Tuesday, July 22, 2008

Waiting for the Parliament Vote

The Nifty finished another day with big gains, making it three in a row. The Index is at 4159.50 within strking distance of the previous pivot high made at 4200.
If the Nifty closes above 4200, it will make a pattern of higher highs. This will break the bearish pattern of lower highs being made since April. Once a pattern of higher highs is confirmed, Intermediate traders (These are investors who may wish to take trading positions for a few days to a few weeks) can choose any one of the two options: They can start buying / investing now, or they can wait for a correction and then enter the market once it is evident that the correction will stop above the last low made at 3800. (This means a pattern of higher lows is confirmed).
There is no 'right' way. Early entry gives an advantage if the up trend continues. Waiting for a correction is safer since the trader / investor avoids the prospects of a false breakout. IThis is a decision that the trader has to make.
A numbr of individual stocks have made bullish patterns, mainly bullish head and shoulders in their charts. This does suggest that stocks are going through a bottoming out process.
We assume that we remain in a bear market. If the Nifty goes above 4200, the intermediate trend will change to up, but the primary trend will remain down.

This is the second blog entry for Monday evening. Scroll down to read the first - 'Banks lose Money, Markets are up, What's Next'.