Index inverse H&S ??? NOT QUITE!!!

Many market players are taken by surprise by the current stock market rally the world over. But what seems to be more confusing the analysts is the 'price patterns' that the markets are making!!

Many known technical analysts are indicating that the Nifty / Sensex has an 'inverse head and shoulder' price pattern. In fact they have even computed targets for the indices based on this pattern.

I, for one, tend to humbly defer.

The price pattern in the Nifty / Sensex is NOT an inverse H&S, even though it looks like one. Just because a pattern looks like an inverse H&S does not make it one.

Think about this : What is an inverse H&S and what are its characteristics ??

It is a 'REVERSAL' pattern and it reverses a down trend. If that is the case the first thing to look for is the basic trend.



Check the chart above .. Do you see a down trend ??? My question to the learned analysts is "If there is no down trend then, what will the pattern reverse??"

I have always emphasised in my practical workshops about the placement of a pattern and this is one example of the objectiveness to be used in applying technical analysis.

Happy trading!

CA Rajiv D Khatlawala

Gitanjali - A gem to catch!!

The Nifty tested 5000 yesterday ... I was infact expecting that some one might release 5000 balloons from the NSE terrace !! But nothing of that sort happened, sadly.

While the Nifty and the frontliners keep most traders confused, there is huge 'operator' activity in the mid caps. One such stock which is positive in Gitanjali Gems ...

The chart pattern looks like a Cup and handle and there is also a triangle in the recent price formation.

A break above 124 should see some good activity , especially given that the volumes have recently picked up.

Enjoy the mid-cap ride, while it lasts !

CA Rajiv D Khatlawala

To be (bullish) or not to be – is the question!

Commodities Traders amongst you would have got decent and quick returns in NAT GAS. Well the Equity markets were not so hyper active. While on week-to week basis they are showing a gain of more than 3%, many stocks are witnessing profit booking.

The World markets are acting as if World GDP is going to gallop in the next few months !! Let's see what's happening in the world financial markets:

One of the major news as far as the world markets is concerned was that last week GOLD crossed the psychological $1000. This is an interesting phenomenon.

All of the world’s financial markets are rising – Gold, Crude, Base Metals, Stocks, Agro Commodities and also most currencies (against the dollar). Historically there has been a inverse relationship between many of these ‘asset classes’- for instance when stocks fall, Gold rises or say when Crude oil rises, the stocks fall.

But these logical relationships seem no longer valid. Is this a temporary phenomenon? Will the inverse relationship restore in coming days? Time will tell.

But one thing seems pretty sure – all the financial markets are rising mainly on account of the huge liquidity in terms of huge stimulus packages given. And most of this stimulus is ‘financed’ by China!

This may be the reason that the Bank of China gave a statement that ‘there is a bubble in stocks and commodities, not only in China but everywhere’. And if this bubble were to burst , it will be a huge blow to the ‘signs of recovery’ which is being promoted by governments the world over.

While previous few weeks saw the US markets outperforming the Asian markets, last week it was the turn of Asian markets to outperform – (another indication of rotation of money?).



Indian markets are treading cautiously... Investors too must do the same - be extremely careful! 4700 Nifty should be the Crucial support below which traders and investors should exit all longs !

Take Care !

CA Rajiv D Khatlawala

NAT GAS - A Morning Star!

Regular visitors on my blog would have observed that my IOC target was reached yday. Also those of you trading in GOLD also witnessed the breaching of the $1000 mark - indicated as early as mid-july when price was $935. NIFTY meanwhile is busy breaking out- though volumes are not supportive (more on Nifty in my next post)

NAT GAS traders (including yours truly) are waiting for a reversal signal. A few days back we almost got a rounding bottom, but unfortunately the break out did not occur. So the rounding theory went blank.



At the current juncture after seeing a panic price fall below Rs 120, it is showing a 'Morning Star' candle stick pattern . This is a classic japanese candlestick reversal pattern and is also considered quite powerful.

A break above Rs 137 should trigger a buying for the 'risk takers' who may keep stops at 121 and target price of Rs 160 -173 in coming days.

Happy trading

CA Rajiv D Khatlawala

Nifty - 4500 seems Crucial - very crucial !!!!!

The Nifty has had most analysts confused . But it seems that if one combines basic fundamentals and basic technical knowledge, it is not as confusing.

Fundamentals are suggesting weakness but the buyouancy in world markets and hence FII's positive sentiment - seems to keep the indices up (the technical part).

But now it seems we may be nearing a convergence of the technicals and the fundamentals!



The charts above tries to provide a different view - you may observe that the trendlines drawn are different than many may have drawn on the charts.

A break below 4500 would surely make me wait longer for buying in to the markets.

Happy trading (or no trading, should we say?)

CA Rajiv D Khatlawala