The Hindu Business Line : Tech Tools

I am a regular reader of your articles on technical analysis. I have read books on market momentum, candlesticks and others but I still feel that something is missing in full study. I use various indicators like RSI, ADX, Parabolic SAR, and ROC but have difficulty in finding support, resistance and price projections.

How can I widen my knowledge in wave counts (Elliott waves)? Is there any good institute in India that can help me in gaining knowledge on the art of technical analysis or should I refer to some more books and practice on charts? Kindly guide me. Saurabh K.

There are many institutes teaching technical analysis in India and there are workshops being conducted regularly, too. But you have already covered good ground by studying, among other things, all about the oscillators, Japanese Candlesticks and Elliott Wave Theory.

Mastery over technical analysis can be obtained only by constant practice. Do not use all technical tools at the same time. Use one or two oscillators that you find most adaptable to your style of trading and gain mastery over them. You can start with paper trading and then move on to trading in small quantities before starting full-fledged trading.

There is one easy way of finding supports and resistances. That is by using the previous peaks and troughs. As most investors remember that the price turned higher from a certain level the last time, or that the price reversed downward from a particular level, these levels turn into supports and resistances that can be exploited during trading.

It would be a good strategy to enter a stock as the price reverses from its previous low. In the same way, stocks invariably turn jittery as they near former peaks.

One of the reasons why former peaks and troughs act as reliable supports and resistances can be pinned down to traders — who do not use technical analysis — who find it easy to remember previous highs and lows.

Another popular method of finding supports and resistances is through the use of Fibonacci numbers and series. You will probably find that the missing link in your study of technical analysis is these numbers. The important Fibonacci percentages are 23.6, 38.2, 55 and 61.8. If you calculate these percentages (of the most recent move) and deduct from the most-recent peak, the short-term support for the prices can be derived. In the same way, calculating these percentages and adding them to the most recent low gives us the resistance levels to look out for in the short term.

Elliott Wave is also closely linked to the Fibonacci numbers, as the waves can be extrapolated using the golden ratio of Fibonacci - 61.8 and 1.618. Calculation of where the corrective waves will stop and the relationship between various waves is also calculated with the help of these numbers.

I am a day trader in commodity futures and follow your levels mentioned. I would like to know which tool could be followed for intra-day trading. Which parameter is good for intra-day trading such as one minute, five minutes and so on? Jyothikrishnan.

The stock market movement is fractal in nature. It means that the same patterns occur in all the time frames, whether it is intra-day, daily, weekly or monthly. The tools that are applied in the daily chart can be applied equally effectively in the intra-day charts as well.

The speed with which trades are initiated and closed will determine the chart duration that is selected. Traders who execute only one or two trades during the trading day can use 15-minute chart or even 30-minute charts. More frequent traders can use one- or five-minute charts.

Lokeshwarri S. K.

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