Bank Nifty : On a weekly chart Bank Nifty made an inside bar pattern , a powerful pattern in volatile instruments

A simple thread to understand relationship between US Dollar and Emerging Markets.

The relationship between the performance of Emerging Market stocks and the US Dollar is one of the tightest macro relationships that exists in investing.

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The weekly return correlation between US Dollar and MSCI Emerging Market Index is -0.70 over last 10 years. Which means when US Dollar weakens, Emerging Market stocks rally and vice versa.

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As seen in this chart, the MSCI EM Index and the MSCI World Index ratio and the US Dollar Index are negatively-correlated.

When US Dollar weakens, EM index outperform World Index and when US Dollar strengthens EM index underperform World index.

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From 1995 to 2000, the USD appreciated over 30%, while the MSCI EM Index underperformed the MSCI World Index by over 15% annualised.

Then from 2001 to 2010, the U.S. dollar depreciated over 18% while the MSCI EM Index outperformed the MSCI World Index by 14% annualised.

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Then from 2011 to 2020, the U.S. dollar appreciated over 30%, while the MSCI EM Index underperformed the MSCI World Index by 7% annualized.

Overall, from 1995 to 2020, this relationship has a correlation of -0.35.

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Outside followed by inside bar is one of the best pattern to trade.

What does outside bar means?
- Outside bar is when current candle high > previous candle high & current candle low < previous candle high

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What does inside bar means?

- Inside bar is when current candle high < previous candle high & current candle low > previous candle low.

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What to interpret from outside bar?

- When we get outside bar which means neither buyer nor seller are in control.
- When we get outside bar, we should wait for the follow through/confirmation in next candle.

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What to interpret from inside bar?
- volatility is getting compressed.
- both buyers and sellers are waiting for next trigger to create fresh position/ close their existing positions.

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What to interpret from OB+IB pattern?

- this is one of the best formation we can get to take a trade.
- Outside bar + Inside bar = Rejection on both side + compression of volatility.

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A simple #swingtrading strategy
1. Whenever you see a stock in strong uptrend it will tend to take support on its 21 ema.
2. Always look whether the stock has taken support previously.
@kuttrapali @rohanshah619 @chartmojo @chartworldat
#adaniports #balajiamine #jswsteel

3. 21 ema will act as dynamic support in a trending market
4. Risk: Reward is favourable in such setups
5. 50 ema can also act as support which can be kept as stoploss for swing trading
6. Volume should be less during pullbacks .
#nifty50 #stockmarket #CHARTS