Trading NR7 setup

[Satyen]

Thanks Kenneth

 

[Satyen]

Deleted..............

 

[vicky_ag]

AW10,

I have been trying a visual backtest on this method. It seems to me, many a times, the NR is followed by a super WR.

What I mean is there is no clear directional bias until the next to next day. The next day to NR is followed by a day which breaches both the high and low of the NR. What action we need to take in that case?

 

[lazytrader]

I'm not sure about this but from wht I have read, when price is read to make a big move it first tests it support/resistance and then goes in the other direction to make sure it has a solid base.

Now lets say tomorrow nifty was to breakdown, it would definitely test 4700 and only it the resistance holds it will break down otherwise it would breakout and run away because of the short covering.

 

[AW10]

I have been trying a visual backtest on this method. It seems to me, many a times, the NR is followed by a super WR.

What I mean is there is no clear directional bias until the next to next day. The next day to NR is followed by a day which breaches both the high and low of the NR. What action we need to take in that case?

Vicky,
NR7 is a setup condition.. not exactly an entry condition. One has to develop entry rules by putting other observations around it. NR followed by wide bar on next day is great setup for daytrader. Wide bars give them great chance to ride intraday trends and make good money. For swing traders, the use of this setup maybe different. If you have observation says that 2 bar after NR7 breaches the limit of NR7 then you have to develop your entry rules accordingly, Maybe wait for such bar and enter.
But before that, let me ask you something – Do you now what % of time this phenomena happens ? How many NR7 breakout did you check? Have you got any other observations about what market did before such pattern appeared ?
Maybe these question will help you remove the subjectivity part from your visual observation. Many a time, we see something (mostly the last few incidents) and try to react as per those observation. But if we increase the span of observation, our findings are different.

I haven’t spent time in analysing this but in my opinion, such price action is possible because of strong trend before NR7. In such cases, it is likely that the party (bull/bear) that dominated the previous few days will not disappear immediately. They might get pushed down for 1 day but they come back on next day and hence we see the pullback and retest of the congestion zone.

I will be interested to know more about your observations.

Happy Trading.

 

[kenneth]

Hi AW10

Yesterday's scan on Savant's recos gave the following scrips for NR7 with volatality. Difference in Today closing price and low from yesterday's low is given in the last two columns. Lets Observe whether the downward trend continues. Only Appollo Tyre has closed above yesterdays high.

Ticker	Date/Time	NRV	Close	BuyStop SellStopC-L-1,Diff,L-L-1,Diff,	
APOLLOTYRE8/4/2009	1	42.550	40.80	39.85	2.70		
AXISBANK8/4/2009	1	894.700	929.10	911.95	-17.25	-26.35	
CMC	8/4/2009	1	809.350	837.90	815.00	-5.65	-13.65	
CROMPGREAV8/4/2009	1	285.200	297.90	290.00	-4.80	-7.00	
RANBAXY	8/4/2009	1	280.750	286.50	280.80	-0.05	-2.80	
RPOWER	8/4/2009	1	166.950	171.30	167.35	-0.40	-1.65	
WIPRO	8/4/2009	1	482.400	495.00	484.55	-2.15	-7.70

Regards
ken

 

[rohangawale]

------Deleted as posted twice by mistake---------

 

[rohangawale]

If anybodys needs i can post daily stocks which formed nr7 pattern on nifty stocks. These are the stocks from nifty which formed NR7 pattern today.

STOCK		HIGH	LOW
DLF		398	393
GRASIM		2790	2750
HCL TECH	252	249
PNB		707	700
REL CAP		912	900
SIEMENS		485	480

 

[bunny]

Here are my random thoughts on the NR7 setup:

In NR7 setup, I have quite often seen that the price breaks below the low on next day, and then again on the next day(2nd day after NR7) it starts its upward move.

What could be the reason for this? It is a trick by the professionals to shake-out the shares held by technical traders who are not as foolish as novices but also not as clever as professionals?

If its such a shake-out attempt how could be identify?
Typically such situation would occur when there are not sellers at that price. No sellers mean professionals do not get to buy. This means lowered professional transactions which would reflect on charts as low volumes.

How can be predict which direction the NT7 will breakout? Up or down?
In the 6th post of this thread, there is written "one of the market groups is trapped"(within losing position). Now the question who is trapped? Is it the bull or the bear who is trapped. This trapped group will soon giveup. If bulls giveup, prices will tank, if bears giveup, prices will sky-rocket.

Next question, how to identify who is trapped? or any hints?
Lets take help from the professional trader who controls the closing price. The professional trader has access to certain privileged information which we cannot see. The professional knows who the big players are and what their positions are. The professional will be in favour of the winning group.

So now next question: Since the professional is sided on the winning group, can closing price be used to predict the direction of breakout?
No thoughts on this one because I am yet to go through the historical data.





Till then, keep your comments coming. And let me know if I am thinking on the right path, or have I become psycho and over-indulgent?

Thanks,
-Bunny.

 

[AW10]

Thanks Ken and Rohan for bringing in the stocks meeting this setup.

Happy Trading