Hey folks! ! !
CA Rachana Ranade here and I welcome you all to another interesting lecture which is about top five strategies to decide when to buy and when to sell stocks completely based on technical analysis. You might have experienced so many times that you buy a stock it goes up for some time maybe and then it starts its downward journey and then you are like asa kasa kai! !
! right so today we are going to try and understand what should be your strategy what should be your focus point so stay tuned till the end of the video. Let's start with the very first technique which is our candlestick chart patterns this is one of my favorite chart patterns and believe it or not whatever data I have back tested this has given a pretty good probability what is the probability of winning your trades.
Okay so what is the first pattern? It is the morning star pattern the second pattern which I am going to talk about in this section only is the evening star pattern. Now if you have seen my video which I had already done on Morning star and Evening star are well and good but in that video I had not talked about how to place your stop-loss order.
This is what we are going to cover in this video in detail as well okay so what is the step number one there has to be a downfall okay step number two you have to see that three candlestick pattern that magical candlestick pattern the very first one has to be a big red candle followed by a doji and followed by a big green candle okay so when should you enter are videos completely focused on this today when should you enter? when should you exit? okay when should you enter possibility number one some people feel that they should enter the moment when the third candle the green candle engulfs the first big red candle possibility number one, possibility number two some traders like where we want to play safe okay and they will wait till the third candle completely engulfs and closes above the first red candle okay so they want to be sure they say even if I enter at a little bit high price we are okay with that okay, if your trade goes well then ideally you should see a very nice upward trend post the morning star button, but if your trade goes against your expectation big question is where do you place your stop loss?
Stop loss has to be placed at the lowest point. The lowest point is the wick of what the second candle which is generally a doji candle. I hope you have understood this okay we are going to see the same pattern in a practical example in the immediate next part of the video.
Let me quickly tell you what is an evening star pattern now first first condition is what yeah there has to be an uptrend okay post the uptrend you should again see that three magic candlestick pattern. What is the three magic candlestick pattern? The very first one is a big green candle followed by a doji candle and then followed by a big red candle ideally when can you enter again two possibilities possibility number one the third candle engulfs the first one or possibility number two let the third candle fully form okay let it close let it close well below the first one and then we will enter the trade okay.
If things go well ideally that's a classic way when you can short the position okay that's a short sale and if your trade goes wrong then where is your stop loss? Stop loss has to be placed at the highest point of the second candle I hope you have understood this absolutely nicely when to enter? when to exit?
In case of Morning star and Evening star two important points number one I am going to talk about this practical application in the immediate next part of the video and number two if you are interested to read more about these patterns, these are known as typical bullish reversal patterns or bearish reversal patterns I have also written a separate blog on that so if you want you can refer this blog on rachanaranade. com. Well now let's understand an amazing practical application of the morning star and the evening star pattern.
This is the chart of Eyeshar Motors okay it's a daily chart here you can see how does the morning star candle formation happens okay so here you can see step number one is what a downfall you can see a big downfall and you know when the downfall starts a normal person is like I will be enter, now I will enter, now I will enter and then ideally your subconscious mind should sing that song. . .
. . okay and when should you ideally buy is when this morning star candlestick entire pattern can be seen okay so which two types I already told you third engulfing the first or after the third is complete okay and here you can see how beautifully the stock has moved up after the morning star pattern right.
Which was the second one? Second one was the evening star pattern and in the same stock you could see an evening star pattern right up on the top and you can see that it was such an amazing run up for the stock you saw those three magic candlestick patterns okay one two three and after this was completed after this was formed and then it started its downward journey I hope you have understood how the practical application should work for a morning star as well as an evening star. Well the next one through which you can understand when to enter and when to exit a stock is the head and shoulder pattern understood shoulder head shoulder simple enter and stop loss okay right so let's try and understand this practically now.
Okay now what is happening? This is a chart of Maruti, now you can see here this is nothing but the left shoulder okay, then you can see a big head okay, and followed by a right shoulder now can you visualize this with my shoulders and the head right so you can see that left and right shoulders are almost similar in height and head has a higher high okay now what happens is that you can now try and draw a visual line joining these three points and this is called as a neck line okay now once the neckline is broken on a downward side ideally this starts the bearish trend of the stock can I enter at this point when the neckline is broken? Answer is Yesss.
This is where ideally you should enter the stock okay this this is going to be a short side okay so this can be done in futures not in intraday okay so you can short the stock when the neckline is broken what can be your target now target if you want to calculate it precisely it's calculated something like this you have to first try and calculate the distance between the neckline and the top of the head and whatever is this distance place it from this point to this point okay so same distance is going to be achieved the same target is going to be achieved below the neckline and if you can see here this target was also achieved very recently on 3rd May 2021 okay. This is how a head and shoulder pattern looks like. Now if I watch by the way if you see here what happened the stock started going down but then it reversed from here now should I have booked my loss here what could be a stop loss?
Stop loss is generally at the shoulder point okay so in our example here somewhere here around seven thousand seven hundred, you can say this could have been your stop loss I hope you have understood this. Now moving ahead to the inverted head and shoulder pattern now what happens in an inverted head and shoulder? What happen shoulder, head, shoulder, now which is your neck line again these three points can be joined and this is where the neckline can be drawn this is which type of fat pattern this is where your bullishness is going to be seen now okay what when should I enter is the first one the moment this neckline is broken ideally here this is where you should enter okay what could be the price target price target you should be calculating it in this way this is the distance between what and what between the neckline and the head this distance you should add it up here and this is where the price target is and here you can see this target was achieved on 14th December, it is an old one 2012.
It is the chart of Tata Motors okay now what could have been my stop loss well stop loss casp has been ai it has not even gone near the stop loss but your stop loss could have been this point of your right shoulder I hope you have understood when to enter when the neckline is broken when to exit ideally at the target price achievement or if the stop loss is hit when is the target price achieved that distance you have to count from what to what from neckline to the head and what is your stop loss, stop loss is that point where your right shoulder point is made I hope both are absolutely clear. Well let is move on with the third indicator which is the pivot point indicator because there are so many people who have already enrolled for my technical analysis course and they are like mam we have taught Fibonacci very nicely in fact I also have a separate video on that on YouTube as well but I have not talked about pivot points and please tell us how to draw that how to decide when to buy when to sell based on pivot point is what I have not talked in the course I thought I should be telling it right here so I want everyone to focus for next two to three minutes because I am going to tell you how to first apply that pivot point on the normal trading view chart okay so first what do I do I go to this one fx function I think and then I search pivot point standard okay I click that once I click that okay now I go to the settings wheel right here okay when I go to the setting wheels in type drop it down and select Fibonacci okay and then click ok once this is done your uh levels will be set up as per the Fibonacci but pivot walla Fibonacci okay now if you ask me one single liner or what do we mean by pivot? Imagine a clock okay now in a clock what is the center point where all the hands of the clock are actually linked with okay so that is nothing but the pivot point okay so now you can imagine that center point if if for that clock if that is taken away then of course the hands of the clock will well I mean just die out right so that is how important a pivot is that's like a make or a brick level okay so if I come down back to the candlestick pattern this is the latest candlestick chart of Maruti I hope you have understood this how did I draw the pivot it was simple effects go to pivot point uh put it on the chart and then select Fibonacci what do you see here P, P means what pivot, r1 is what resistance one, r2 resistance to two, r3 resistance 3 similarly on the lower side you can see s1 s2 s3 will stand for what support 1 support 2 support 3.
Question is when to enter as per this pivot point strategy it is said that if you can see the pivot being strongly held okay or you can see a very big bullish pattern on the pivot itself breaking the pivot from the bottom you may enter that specific stock okay now what can we see here in Maruti has it broken with good volumes or something like that by the way this is the volume no not very amazing volume scene but it has respected the pivot level okay so I should be keeping a watch on that if you see the next day, next day you can see a big green candle okay and this is also supported with good volumes you can see here pivot, it is well above the pivot point plus you can see that this r1 level resistance one has also been taken out okay so ideally after your pivot is strongly taken out I remember I was seeing this chat day before yesterday when of course this video will be released at a later date but when I was seeing this chart I remember in the first one and half hour itself the volume had surpassed the previous entire day's volume so that shows how big strength is seen in that stock okay so you can see that big green candle being formed that is where during the day one could have taken a trade r1 broken but you can see that at r2 it took a resistance and came down a little bit what happened today as I am shooting the video which is on 23rd of June you can see that the stock has also broken the r2 and now it is going towards r3 okay now if someone would have already been long a person may have taken partial profits here because ideally r2 generally acts as a strong resistance but what happens here you can see that the volumes are also very high even today so there is a great chance that it might test r3 tomorrow okay but is this the only way just say the pivot take the position can you do that? No answer is No absolutely not. You have to check out MACD you have to check out RSI, you have to check out volumes and then based on the big combination of all these things you have to decide whether to buy or whether to sell whether to enter whether to exit all these things MACD, RSI, Bollinger band everything I have taken up in my Basics of Technical Analysis course.
So if you are interested can surely go out and check on my website rachanaranade. com. So let's move on with our next parameter which is RSI, Relative Strength Index, now what does this indicator tell us strength!
! Strength at which the stock can go in the upward direction okay it shows the momentum of that stock okay so possibility number one I will say that the stock will go up possibility number one possibility number two I will say that the stock will go up but with good strength with good speed and if I want to know the second one strength speed that is indicated by RSI okay. Now how to put it in trading view?
You have to just click that Fx and then hit RSI that is relative strength index okay so generally what are the inbuilt parameters inbuilt parameters are 70-30 what I always put up is the 60-40 parameter okay so I am just taking it down to 60-40 and then I press okay right now please do not ask me what is uh more in detail about RSI what is the 60? what is this 40? Okay everything I have explained again in detail in my Technical Analysis course what is the focus point of today's lecture when to enter?
when to exit? Okay now you just try to back test this okay I am giving you an example of Asian paints this is somewhere around December. Around December it has broken the 60 RSI okay you can see 60 RSI is broken on the upward side from below okay now once it has broken this is ideally where one may enter a stock again same thing just because RSI across the 60 are you going to enter?
Answer is No. This is one of the indicators correct so RSI broken 60 from below that's where ideally one can consider entering and now see this I am just putting this as a vertical bar okay just for those who want to learn about this Alt V is the shortcut for this automatically a vertical bar is drawn so this is where the 60 level was crossed. It is going up, up, up, up, up, .
. . .
. . .
. . till here, here first time you can see that it has started its downward journey so again I am pressing Alt V here okay now this was the big red candle but what happened before that so I will just come one candle before this okay this is the candle now see how much is the RSI!
! At this candle RSI at this candle is 80. 87, okay so it is said that above 60 the stock starts showing strength but once it reaches 80 now it is tired okay now see bichara it has gone up so much it will be tired now at some point of time it has to go down right I want you all to tell me in the comment section can you see some candlestick pattern which we have discussed in today's lecture only and you can see how beautifully that has been honored and the stock starts going down and immediately after it has gone down again you can see that magic candlestick pattern again there and there from there also you can see the stock going up okay comment section may have to tell me okay so what is the discussion right here right now number one last time I am revising it for you once it crosses 60 it is ideally a green signal to buy, once it is at 80 it's a warning signal stock is tired you may exit your position and one last time is this the only indicator answer is no okay I hope you have understood very well how to use RSI to decide when to enter and when to exit Well let's move on with our last strategy for the day you won't be like mom every time you are telling this that do not use this as a standalone strategy combine it with something at least tell us one combined strategy.
I am going to tell you this combined strategy wherein I want to check three parameters which three parameters number one Pivot, number two RSI and number three Volume okay how can I use these three in combination to decide when to buy when to sell okay. For buying let me tell you ideally what would I check number one RSI should have cross 60 number two volume should be highest in the last five trading sessions okay that's how I do it and number three is that I would check whether that candle has very clearly given a breakout above pivot point and it is somewhere between that pivot to r1 okay so let's see if I can see the all these three conditions being met in one of my favorite stocks which I have told so many times which is Jubilant Food works so let's see what happens in this talk um we are somewhere around this is of course uh kind of an old data this is 4th of August 2020, okay now I am trying to zoom this in okay now which is this point this is the point when 60 has been hit okay so again I am just drawing Alt V here vertical line this is where the 60 point has been crossed okay now if you see here just one day before pivot has been honored okay and the stock tried to go up but did not close at r1 it came down again okay so it was not able to go it was not able to close above r1 what happened on the next day? Next day the this stock itself has opened up as a gap up and it has shown a very nice positive journey throughout the day and it has almost closed at the highest point almost right.
Now let's see what has happened with the volume candle now you can see that this is the volume candle and it is way above all these previous candles generally has checked only last five candles this is like last what 15-20 candles whatever I can see on the screen one may say out of those this candle is the highest okay so three all three criteria number one criteria is what RSI went above 60, number two it is going strong it has already gone above p1 and it is already testing r1 and number three volumes are very high okay now ideally if you remember I told you r2 can be a question point okay so immediate next day was a caution point for me but now I am going to combine it with what volumes are a volumes are also going very strong on day two okay also you can see that RSI is still above 60, so what's the fear let me continue okay let me enjoy the ride till what is the question okay you remember I said that the stock will go up and up and up and up but it will be tired at some point in time what is that some point in time when RSI is about to touch 80. So if you see here at this very point it has touched 80 okay I am drawing a horizontal line this is the eight take a line okay and which one is this day again let me put a vertical line okay wow so many lines I am drawing anyway so this vertical line you can see this was the highest point again 7% move in a single day okay ideally this is where we should stop okay because from here if you can see again the stock is slowly and steadily the RSI is going below the 80 level and eventually it has gone even below 60 level okay does this mean that the stock compulsory must show downward journey? No.
Can you miss out on the probable profit? Answer is Yes, shall I show you what happened. The downward journey did not start and this is what was the highest point after which a downfall started okay so please understand with technical analysis are you going to get all trades correct?
No but is your probability of winning going to increase? Answer is Yess. I hope you have understood how the combination of RSI volume and pivot can be used together to gain more confidence while entering or exiting a specific position.
