[Premium] Reading Our Updated Chartbook Notes

Below is the Cap-Weighted Nifty Energy Index Weekly chart and its notes from our Sector Chartbook.

Direction: This is the most subjective of the six metrics provided, as it's basically our opinion of the security we're looking at based on all of the evidence. It will read either bullish, neutral, or bearish, which provides our overall outlook for the timeframe being looked at. At the end of the day, the market doesn't care what we think, so that's why we rely on the other five metrics provided that can be more objectively identified on the chart.

Trend: This is simply what the trend is for the timeframe we're looking at. It will read either uptrend, sideways, or downtrend. We use both the slope of the 200-period moving average and price action (pivot highs and pivot lows) to determine the direction of the trend.

Momentum Regime: This explains whether momentum is in a bullish or bearish range. If RSI was more recently in overbought territory (above 70) it will read bullish. If RSI was more recently in oversold territory (below 30) it will read bearish.

Confirmation/Divergence: This explains whether or not momentum is confirming price action. If prices are making new highs and momentum is making new highs, then it will read confirmation. If prices are making new highs, but momentum is making lower highs, then it will read divergence. The same logic applies to new lows. In strong trends we want to see momentum confirming price action.

For a more detailed explanation about Momentum and the Relative Strength Index, visit our education section.

Risk Level: This explains the level that we want to be long above, or short below. The directional bias will be determined by where our target is. If our target is above the risk level, then you know there's a long bias. If our target is below the risk level, then you know there's a short bias. If our opinion is neutral and we see little directional bias, we will pick either an upside or downside target based on what we're seeing in the price action at the time. With that said, if prices go in the opposite direction, you will be able to determine a target based on our chart annotations. In neutral markets where we're getting mixed signals from these metrics, the best answer is probably to avoid trading that security all together until we get more data and a clearer picture develops.

Target: This explains at what level we want to be taking profits and typically represents potential support when short or potential resistance when long.

We've implemented these notes to simplify the process for both ourselves and our subscribers. We think these are the six most important metrics of our analysis, and that combined with the chart itself, they quickly summarize our opinion for any given security. In an ideal world all six of these metrics would be pointing us in the same direction, either long or short, but markets are messy so we often get mixed signals. When there are mixed signals, pay attention not only to the notes under the chart, but to the annotations on the chart as well. And remember, if there's anything you don't understand you can contact us here at any time and we'll get back to you generally within 24 hours.

In addition to the bottoms-up analysis provided in each of these Chartbooks, our top-down analysis of data from markets all over the world is used to update you on the major themes we're seeing in India and elsewhere. These themes are discussed throughout our free and premium posts each week, as well as our monthly members-only conference call.

We hope this was able to clear up any confusion regarding our updated Chartbook notes. If you still have questions, please contact us here and be on the lookout for updates to our education center in the coming weeks.

Thanks for reading and let us know if you have any questions.

Allstarcharts Team