Saturday, June 14, 2008

On your marks, get set, Go... upswing begins ?

Is the Nifty ready for an uptrend ? Chart signals suggest this may well be so. We have two NR7 days in the Nifty, then long lower shadows, finally all of this happening after a sharp down move, at January - March lows. The stage seems to be set for a short term up trend. The market will eventually tell us if this uptrend is a rally in a bear market or the start of a new up move. But, short term traders do not have to worry about this. The signs indicate an up move, therefore they should position themselves to buy in intra day trades, or in swing trading.

The Daily chart for the Nifty given below highlights NR7 days. Note how these NR7 days identify the reversal of trend. Some NR7 bars also mark continuation. The NR7 on Friday, suggests reversal of the down move, for reasons explained above.

How do you trade the possibility of an up move ?

1. Identify a maximum of 10 stocks with high relative strength + high volatility.

2. Set up your Live Grid with these 10 stocks. During the trading day, look to buy new highs in the stocks, as also buy when the tm Trend indicator signals a correction in an uptrend.

3. Same principles should be applied to swing trading. Do this on end of day charts, or 30 minute charts if you can track the market during trading hours.

You have to make a complete trading plan with rules for Entry, Stop Loss, Profitable Exit & Trailing Stops.