CLASS NO 4 PATTERN CHART READING

DATE – 20/03/2022
BY SHANU TADVI
 Index
 Over bought and Over sold
 Bollinger band
 Supply and Demand
 Over bought and Over sold
In any Business a successful businessman will buy cheap and sell
expensive. Similarly in stock market too we have to buy low and sell high.
To understand this we have to understand what is the condition of Over
bought and Over sold.
Any stock of which retailers have larger holding.. Is known as Over bought
stock, and any stock which is sold by both retailer and institution, FII, DII,
Promoter etc. (Smart money) is known as Over sold.
Over Bought is a situation which is very difficult to sustain even for 10
months but Over Sold can be in that situation for over 10 years. That is why
trading Over bought is easy compared to Over sold situation.
For a Over sold stock to move, Retailers must to exit.
 How to find if stock is over bought or over sold ?
To find out about the condition of Over Bought/Sold we need to see RSI
(Relative Strength Index) of the stock.
Usually it is taught that whenever stock is over 70 its Over bought condition
and whenever its below 30 is over sold condition. But this is not completely
true. It is observed that whenever stock RSI goes above 70 in monthly or
weekly, It generally doubles its price in a period of six month to a Year.
So the obvious question that remains is when is a stock truly Over Bought.
That condition is met when in Monthly Hilega Milega (HM) system shows
strength over 86 to 95. That means stock can take minor Price wise
correction maybe in current or next month.
Monthly Chart Nifty
Weekly chart Nifty
Whenever Nifty or stock is in Bull phase that means they have
broken all types of resistance, there is only Strength wise resistance
that acts on the said chart. To check strength wise resistance see if
HM on Monthly and weekly and check the previous strength wise
resistance that was hit and price took correction

Whenever there is no Dynamic or static resistance, you can take

help of strength wise resistance in HM as shown by putting
horizontal line over last highest point. Whenever HM over 86 in
Monthly and weekly and in Day time frame HM is around 90-93, exit
if you were long and be ready to take short position at any sign of
reversal like BB trap, OH, Killer wave etc.
 Over Bought is easy to trade as compared to Over sold trade. To
trade on Over sold condition you need lot of Practice and
Experience. But in Over bought condition you can trade at any sign
of reversal because this condition cannot be sustained for too long.
In Over sold condition, when strength is at 15 and Monthly chart
candles are flat

OVERSOLD CONDITION
Bollinger band
Bollinger band is an indicator which is based on Average 20 sma,
which shows maximum deviation from its average. It consist of 20
sma as mid line also known as line of gravity and has upper and
lower band which shows the maximum deviation of price in normal
circumstance. This is a Dynamic indicator as moving average is
Dynamic hence the bands are Dynamic as well. Upper band works
great as resistance while lower band works as support.
 Whenever market in uptrend the median line/20 sma will be 45° upward
and vice versa and in such case whenever price comes near median line
it bounces back up until the trend last. Once it closes below median line
once should be aware that trend could reverse. If the price backs from it in
smaller time frame then we take trading decision. If it was uptrend and
price is backing from station (20 sma) then we do trade buy side/upside
and vice-versa. Shorting in Uptrend should only be at upper band when
price fails to break and sustain and looks to reverse.
Aside from this there another condition where we can Buy/sell. Whenever
price breaks any band upper or lower and sustains, this is known as
Bollinger Band blast, meaning Price is breaking and sustaining its maximum
deviation point, which indicates that there is a heavy momentum towards
that side. This condition do not occur often but whenever it does.. It
denotes Trending and momentum and if we recognize it.. We can ride the
momentum and there is a scope of making good money.
 Whenever Price has to make a big move be it upside or downside, Band is Squeezed in
small size which looks like Pipe as you can see in the previous picture. In this small area
Price try to accumulate/Distribute it self. Longer it Accumulation/Distribution, bigger the
move.
After this phase it should band blast either upside or downside.
Usually band blast in such scenario is confirmed when the candle takes a gap up after the
previous candle which broke the band as you can see in the previous picture.
There are other patterns which surrounds Bollinger band like BB trap where 1st candle of
the day takes gap up/down opens and closes completely outside of the band and next
candle or any further candle closes below vwap, indicating that gap up/down was a trap
and it failed. In Day time frame if such pattern occurs we wait for price to close below 5
sma high/low and then take entry accordingly.
There is another Pattern which is been discussed in earlier classes which is Moh Maya
pattern where in day time frame a complete Doji candle is formed outside of the band
after a great fall or rise and next candle closes above the close of Doji candle, we may
initiate the trade.
Supply and Demand
Whenever in market if there is shortage of any product, the price of
the product is increased since there is a low supply and high
demand. Similarly when there is high supply of a product and low
demand, the price will be slashed.
This is known as Supply and Demand. Same is the situation while
trading. There is a Demand zone and then there is supply zone
which act as support and resistance respectively.
To understand supply and demand of the market we take help of
indicator ‘RSI based Automatic Supply and Demand.’ on trading
view It clearly shows where demand and supply lies which makes
trading decision easier.
 In this Indicator we can see on chart automatically Supply and
Demand zone appears. The upper side is known as Resistance zone
and downside is know as supply side.
It works best in Higher timeframe like Daily, monthly and weekly.
Whenever Price resists, it breaks down and if sustain above.. It gives
break out. It could also work in lower time frame but there are
chances of wrong signal and gets complicated.