Monday, July 28, 2008

Market in Narrow range, ready for a big move

The Nifty moved in a narrow range today, a suggestion that the contraction will soon lead to an expansion in any one direction.
Today was the narrowest range in the last seven days, a day on which neither the bulls nor the bears gained an upper hand. Such range contraction days are unlikely to continue. Soon enough , one of the two groups (bulls and Bears) overcome the other.
This question comes again: Where will the market go: up or down. The answer lies in the future. Wait for the market to begin a movement, the chances are that the momentum will continue in the same direction.
For the Nifty, a move above today's high - 4360 could suggest strength, while a move below today's low - 4285 may result in more downside pressure. This is as simple as it gets. Traders should wait pateintly for the move to begin, then go with it. By tomorrow morning, if world markets develop a strong direction, the Nifty could simply follow it. If world markets remain flat, then the Index will probably remain choppy for a day or two till either the bulls or the bears win this skirmish.
This is not the first time that I have discussed the narrow range day. It will not be the last either. These cycles of contraction and expansion occur frequently. They are usually easy to trade. Just follow the market.

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