In technical analysis there are more than 100 indicators that can be used and applied on stocks.
But trust me
most of the indicators gives similar output. It is better to stick with 3 to 4
indicators that you are most comfortable with and understand it completely.
Many of the books and if you search online using Google search will give
you very crude way to use these indicators for simply overbought or oversold
conditions which are wrongly pre-defined as 70 and 30 levels on RSI. The
reason I say these levels as incorrect because during strong bull trend RSI
will easily reach 80 to 85 levels and during strong down trend RSI reading of
20 is fairly common. For optimum use of RSI try to see the levels from where
RSI has turned previously or in short which level is acting as support and
resistance – in a similar way we identify supports and resistances
The below article highlights on
how do we combined indicators like MACD, Time Cycles and advanced concepts like
Directional Movement Indicator. The complete strategy is not revealed which is
mentioned in today’s morning research report.
Kotak Bank Daily chart:
As shown in
Daily chart of Kotak Bank, since mid 2011 prices are well intact in the upward
moving channel. Recently in mid June 2014 prices broke above the channel
resistance near 910 levels, made a high near 960. But, after that prices were
unable to sustain above the same and showed sharp down move in last few trading
session. This down move has broken the black color channel support which was
intact since start of 2014. This is suggesting that short term top is in place
for Kotak Bank. We have applied various other tools which are giving warning
signs at current level that up move from ……. is in danger.
Directional movement index (+) in blue
color and Directional movement index (-) in red color is working
very well. In the past we observed that whenever blue color line moves above
red color line prices showed strong move
on upside on the other side whenever blue color line moves below red line
prices have showed down move. In simple terms, crossover of blue and red color
line is providing signal for buy and sell. At current level, ………
MACD: This indicator is showing negative
divergence and also the red line has crossed below signal line. What
does it mean? Indicators are suggesting weakness but is it right
to take the trade based on Indicator? Absolutely not! It is imperative to look
at price charts of shorter term duration to get good entry
or exit levels along with Risk Reward ratio.
Time Cycle of 96 days: is working well
to find out the top and bottom.
A detailed 120 mins chart is also shown in
today’s morning report for Kotak Bank. Looking at short term indicators
with crucial price levels is the key for successful trading and timing the
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