a low immediately pops out and gives the
impression that this is an important level, then it is
significant. The best way is to learn this by experience.
How
do we define ‘extreme’? We need two points, one a
significant high and the other a significant low. These two
points are probably on the extremes of the chart.
In
the Nifty, a significant low was made at 920, Marked A. You
just have to look at the chart and realize that it is
important.
The
rally that started from A, has seen its highest point today at
B. This is a significant high. If this high is exceeded
tomorrow, we will consider that as important, but for today we
have the point B as an important high.
Now
we take the Fibonacci Tool and draw a line from A to B. When
we are done, we get the Fibonacci Retracement levels:
The
Retracement Levels tell us that we should expect a minimum
pullback to 1014, then 995.8, and so on.
In
the trend from A to B, there is another Low that may be
considered significant. It is from here that the current rally
started.
In
the chart given below, note
another Low, marked A1.
We
should consider a retracement from the low at A1 to the High
at B.
Look
at the two retracement charts. You will find that the 995
level comes in both of them. When two or more Fibonacci Tools
point to the same level, that level becomes significant.
This
entire process can be made much easier.
What
have I done? I have drawn both the retracements on the same
chart. Note how 995 speaks out at you. There are two support
levels at that point.
How
can we be sure that prices will drop to 995? We have no
certainty that this will happen. If prices do fall, we would
expect it to reach 995 fo reasons explained above. If they do
not touch this level, so be it.
There
is much more to Fibonacci than this. But this surely gives us
a start. Be careful when prices reach a significant Fibonacci
level.
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