ATMASPHERE January 2015 Edition

ATMASPHERE JANUARY 2015

CONTENTS

Letter from the President - Page 01

Editor’s note - Page 02

Trading TRIX by Jihan a.k.a SpeculatorBaba –Page 03

Market Profile – The Final Turn by Alex a.k.a Pit Trader– Page 05

The Coppock Indicator by Kannan Raju – Page 07

The Regression Channel and The Fibonacci Fan by Sahil Vijay – Page 09

Swing Trading Entry Strategy by Rajat Dutta – Page 12

Past and Present Events – Page 16

Future Events’ Updates– Page 17

This newsletter is produced by the Association of Technical Market Analysts. All comments and editorial material do not necessarily reflect the organization's opinion

nor does it constitute an endorsement by the Association of Technical Market Analysts or any of its officers, of any products or services mentioned. Sources are

believed to be reliable at time of publication, but not guaranteed. The Association of Technical Market Analysts and its officers, assume no responsibility for errors or

omissions.

JANUARY 2015 ATMASPHERE|1

LETTER FROM THE PRESIDENT

Dear Colleagues,

ATMA continues to make strides ahead in its inclusive approach to growing the Technical Analysis community in India. You will

notice up to three forward months’ educational monthly meetings open for registration on our website for most chapters, hereon.

Do take full advantage of those and register your seats and mark your diaries. Regularly meeting with like minded professionals

enhances the networking and learning value. Chennai & Hyderabad Chapters have been initiated well and meetings have started in them now, on a regular

basis. ATMA is raising its commitment to accumulating quality content and now by default effort will be made by each chapter to record videos of these

meetings and load on our website for the benefit of country-wide membership. We urge all to continue to recommend good speakers to us.

Special content and events will be a strong focus this year. To begin with we are bringing the highly popular two day workshop on the Certified Algo Trader

conducted by Mr. Manish Jalan to National Capital Region. Members, as usual, will be beneficiaries of very large discounts. Register early. An Annual

Conclave gathering India’s Technical Analysts under a single roof and having a wide battery of good presentations, networking and expanding the

community has been due since inception. We are changing that this year. Early May this year the 1st ATMA Annual Conclave is going to be underway.

Detailed plans will be announced soon. Mark your diaries I the meantime. We are hopeful this will be an event to remember for the rest of the year, until its

next edition.

ATMA wishes to make a special mention of gratitude to two of its new sponsors Zerodha & Tradejini. Not for Profits sustain and nourish their work with

active participation and support of the For profit sectors. Your support in sponsoring all our Monthly Chapter meetings for the first quarter 2015 across

India is very inspiring.

Thank You.

Sincerely,

Sushil Kedia

2 | ATMASPHERE JANUARY 2015

EDITOR’S NOTE

In this issue -

1. Jihan illustrates a powerful oscillator, TRIX, which is used by many professional traders worldwide.

2. Alex comes towards the final turn of his series on Market Profile.

3.Kannan Raju explains one of the best indicators on the reversal trade, The Coppock Indicator.

4.Sahil Vijay explicates two simple yet powerful trading tools, The Regression Bands and The Fibonacci Fan.

5.Rajat Dutta brings yet another article on the concept of Swing Trading Systems.

ATMAsphere is your platform to learn & to teach. In fact, when you teach you learn better by handling curiosities of younger minds. So do write out to me

sending in your articles and we can all learn from each other. We await your feedback on ATMASphere. Please let us know what we can do to deliver content

that meets your needs by sending an email to editor@atma-india.net. You can also subscribe to ATMASphere completely free by clicking here.

Sincerely,

Gunjan Duaa.

JANUARY 2015 ATMASPHERE|3

Trading TRIX

Description

Triple Exponential Average (TRIX) is a momentum indicator that displays

the percent rate-of-change of a triple exponentially smoothed moving

average of a security’s closing price. The triple exponential average (TRIX)

indicator is an oscillator used to identify oversold and overbought markets,

and it can also be used as a momentum indicator. Like many oscillators,

TRIX oscillates around a zero line. TRIX is used as an oscillator, a positive

value indicates an overbought market while a negative value indicates an

oversold market. When TRIX is used as a momentum indicator, a positive

value suggests momentum is increasing while a negative value suggests

momentum is decreasing. Many analysts believe that when the TRIX

crosses above the zero line it gives a buy signal, and when it closes below

the zero line, it gives a sell signal. Also, divergences between price and TRIX

can indicate significant turning points in the market.

Formula

EMA1 = EMA1n-1 + ((2 / (n + 1)) * (Pn - EMA1n-1))

EMA2 = EMA2n-1 + ((2 / (n + 1)) * (EMA1n - EMA2n-1))

EMA3 = EMA3n-1 + ((2 / (n + 1)) * (EMA2n - EMA3n-1))

TRIX = (EMA3n - EMA3n-1 ) / EMA3n-1

Where:

Pn =the current price. EMA1n-1 = the exponential moving average value of n periods back EMA2n-1 = the exponential moving average value of n periods back EMA3n-1 = the exponential moving average value of n periods back

Use Since TRIX measures the rate-of-change of closing prices, a positive TRIX

value is interpreted as a steady rise in the closing price of a security. A

positive TRIX is thus akin to a positive trending price, allowing the indicator

to act as a buy signal whenever it crosses up above the zero line. Similarly,

crossing below the zero line suggests the price is tending to close down at

the end of each period, which can be a sell signal.

The “signal line” is also a useful buy/sell indicator. Since the signal line

period is shorter, a cross above it suggests that recent stock prices are

closing much higher. A buy signal is triggered when TRIX crosses above its

signal line, and a sell signal is triggered when TRIX crosses below its signal

4 | ATMASPHERE JANUARY 2015

line. This method can generate false signals during sideways price

movements, so it works best when prices are trending. It is therefore wise

to use TRIX in tandem with other indicators for confirmation.

The above chart is of SBIN and plotted under the price chart is the TRIX

indicator, which oscillates around the 0 point, which is the centre (Green

Line). Buy signals are generated by a crossover. As you can see the

crossover give accurate buy and sell signals , another way to take trade is

to trade when price moves above the centre line, here the risk is that

sometimes one gets an entry in the middle of the trend. Although, some

traders use the 0 line buy or sell signal a point where they increase their

positions. Divergence is another way to find the reversal in the trend but

divergence are taken as a signal while crossover is taken as an entry point.

The author of this article goes by the name of his twitter handle

@Speculatorbaba. His name is Jihan, He lives in Singapore and is a fund

manager, who trade Global Commodities and Indian Indexes. He has

been trading for the last 10 years and writes fiction when he can’t find a

decent looking chart.

JANUARY 2015 ATMASPHERE|5

Market Profile – The Final Turn

We have been discussing Market Profile in the last few articles

Now we come to the closing end of this series on Marketprofile. So I

assume that you already know basics of Marketprofile, if you don’t then

before reading this you read the earlier editions of the series in the

previous editions before reading this.

As I mentioned previously Marketprofile is useful to understand the

context. Problem with the context is subjective and it changes with

person-to-person but with the MarketProfile subjectivity is nullified

because Market Profile is based on data and data is constant. So when

someone say market is trading above previous Value area high (VAH) then

it ought to be bullish.

Now comes the 2nd challenge that is to identifying context. Context is far

superior when observed on higher timeframe and somewhat meaningless

when observed on very short time frame. Isn’t it will be nice if we have say

30 or 60 days Marketprofile combine together?

Here comes the composite profile for our rescue. Before going into the

explanation just look at the chart so it will be lot easier to understand. In

the chart to the extreme left in magenta composite profile of hundred days

volume profile been plotted on regular Nifty future Marketprofile chart.

On that composite volume profile there are lots of mountains and valleys.

Where nifty future attracted most of the volume is called as composite

high volume node (CHVN) and where Nifty Future auctioned less and

attracted very less volume is called as composite low volume node (CLVN).

Low volume nodes are mostly extensions of ongoing trend. Therefore most

6 | ATMASPHERE JANUARY 2015

traders use it for effective entry points. And composite high volume nodes

are usually used for exits. Mostly price remains choppy at and near CHVN

so using it as a entry instead of exit is not a great idea. In above chart Nifty

future attracted highest volume in last 100 days is at 8370 (horizontal

magenta line). This can be also treated as important support (exit

reference if short.)

Hi, I often go with nick name Pit Trader.

I mostly trade in index futures and options. I am an Indian National but

presently stay put in Toronto. I actively trade in both national stock

exchange India(NSE) and Chicago Mercantile exchange US (CME),my

preferred instruments are NiftyFuture and E-mini S&P 500. I use

Multicharts & R. I'm a programmer myself, and use my own trading

systems based on statistical models and Marketprofile.

JANUARY 2015 ATMASPHERE|7

The Coppock Indicator.

The Coppock Breadth Indicator, originally known as Trendex Timing

Techniques for Texas Traders, is a little known indicator used to identify buy signals from around the bottom of the bear market. It is very good at discriminating between bear market rallies and true bottoms in the stock market and has proven to be remarkably resistant to “whipsaws”. It was first published in Barron’s Magazine in October 15, 1962. Since then, the coppock momentum oscillator has been adopted and adapted by savvy market technicians around the world. The indicator is designed for use on a monthly time scale. It is the sum of a

14-month rate of change and 11-month rate of change, smoothed by a 10-

period weighted moving average.

Formula : -

Coppock = WMA[10] of (ROC[14] + ROC[11])

Coppock, the founder of Trendex Research in San Antonio Texas, was

an economist. He had been asked by the Episcopal Church to identify

buying opportunities for long-term investors. He thought market

downturns were like bereavements and required a period

of mourning. He asked the church bishops how long that normally took

for people, their answer was 11 to 14 months and so he used those

periods in his calculation.

A buy signal is generated when the indicator is below zero and turns

upwards from a trough. No sell signals are generated (that not being its

design). The indicator is designed for trend following, and based on

averages, so by its nature it doesn't pick a market bottom, but rather

shows when a rally has become established.

Interpreting the Coppock Curve

The Coppock Curve is simply a smoothed momentum oscillator with long

timeframes that have only generated a few signals throughout recent

history. While the indicator generates signals in both directions, most

technical analysts prefer to watch for sell signals rather than buy signals

The Coppock Curve can also be adjusted in many different ways:

Different Periods – Coppock Curves can be calculated using monthly,

weekly, or even daily periods, although the indicator gets progressively

more choppy as the duration of the periods shortens due to increased

volatility.

Changing Metrics – Coppock Curves are designed to be calculated with

11-day and 14-day ROCs, but traders can adjust these numbers as

necessary in order to increase the accuracy of the indicator in certain

cases.

Multiple Curves – Multiple Coppock Curves can be utilized in order to

identify crossovers and other events, similar to the way in

which MACD and moving averages are interpreted when looking for

buy or sell signals.

8 | ATMASPHERE JANUARY 2015

The chart above shows the points, where the coppock indicator gave

reversal signals and as we can see that most of the times the signals gave

good buy signals and good money was made on these buy signals.

Some limitations to keep in mind include:

False Signals. The Coppock Curve generates a lot of false signals, where

the indicator crosses above or below the zero line during choppy

trading, particularly when using shorter timeframes like daily or weekly

bars.

Curve Fitting. The Coppock Curve’s default settings are relatively

arbitrary, which means that traders may be tempted to change them in

order to curve fit a given index or equity and generate buy/sell signals.

Kannan Lakshman Raju is currently working as a Research Analyst in

AdVentures India Financial Services Limited. He is the founder of the

website www.chartslive.com, a free global Technical Charting portal.He is

currently developing Trading Strategies for various technical charting

softwares.

JANUARY 2015 ATMASPHERE|9

The Regression channel and The Fibonacci Fan

Today I will discuss two systems that I regularly use to track the trend

and most of the time these system do well to achieve what I expect from

them.

The Regression Channel.

The regression channel is an analytical graphing tool that is based on the

Linear Regression line. There are several types of regression channel that

differ mainly by how the distance to the upper and lower channel lines are

calculated:

Standard Regression Line - the distance is based on a selected

number of standard deviations

Raff Regression channel - the distance to the channel bands is

equal to the distance to the farthest point, whether above or

below the Regression line;

Error Line - the distance is based on the number of standard

errors.

The most common selection of the upper and lower bands of the channel is

when a user has an ability to set the distance based on the previous price

reversal points. Many traders, in addition to the main bands, use additional

50% bands that extend for half of the main bands' length.

In technical analysis, the Regression channel is used to trade along the

trend by assuming that the general trend will follow the Regression line.

Thus, the upper and lower bands are drawn in the way in which that 80-

90% of the price actions are placed between the bands. The periods when

the price moves below the lower band line are considered to be periods for

buying and periods when the price moves above the upper band are

considered to be periods for selling. Since the general price trend that is

defined by the Regression line can be broken and the price could remain

for a prolonged time above the upper band or below the lower band, a

conservative approach might be to move the buy and sell points to when

the price moves back inside of the channel.

10 | ATMASPHERE JANUARY 2015

Fibonacci Fan

The Fibonacci fan is a charting technique that constructs the support and

resistance levels by creating three diagonal lines that follow the Fibonacci

ratios of 38.2%, 50% and 61.8% respectively. The diagonal lines drawn

across the chart shown below are based on the Fibonacci ratio percentages

Fibonacci fans are very similar in concept to the Fibonacci retracements

and in many ways they are used the same way Both are effective tools for

identifying support and resistance levels, determine the trend, areas to

enter and exit, and to help provide levels to set stops.

Fibonacci fans, go one step further then Fibonacci retracements by

adding time to the equation, so now we have price and time, mixed

together. The Fibonacci fan uses the same primary ratios of 38.2%, 50%

and 61.8% that form the “Golden Ratio”

Fibonacci Fans use these ratios based on time and price to provide support

and resistance trendlines and are used to measure the speed of a trend's

movement, higher or lower. In a bullish Fib fan, the higher fan that the

price is in, the stronger the movements are, as the price starts to

deteriorate and weaken, the price will challenge the first fan, where at first

it provides support, once the price breaks through the first fan line it

usually won’t stop until it reaches the next fan line of support.

If the price moves below a Fib Fan trendline, then the price is usually

expected to fall further until the next Fib Fan trendline is reached. When

the final fan has been broke and the price is no longer with-in any parts of

the fan, it signals that the trend has changed. Used along with Elliott wave

counts, is a great tool for confirming a trend change has taken place. I

would never use the Fib fan chart alone because of the possibilities of false

signals, always use it together with other forms of Technical analysis to

strengthen your existing tool belt.

JANUARY 2015 ATMASPHERE|11

In the chart above, The price touching the Fibonacci line acts as a support

or as a resistance and when the price move out of that range , it acts as a

breakout for the extension of the trend

The downtrend Fibonacci fan again shows how much of a powerful tool it is

and is a must for every investor and trader. The price made an attempt to

move out of the bearish run but was forced to stop at the resistance and

moved back toward the support, before finally moving out of the fan lines

and starting a new bullish trend.

Sahil Vijay, CMT is in the financial markets for the last nine years and

currently working as a Treasury Analyst with Capital Bank. A Banker by

profession he looks after Investments and takes trading decision in Debt,

Equity and Foreign Exchange markets. He uses Elliot Wave Theory, Gann

Studies, Bollinger Bands, Fibonacci Analysis and Momentum Oscillators

like RSI to drive confluence points in various markets to establish low risk

–high yield set ups, he also include inter market analysis and global

indices in his study to draw better understanding of the under currents in

global financial markets.

12 | ATMASPHERE JANUARY 2015

SWING TRADING ENTRY STRATEGY

In my previous articles I explained the Swing Trading concepts / Strategy,

in this article in will explain the Entry & Exit Points.Your swing trading entry

strategy is the most important part of the trade. This is the one time when

all of your trading capital is at risk. Once the trend goes in your favor you

can then relax, manage your stops, and await a graceful exit.

This Article explains the basic price pattern that is used to enter stocks.

Once you become familiar with it, you can try out more advanced

strategies based on the specific pattern that you trade.

With your entry strategy, the first thing that you want to do is identify

swing points. What's a swing point you ask?This is a pattern that consists of

three candles. For entries on long positions, you look for a swing point low.

For entries on short positions you look for a swing point high.

Identifying reversals using swing points

For a swing point low:

-The first candle makes a low.

-The second candle makes a lower low.

- The third candle makes a higher low.

This third candle tells us that the sellers have gotten weak and the

stock will likely reverse.

For a swing point high:

-The first candle makes a high.

-The second candle makes a higher high.

-The third candle makes a lower high.

This third candle tells us that the buyers have gotten weak and the

stock will likely reverse.

For our long entry strategy, we should try to find stocks that have pulled

back and made a swing point low.

Let's look at some examples:

JANUARY 2015 ATMASPHERE|13

See how the pattern consists of a low (1), lower low (2), and then a higher

low (3)? This is a classic swing point low. Our entry strategy would be to

enter this stock on the day of the third candle.

Now let’s look at a stock on the short side.

See how the pattern consists of a high (1), higher high (2), and then a lower

high (3)? We would look for an entry on the third candle.

It is worth noting that not all swing points will result in a powerful reversal.

However, a reversal will not happen without a swing point developing.

Take the time to go though a few charts and look at the reversals that

happened in the past so that you are able to quickly identify this crucial

price pattern.

Consecutive price patterns

Ideally, we want to trade stocks that have consecutive down days prior to

the swing point low developing. This is the best case scenario. Here is an

example on the long side:

This is reversed on the short side. In this case, you want to look for

consecutive up days prior to the swing point high developing.

14 | ATMASPHERE JANUARY 2015

When you look for swing points to develop, you always want to look to the

left of the chart to see if the stock is at a support or resistance area on the

chart. That will improve the reliability of this entry strategy.

Also, sometimes you may want to be more aggressive with your entry. Ok,

now that we know how to get into a trade, how do we get out?

We need an exit strategy. I will Share that in the February Edition.

Rajat Dutta is a system designer & a fund manager for Moneyrizing

Wealth Management Company. He is a trader since 1998. His Specialty is

trading micro trend with a focus on analyzing and trading Index, Index

based Options & Commodities. You can follow him@Moneyrizing& can

interact with him atRajat@moneyrizing.com

JANUARY 2015 ATMASPHERE|15

Accessible on your favorite Gadget!

World's FIRST E-Library of Technical Analysis

Some of the latest e-book additions in the Library:

As a well rounded professional you surely wish to read on

negotiation techniques, VBA programming, Statistics,

business biographies, investment classics and a whole host

of subjects. Yes, the R.N. Elliott ATMA E-library of Technical

Analysis regularly stocks up on varied titles that take care of

holistic professional interests of Technical Analysts!

The R. N. Elliott ATMA E-library of Technical Analysis

Inaugurated on 6th October 2012, at the hands of Mr. Robert

Prechter, Jr. the world’s first E-library for Technical Analysts continues

to grow.

A world that is short on time to travel, you can check-out books,

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ethically obtained, copyright respecting readings using any of your

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Access E-books as well as audio-books on Technical Analysis, Trading

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ATMA Members& Affiliates, except for the student

affiliates, can access the library 24X7 by just logging into

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please feel free to contact ATMA Office and enjoy reading!

16 | ATMASPHERE JANUARY 2015

PAST EVENTS’ UPDATES CHAPTER DATE

Delhi 31-08-2014

Bengaluru 07-09-2014

Mumbai 20-09-2014

Mumbai 08-10-2014

Delhi 02-11-2014

SPEAKER TOPIC

Dr Sanjay Sinha Elliot& Fibonacci – Understanding The

Eternal Relationship

Mr. Krishna Rao P S Using Trendlines and Fibonacci

Mr.Atul Suri Trading for a Living

Mr. Ambareesh Baliga The Games Promoters Play - In the

market as well as in the financial

accounts

Mr. Sachin Aggarwal

Stock Markets, Charts and Profit Making

JANUARY 2015 ATMASPHERE|17

FUTURE EVENTS’ UPDATES CHAPTER DATE SPEAKER TOPIC

Delhi 31-01-2015 Dr. Sanjay Sinha

Elliott Wave – How to

Forecast the Critical

Moves

Mumbai 31-01-2015 Mr Ashish Kyal

Two Stage

Confirmation

techniques &

Advanced Elliott

Waves

Bengaluru 31-01-2015 Mr Kora Reddy

Introduction to

Seasonal Trading

Patterns

Chennai 07-02-2015 Mr Vipul

Ramaiya

Equity Research &

Strategy for

Institutions

Kolkata 14-02-2015 Mr. Vikram

Murarka

Innovative

applications of

Moving Averages

FUTURE EVENTS’ UPDATES CHAPTER DATE SPEAKER TOPIC

Mumbai 21-02-2015 Mr Manish Jalan Advanced Options

Strategy using the

framework of

Technical Analysis

Hyderabad 22-02-2015 Mr Sunil Daga

Fusion Analysis:

Concepts applied to

study the India story.

Delhi

28-02-2015 Mr. Kunal

Saraogi

Evaluating Long Term

Outperformance

Bengaluru 28-02-2015 Mr Anurag

Saboo

Systematic Trading

sans Emotions

Bengaluru 21-03-2015 Mr Jagdish Ahuja Rise of Algo Trading in

India

Kolkata 21-03-2015 Mr. Subhadip

Nandy

Using Elliot Oscillator

, Stochastics and

Displaced Moving

Averages to identify

short term options

trades

18 | ATMASPHERE JANUARY 2015

FUTURE EVENTS’ UPDATES CHAPTER DATE SPEAKER TOPIC

Mumbai 21-03-2015 Mr Hemant Kale

Wolf Wave: The One

Strategy which you

can never miss.

Delhi 04-04-2015

To

05-04-2015

Mr Manish Jalan Certified Algorithmic

Trader Program

Kolkata 25-04-2015 Mr. Rajat Bose

Using RSI and MACD

together to identify

positional trading

opportunities.

JANUARY 2015 ATMASPHERE|19

20 | ATMASPHERE JANUARY 2015

Benefits of Membership with the ATMA

Apply for your ATMA Membership Today!

JANUARY 2015 ATMASPHERE|21