The March begins anew?

It has been a while since I gathered my thoughts on the markets. I attribute it to a combination of the markets doing as expected, a bit of laziness and a lot of work. (Have a day job after all!)

Consolidation at a new ATH is as good a time as any to revisit the assessment and the expectations. So, here we go again …

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NIFTY and the Bank NIFTY are at ATHs. The economy is in the eye of a hurricane but the markets are enjoying perfectly sunny weather!


Consolidation at the previous ATH is tricky business.  Many questions abound. Double top? Record trailing PE? Nth round of NPAs? The crux of it all is that it is easier to justify buying cheap and an ATH, by its nature, doesn’t appear cheap. But how do the numbers look?

Monthly Charts

  1. NIFTY has made 3 consecutive green candles after reversing from -0.5 to -1.0 SD range on the Monthly BB charts.
  2. This was the 2nd successful reversal from the same BB support.

Where do we go from here? What does history say?

The NIFTY has made 3 or more consecutive green candles 19 times prior to this one.

  1. Seven times the streak ended at 3 months BUT a top was made only 3/7 times. 
  2. Three times the streak ended at 4 months.
  3. Six times the streak ended at 5 months.
  4. Once the streak ended at 7 months and twice at 8 months.

My definition of a correction is a move to at least the 20MSMA. Of the 13 prior instances where the NIFTY corrected to the 20MSMA or lower, only ONE happened without testing the 2SD – 2.5SD range on the Monthly BB. The major corrections actually end up reaching close to the +3SD.

The NIFTY chart above demonstrates that we are a small distance away from that level.

The Quarterly & Half-Yearly Charts

Despite the anxiety created by the ATH, NIFTY quarterly (Current candle WIP) below demonstrates that we haven’t really gone anywhere in 6 quarters. 2% – 3% on a quarterly chart is practically nothing.

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But when you look at the NIFTY Half-Yearly chart, a different picture emerges and, you can see six consecutive green candles (current candle WIP) which has happened only once before (8 consecutive green candles between 2004 – 2008)

The Bank NIFTY

The NIFTY is a sum of its components and the biggest influence on the NIFTY is the Bank NIFTY. The Monthly – Quarterly – Half-Yearly charts for the BN are below

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A major bear-market led by the Bank NIFTY has ALWAYS happened after a test of the +2.5SD BB on the Quarterly charts and, sometimes, in conjunction with a similar formation on the Half-Yearly charts.

The other Chart – CNX 500

This is one chart that is very rarely analyzed. After all, why bother with this chart when the real move is always led by the top – 10 stocks. Thankfully this one lays bare the consolidation that I’ve been referring to. The CNX 500 – 1M – 3M – 6M charts are below

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What you see there is a 9 Quarter consolidation and a market on the verge of a potential break-out (?).

To Summarize

There is a very good chance that the market of two-halves will get together and move in as a single unit over the next few months and quarters. Which direction? The most probable move is to the upside.

My hypothesis is as follows

  1. A strong move in the NIFTY over the next 2- 4 quarters. The target is a moving one but I don’t rule out a 15% – 20% move.
  2. The Bank NIFTY will lead the move and 38K – 40K is possible in the same TF.

The major top can come either in the 2nd half of CY 2020 or early CY 21. This move will be fairly quick. WHY? NIFTY has to put in some distance between its price and the moving averages for the major fall to happen i.e. it has to get stretched.


Disclamier – The above is my analysis of the market and should not be construed as investment advice. I am not registered with SEBI.

The Now or Never Month – August 2019

The last few weeks (esp. the last one) have been hard for a number of people (including me).

The Baseline

NIFTY made a high of 12103.25 (the curse of the thousands played out again) and has since then corrected to a low of 10848.95 in 9 weeks. This is a move of 10.36% at an average pace of 1.15% per week. As far as pace of corrections go, this has been a fairly tame correction. The average pace of the last 5 weeks has been 1.89% per week.


What does History tell Us about Corrections

First of all, it’s a good idea to review this twitter thread of mine reviewing corrections on the NIFTY since 2002.

Now what about this correction?

Lets review the Weekly Charts

  1. This correction has gone beyond the -3 SD on the Bollinger Bands!
  2. 8 of the past 9 weeks have been red candles on the weekly charts.
  3. The correction has landed at the doors of the 100 WSMA @ 10848.95


Now Lets review the Monthly Charts

  1. Two consecutive red candles have been formed.
  2. The correction has *almost* tested the -0.5 SD BB (10793.xx)


So, NIFTY has reached the same levels as the Sept – Oct 2018 correction.

 How do these levels compare to the 2018 correction?

  1. September – October 2018 correction ended at -0.5 SD BB on the Monthly Charts
  2. It also ended just below the 100 WSMA.
  3. The 2018 correction had lasted 8 weeks.
  4. It never went close to the -3 SD on the Weekly BB.


Now that we have the context lets try and peer into some additional data points ….

The value of the -3 SD Bollinger Band Test

  • The NIFTY has tested the -3SD on the Weekly BB only ten times in its entire history!
  • 6 / 10 times, the NIFTY low in the week of -3SD BB test was within 2% of its intermediate low.
  • 8 / 10 times, the swing low happened within 2 weeks (or in the same week) of the -3 SD test week.
  • 7 / 10 times, the low formed within that 1 – 3 week period was the final low.
  • 3 / 10 times, the market made a substantially lower low (it turned out to be start of a bear market)


The duration of the fall (>= 9 weeks)

  • There have been 7 instances since 1997 where the singular fall / correction lasted >= 9 weeks
    • One of them lasted 9 weeks
    • Two of them lasted 10 weeks and 13 weeks each
    • The remaining two lasted 11 weeks and 12 weeks each
  • Only 3 / 7 had <= 1 Green candle in the entire journey from top to bottom (similar to the current correction)
  • 4/7 corrections made a final low whereas for the remaining 3/7 instances, the low formed by this correction was within 4% of the final low.

Greater than 9

Now we come to the Now or Doomsday (Monthly Charts)

If the NIFTY breaks the -0.5 SD on the Bollinger Band conclusively, then it tends to test either or all of the following

  • The 50 MSMA (9654)> Rising at 52 points per month
  • -2 SD on the Bollinger Band (10047).
  • -2.5 SD on the Bollinger Band (9818).

In a worse case scenario, can also test the 100 MSMA (8050).

In a nutshell

  • There is a high probability an Intermediate Term low has either formed or will form within the following parameters
    • Previous week or within the next 1 – 3 weeks
    • Current low or within the 2% – 3% of the current low.


  • IF there is a sustained break of the -0.5 SD Bollinger Band on the Monthly chart (10793), then its time to sit back and watch the chaos unfold. IF that happens, then the current correction will feel like a bull-market. 


Disclaimer – The above is my market analysis and should NOT be considered as any kind of market advice. I am not certified to provide market advice. 


Where do we go after the damp squib?

I Am trying out to this experiment of moving from an unstructured twitter thread to the blog. I have no real idea of how successful or coherent I’ll be, but hopefully I’ll get better at this. Please excuse me if the post rambles a bit.

 The (non-)volatility of election results

From a volatility perspective the election results turned out to be a damp squib. Agreed that on the day of the results, there was a 400-point candle but on the weekly charts it didn’t even manage the widest range for Calendar Year 2019. That’s a pity. Even in 2014, NIFTY made the widest range bar in > the past 20 weeks and the less we talk of sparkling price volatility in 2009 and 2004, the better it is.

That was legendary volatility; days you remember for years!

The question will, inevitably, come up. Why does this even matter? Maybe as they say, the markets had already *priced* in the election results (That is BS; just in case you haven’t read my tweets).

The Consolidation

The real reason it matters is the yellow rectangle and the consolidation it represents. Since making an intermediate top in early August 2018, NIFTY has moved 3% in ~ 10 months and 5 of those 10 months were spent under the tender love and care of the 20 Monthly SMA. This SMA was, almost, retested in May 2019.

While the NIFTY has moved beyond the previous ATH with some minor conviction, it hasn’t seen the kind of explosive move that many (including myself) expected.

The baseline

For the purpose of the next set of analysis, I’m going to assume the elections were a non-event (sadly). Let us see where the NIFTY stands today

Weekly Charts

  1. Price is between +1 SD to +2 SD BB
  2. RSI is approaching 70.
  3. The price differential between the Week’s High and the 20WSMA is 6.3%

To Summarize, it is potentially (Why potentially? The price action and data is dynamic) getting close to levels where we should worry but not yet.

The Weekly Chart

Monthly Charts

  1. Price is tagging the +2 SD BB (3rd consecutive month)
  2. RSI is approaching 70.
  3. The price differential between the Month’s High and the 20MSMA is 10.22%

Monthly Charts

Quarterly Charts

  1. Price is tagging the +2 SD BB (2nd consecutive quarter)
  2. RSI is at 79.84. For context, this has been higher only twice earlier (Jan 2006 @ 80.4 and Oct 2007 @ 86.74)

This Long-Term trend is starting to breathe rarefied air. Yet, this is a quarterly chart and fortunes can be built & lost in a single quarterly candle.

The Assessment

With the baseline established, let us begin an interpretation of the charts

The Quarterly charts (Long-Term Trend)

  1. Since 1999, there have been six corrections (bear-markets?) lasting at-least two quarters.
  2. 5 of the 6 started from a new ATH.
    1. None of these 5 started below the +2.5 SD BB on the Quarterly Charts.
    2. 3/5 tested or crossed or at-least went very close to the +3 SD BB.
    3. The same levels on the NIFTY (today) are 12600 – 13400 and rising at 400 – 500 points per quarter.
  3. The one instance where the NIFTY didn’t make an ATH and had a multi-quarter correction (bear-market?) was in October 2010.

To summarize, the lack of an explosive move post elections has, probably, extended the duration of the LT Trend.


The Monthly charts (Medium-Term Trend)

  1. The Monthly candles for the past 3-months have all tagged the +2 SD BB.
  2. If we refer to the Yellow rectangles, in the chart below, we’ll see that none of the 6 instances (since 1999) resulted in an immediate top and the rally continued for anywhere between 3 months – 4 years!


  1. In all these instances, the final top happened with the Monthly RSI – broadly – beyond 70 (and we’re not there yet)
  2. Another interesting data point is that months of December 2018 – February 2019 were all red candles. 3 or more consecutive red candles doesn’t happen often.
    1. It has happened only 11 times earlier (since 1997) and of these 11 instances
      1. 2 have happened at or near the top.
      2. Remaining 9 have happened in the middle or the end of a down-move.
    2. The current set of red candles are very similar (at 20MSMA) to what happened in 2013 and 2016 which resulted in significant ATHs and multi-month rallies.



The Weekly charts (Short-Term Trend) –

Finally we have reached the point of assessment of the Short-term trend

  1. The two broad parameters that give a, high-probability, view of an upcoming correction are
    1. The price differential between the Week’s High and the 20WSMA is somewhere in the range of 7% – 8%. The 20WSMA is rising at 50 – 60 points per week.
    2. Test of the range > +2 SD BB (Currently @ 12205) rising at ~90 – 100 points per week.
  2. Sometimes, this can combine with a streak of 5 – 8 consecutive green candles (currently NIFTY is making the 4th Green candle)

The curse of the thousands

Whenever NIFTY has crossed a x000 milestone (i.e. 8000 – 9000 – 10000 – 11000 etc) for the first time; it has found an immediate resistance between the range of x100 – x200 points (8180 – 9119.20 – 10137.85 – 11171.55).


This has been a much longer blog-post than I anticipated it would be; let me try and gather my thoughts into a summary

  1. The Short-term trend may face a hiccup in the next few weeks due to a convergence of multiple parameters.
  2. The Medium-term trend has some way to go and FY19 might turn out to be a real good year for the investors.
  3. The Long-term trend is entering the slog overs, but difficult to say whether it is the 40th over or the 47th over of the 50-over inning.
  4. The levels to note (at this time) are
    1. ST Trend – 12100 to 12250 (rising at 50 – 100 points per week)
    2. MT Trend – 12300 to 12600 (rising at 160 – 180 points per month)
    3. LT Trend – 12600 to 13400 (rising at 400 to 500 points per quarter)


NOTE – The above post should be considered as my analysis notes and should not be construed as any kind of investment advice.

The Anatomy of a NIFTY Top

In this post, I’m going to explore something that has always fascinated me; how do market tops happen? Are there data patterns (beyond candlestick patterns) which can be utilized to identify those tops in real-time? So, let’s see if some of those questions can be answered in this post.

For the sake of lucidity, I’m going to split the analysis into a few parts.

Let’s first define what a top means (for purposes of this post)

  • Price Action that leads to a multi-month (>=3) correction
  • Test of the +/- 0.5 SD Bollinger Band (i.e. BB with 0.5SD width and 20MMA)

The Nifty Infancy i.e. 1990 – 1995

During this period, there were 2 market tops which led to multi-month corrections. These tops happened in April 1992 and September 1994

  • Both tops were made during months with red candles and the month range was 16.8% and 6.8% <Interesting Symmetry there!>
  • The first was a blow-out top and the second was a measured top.
  • The second top was 8.2% higher than the first top.
  • Due to the Infancy, both were All-Time High tops.
  • RSI high before either of the two tops was 90 and 75.


NIFTY Starting School: 1996 – 2003

These years could also be characterized as the consolidation years. NIFTY made 4 market tops during this period, but it wasn’t until the 4th market top that it crossed the All-time high created during the Infancy years. The four tops were made in June 1996, August 1997, April 1998 and February 2000.

  • The ATH top (Feb. 2000) was made ~ 32% above the previous ATH (Sept. 1994)
  • All except August 1997 top were made in months with Green candles.
  • The monthly range, for months where tops were made, were 9.4%, 15.3%, 10.6% and 16.3%
  • Only the final top was an ATH.
  • All consolidation tops (first three) happened with RSI highs between 55 – 60 and the final ATH top happened with an RSI high of 72.


NIFTY’s Wild Years: 2003 – 2009

This period saw the most one-sided rally that NIFTY has ever seen followed by a stunning fall. This rally enticed and introduced many people to the equity markets (including me) and then us newbies saw our portfolios getting halved over the period of a few months. Probably the best description of these wild years can only come from a Charles Dickens epic – “It was the best of times and the worst of times …..”.

During this period, NIFTY made three tops (as per my definition) in January 2004, May 2006 and finally in January 2008.

  • All three months were made in months with red candles (normal service resumed!!)
  • The monthly ranges, in which the tops were made, were 12.8%, 23.2% and 30.2%
  • The first ATH was 10.8% above the previous ATH (Feb. 2000). All three were blow-out highs with months of sustained upmove prior to the tops.
  • The RSI tops were 78, 82 and 85 prior to each of the ATHs.


NIFTY Trying to grow up? – 2009 Onwards

It might be fair to say that NIFTY has nursed a long hangover of it’s wild years. Every time NIFTY has moved up, people have looked for a premature top (atleast IMO). During this period, NIFTY successfully made 4 tops and a fifth one will happen sometime in the near or far future. These four tops happened in November 2010, May 2013, February 2015 and September 2016.

  • 3 of the four tops were made in months with red candles.
  • The monthly ranges in each of these four months were 10.2%, 5.2%, 9.3% and 4.6%.
  • The first ATH was 43.5% higher than the previous ATH (Jan 2008)
  • The RSI tops prior to these market tops were 68, 61, 83 and 63 respectively.

What does all this mean?

  • Of the 13 tops on monthly charts, 9 were made in months with RED candles.
    • 3 of the four tops made with green monthly candles were made between 1995 – 1998.
    • So, there is a > 70% approaching 90% chance that the top will be made in a month with a red candle.
  • NIFTY has tendency to make ATHs (post-consolidation) at 8-10% above the previous ATH. Beyond this, it doesn’t stop till it reaches the 30s.
  • The average monthly range for a top month is 13.13% and the median monthly range is 12.8%. Only 4/13 have < 10% monthly ranges and the highest concentration is between 9 – 13%!!! Remember this is range for ONE month.
  • All but one of the ATH tops were preceded by huge GREEN candles on the monthly charts.
  • Two of the ATH tops were made with RSI @ 72 whereas RSI was > 78 for all other ATH tops.

Where is the NIFTY today?

Monthly range for June is < 2% with the current ATH being 6.4% above the previous ATH AND the current RSI high is 69.6. I shouldn’t need to spell out where my interpretation of the price action is pointing.

BUT and this is a huge caveat, History should be taken as an indicator but not a predictor of the future. There is a first time for everything!

Thanks for reading so far! I’m reachable @jdsfinance on twitter.

Looking at Market Data

Quick Summary

Over the past few years, I’ve developed a slightly different approach of looking at data regarding the Indian Stock Markets. I don’t know what to call it; but what I’m aiming to do is look for patterns, more specifically trade-able patterns made by historical data. One might say that this is what charts do and that is correct (to an extent).

The only difference in my attempt here is one word – context. A chart pattern, in and of itself, is useful and good chart readers (of which there are many and most of them way better than me) can intuitively grasp the context. Unfortunately, I have struggled in that respect, immensely, at times.

This blog here is an attempt to elucidate and improve my own understanding of ‘context’ as it concerns market data. I have no real-idea of how good I’ll be, in following up this maiden attempt, but I’m going to give it a good try!!