THE AMA SYSTEM

Introduction to AMA (Ankit's Moving Average)


I am putting out a proprietary trading system for the benefit of all our readers known as the AMA SYSTEM.

AMA stands for Ankit's Moving Average.

AMA has been modified from the conventional SMA and EMA's to reflect support and resistance points for Nifty in a more dynamic way based on a certain regression and mean reversion for Nifty.

I will be updating 5 values for Nifty on a daily EOD basis.

5 AMA
13 AMA
34 AMA
89 AMA
144 AMA

As can be seen all values taken are fibonnaci numbers and represent Nifty's values across the entire spectrum from short term (5 & 13 AMA), medium term (34 & 89 AMA) & long term (144 AMA)

These 5 values will represent support and resistance points for Nifty on a dynamic basis which will change on an ongoing basis with Nifty's daily movements and help us to refine and make better trading decisions.


Happy Trading!!!

Nifty Update

Nifty took resistance exactly in the centre of our resistance band of  6180 - 6250 as mentioned in our previous post. Having touched a high of 6220+  Nifty fell 300 points in a matter of 4 days and made a low of 5930.
This in TA terms is known as 'Faster Retracement' and this can be an early warning sign & additional confirmation that Nifty has formed its major top at the recent 6220 high and started its journey on the way down. This could imply that Nifty has ended its 5th wave at the high of 6220 and we may have started the major C down. For additional confirmation that the 5th wave of corrective B wave has indeed ended Nifty has to break below 5930 & 5820 and give a faster retracement of the entire rally from 5500.

Nifty has retraced it's entire fall from 6220 to 5930 by round about the 61.8% mark and if  6130 is not crossed soon then we may witness another round of swift selling in which Nifty may target Faster Retracement of the entire rally from 5500. If so, that could mean we could witness some serious index selling and volatile days in the June contract.

Other factors supporting the bearish view on Nifty are :
1. India Vix consistently staying above the 200dma and showing early signs of a breakout.
2. Rupee depreciating rapidly and has broken below the all imp 56 level.
3. Global markets at all time highs and a correction can be witneessed soon as most of them have reached imp resistance zones and are highly overbought.
4. The recent selling in Nikkei coupled with record volumes ever has given a reason to be unnerved and be cautious.


Continue holding shorts in Nifty and even create fresh ones near 6100 with sl at 6160.

Nifty Update

In our previous update we mentioned 6080 & 6120 as the important levels. Nifty now having broken above 6120 has shot up vertically and reached almost near 6200, a mere 100+
points away from the all important previous top of  6339.

The chart above shows that Nifty has entered its most crucial zone.


The band of 6180 - 6250 is the last overhead Multiple Trendline Resistance Zone for Nifty. To keep the bearish possibility alive, Nifty HAS TO reverse from this zone. As per EW theory, we are in the last and final leg, the 5th wave of the corrective (C) post which the major C down should start.

It would not be prudent to be long  in a scenario where Nifty is near a Major Potential Reversal Zone coupled with a rising Vix which is sustaining above its 200 DMA which indicates underlying bullishness in Vix (CAUTION ADVISED). That in itself does not warrant a reason to short but its better to cut out longs or stay hedged.

Another note of caution would be on the rest of the world markets which have been rallying relentlessly to new highs. Atleast some correction / retracement is warranted and may come anytime soon. Its important to note that DJIA has reached a major resistance zone of 15200 -15400 band and any further upside would be very limited and this band can be a reversal zone for the DJIA which will set in some serious corrections.

If Nifty does not manage to cross this resistance band soon and shows any sign of weakness/ top formation near such important levels then one may take short positions in Nifty.

Nifty Update

NIFTY DAILY CHART :

Nifty has inched perilously close to 6100. Views on the street are divided as to whether Nifty will cross the 6100 mark or not. Let's take a closer look at Nifty's roadmap ahead.

Nifty has reached a major resistance near the 6080 zone. 2 very important trendlines meet at the 6080 - 90 levels. One from the top of 6300 and one from the bottom of 4500. Both these trendlines converge at the 6080 odd levels. It can also be seen that Nifty is moving in the Purple band whose upper value comes near the recent top of 6300. This channel however will come into play only on break above the recent top of 6112.


Now lets take a closer look at the chart as to why the 6080 level is extremely crucial.

If Nifty closes in the negative in tomorrows trading session & further if it closes below 6020 which is today's low and a recent high, as depicted by the horizontal Orange line then Nifty will form a pattern called the EVENING STAR. Formation of this pattern after such a one sided rally and at such high levels will be sufficient to act as a trend reversal pattern in Nifty. It will be worthwhile to note that Nifty had formed a similar pattern at the recent top of 6112 before falling all the way to 5500. (encircled and shown by arrow)



NIFTY WEEKLY CHART :

As can be seen, 6080 is an important resistance zone even in the weekly time frame.


So to sum it up, 6080 - 6110 band is extremely crucial. Above this, Nifty can make a sharp upmove towards 6300 level & staying below this Nifty can reverse it's current trend.

Any signs of weakness in tomorrows trading session can be taken as a Low Risk High Reward shorting opportunity.


SHORT NIFTY Futures @ corresponding 6080 spot levels with sl at 6120.

Alternatively,
BUY NIFTY IF breaks above 6120 levels with sl @ 6020

Nifty has given a phenomenal rally from the lows of 5500 to 6000 levels and in the process it has broken past the important resistance levels of 5840 & 5970 mentioned previously.

Lets take a look at the Nifty chart closely.
As can be seen from the chart, Nifty broke past the previous trendline resistance@ 5840 (marked in RED) and has now reached another important trendline resistance@6030. Nifty is moving in a broad channel & having touched the channel bottom @ 5500, it is now moving towards the channel top @ 6250. Nifty however faces overhead trendline resistance at 6030, 6080.

There are 2 scenarios in place now.

Scenario 1 : The upmove from 5500 is impulsive and is the 5th and the last leg up. In such a scenario the logical target for Nifty comes at 6250 i.e. the channel top.

Scenario 2 : The rally from 5500 is corrective and may top out near the resistance levels of  6030, 6080 (RED ARROW) and resume its downward journey from there.

Now what can give us a clue as to which scenario is in play???
The 2 short term trend deciding levels are 5930 & 6030. If Nifty manages to breakout and sustain above 6030 then probability of scenario 1 will increase whereas if Nifty manages to break and sustain below 5930 then probability of scenario 2 will increase.

Nifty's movement post RBI POLICY tommorow will give us further clue to the direction and underlying nature of this rally.

It is interesting to note that the upmove and breakout from the resistance band of 5970 today was followed by a spike up in the VIX levels which has been increasing from the past 3 days & has now closed above its 200dma @15.80. This further puts a question mark on the validity of this breakout and any weakness shown by Nifty near the resistance level of 6030 coupled with a breakdown below the 5970 levels can be used as a good shorting opportunity.

Till then play as per levels.