I am back with an example of my favorite setup; Divergence. The chart below illustrates Bullish Hidden Divergence at work. Ok I am assuming that most of you know what’s Regular Divergence and what’s Hidden Divergence. The basics can be read here in my earlier post on Divergence. And since this post is about Hidden Divergence (HD), I would like to add here that HD is actually a sort of continuation pattern. It gets you in the prevailing trend.
As you can see in the chart above, that first the price made a HH and the indicators below made a LH confirming Negative Divergence (marked in red arrows) and hinted that price is ready for a breather or a pullback of sorts. This pullback resulted into a Bullish Hidden Divergence (marked in blue dashed arrows); Price making a HL and the indicators going on to make a LL. Now if we were to go long, we had quiet a few signals which made our decision easy. We had a pullback to the 50 MA which held, we had a small DB and finally we also had a Hidden Bullish Divergence. As for the entry once the price took out the lil peak between the two bottoms (plus 20 MA also took out) we had our chance to go long with a tight stop just below the DB area. As for targets, there are different techniques; some people use measure rules and some go for Fibonacci projections and than there are some who are just content into selling into the next resistance around the corner. Follow whichever suits you; YOU KNOW YOU ARE SAFE IF YOU ARE USING SOUND MONEY MANAGEMENT!!!
I was just reminiscing about our high school days with a few friends and that reminded me of this beautiful poem by Alfred Noyes, we had as a part of our English syllabi. After you are done with the poem, watch the song Everywhere by Fleetwood Mac based on this poem. And before you start wondering Hey what’s this got to do with trading and stuff? Well nothing it’s just that I like this poem and there are many things I would love to share with you friends, other than my insane ramblings about the market! Go ahead and enjoy, there is a life to live besides trading!!!
The wind was a torrent of darkness upon the gusty trees,
The moon was a ghostly galleon tossed upon cloudy seas,
The road was a ribbon of moonlight looping the purple moor,
And the highwayman came riding--
Riding--riding--
The highwayman came riding, up to the old inn door.
He'd a French cocked hat on his forehead, and a bunch of lace at his chin;
He'd a coat of the claret velvet, and breeches of fine doe-skin.
They fitted with never a wrinkle; his boots were up to his thigh!
And he rode with a jeweled twinkle--
His rapier hilt a-twinkle--
His pistol butts a-twinkle, under the jeweled sky.
Over the cobbles he clattered and clashed in the dark inn-yard,
He tapped with his whip on the shutters, but all was locked and barred,
He whistled a tune to the window, and who should be waiting there
But the landlord's black-eyed daughter--
Bess, the landlord's daughter--
Plaiting a dark red love-knot into her long black hair.
Dark in the dark old inn-yard a stable-wicket creaked
Where Tim, the ostler listened--his face was white and peaked--
His eyes were hollows of madness, his hair like mouldy hay,
But he loved the landlord's daughter--
The landlord's black-eyed daughter;
Dumb as a dog he listened, and he heard the robber say:
"One kiss, my bonny sweetheart; I'm after a prize tonight,
But I shall be back with the yellow gold before the morning light.
Yet if they press me sharply, and harry me through the day,
Then look for me by moonlight,
Watch for me by moonlight,
I'll come to thee by moonlight, though hell should bar the way."
He stood upright in the stirrups; he scarce could reach her hand,
But she loosened her hair in the casement! His face burnt like a brand
As the sweet black waves of perfume came tumbling o'er his breast,
Then he kissed its waves in the moonlight
(O sweet black waves in the moonlight!),
And he tugged at his reins in the moonlight, and galloped away to the west.
He did not come in the dawning; he did not come at noon.
And out of the tawny sunset, before the rise of the moon,
When the road was a gypsy's ribbon over the purple moor,
The redcoat troops came marching--
Marching--marching--
King George's men came marching, up to the old inn-door.
They said no word to the landlord; they drank his ale instead,
But they gagged his daughter and bound her to the foot of her narrow bed.
Two of them knelt at her casement, with muskets by their side;
There was Death at every window,
And Hell at one dark window,
For Bess could see, through her casement, the road that he would ride.
They had bound her up at attention, with many a sniggering jest!
They had tied a rifle beside her, with the barrel beneath her breast!
"Now keep good watch!" and they kissed her. She heard the dead man say,
"Look for me by moonlight,
Watch for me by moonlight,
I'll come to thee by moonlight, though Hell should bar the way."
She twisted her hands behind her, but all the knots held good!
She writhed her hands till her fingers were wet with sweat or blood!
They stretched and strained in the darkness, and the hours crawled by like years,
Till, on the stroke of midnight,
Cold on the stroke of midnight,
The tip of one finger touched it! The trigger at least was hers!
The tip of one finger touched it, she strove no more for the rest;
Up, she stood up at attention, with the barrel beneath her breast.
She would not risk their hearing, she would not strive again,
For the road lay bare in the moonlight,
Blank and bare in the moonlight,
And the blood in her veins, in the moonlight, throbbed to her love's refrain.
Tlot tlot, tlot tlot! Had they heard it? The horse-hooves, ringing clear;
Tlot tlot, tlot tlot, in the distance! Were they deaf that they did not hear?
Down the ribbon of moonlight, over the brow of the hill,
The highwayman came riding--
Riding--riding--
The redcoats looked to their priming! She stood up straight and still.
Tlot tlot, in the frosty silence! Tlot tlot, in the echoing night!
Nearer he came and nearer! Her face was like a light!
Her eyes grew wide for a moment, she drew one last deep breath,
Then her finger moved in the moonlight--
Her musket shattered the moonlight--
Shattered her breast in the moonlight and warned him--with her death.
He turned, he spurred to the West; he did not know who stood
Bowed, with her head o'er the casement, drenched in her own red blood!
Not till the dawn did he hear it, and his face grew grey to hear
How Bess, the landlord's daughter,
The landlord's black-eyed daughter,
Had watched for her love in the moonlight, and died in the darkness there.
Back, he spurred like a madman, shrieking a curse to the sky,
With the white road smoking behind him and his rapier brandished high!
Blood-red were his spurs in the golden noon, wine-red was his velvet coat
When they shot him down in the highway,
Down like a dog in the highway,
And he lay in his blood in the highway, with the bunch of lace at his throat.
And still on a winter's night, they say, when the wind is in the trees,
When the moon is a ghostly galleon tossed upon cloudy seas,
When the road is a gypsy's ribbon looping the purple moor,
The highwayman comes riding--
Riding--riding--
The highwayman comes riding, up to the old inn-door.
Over the cobbles he clatters and clangs in the dark inn-yard,
He taps with his whip on the shutters, but all is locked and barred,
He whistles a tune to the window, and who should be waiting there
But the landlord's black-eyed daughter--
Bess, the landlord's daughter--
Plaiting a dark red love-knot into her long black hair.
A good end to March and equally good start to April, below is the monthly chart of Nifty and we can see that we have managed to bring ourselves above the 61.8 Fib (drawn from 2003 lows to 2008 highs) and also retraced to 23.6 Fib (drawn from 2008 highs to 2008 lows). Nicely nestled between the support/resi zones shaded in the chart. The only thing that looks like providing resistance on the monthly chart is the 50% fib and 50 periods MA together at 3650!
The weekly chart below forced us to redraw the triangle; in fact the shaded area on the dashed TL gave it an impression of a downward breakout. Though the break did give a quick short but overall the pattern was a false breakout (no wonder the pundits say “triangles are notorious”). Now Nifty looks like going to test the 50 periods MA which is co incidentally at 3635!!! So 3635/3650 makes it a good resistance to watch out for.
The daily chart is as colorful as the weekly above; this is our third attempt at breaking out of the congestion shaded in yellow. The channel in green (the bull ambush!) is actually too steep for bulls comfort but anyway it has done its job. This long period of sideways consolidation had done one great thing; it has bought down the 200 period MA (3463) to a striking distance, the next logical target on the daily charts. We have a resistance at 3240/50, and with things getting excitedly overbought, a breather is needed. Any retracement from here will first test 3150 (previous high and also the gap support of yesterdays euphoric move!). This time bulls have plenty of supports (see the hourly chart below) on the downside like 3100/3050/3000 and finally the famous 2950!
Speaking of supports, nothing is much better than the hourly chart below to display them. First I have shaded in blue (had to make the chart colorful!) all those sweet little water bodies a.k.a GAPS. These can be unfulfilled fantasies of Bears or can turn into nightmares of Bulls. Dumb as I am, I finally gave up identifying these gaps as Breakaway/Runaway or Exhaustion gaps, so taking the creative liberty let’s just call em BEARAWAY gaps!!! No idea which will be filled or won’t be filled but each one will be a delight to watch. Like said earlier it would be a game of Dragons and Dungeons. As mentioned earlier, things are looking overbought (and price too is overextended from the MA’s) and retracements mentioned above are likely to happen.
"The worst part of success is to try to find someone who is happy for you." Bette Midler
Trading is nothing short of speculation and people who treat it as intelligent speculation have a fair chance of doing well.The posts in this blog are nothing but notes I am making for myself. I welcome serious discussion on TA from like minded people and willing to share whatever little knowledge I have of TA. Nothing on this site should ever be interpreted as advice, research or an invitation to buy or sell any securities.
TRADE LESS TRADE SMART!!!
Hit me with brickbats at mbhagra@yahoo.com
