Friday, September 19, 2008

A short term low may be in place

The NIFTY may have made an intermediate low, a bullish bounce back is possible. This is the message of many days of volatile trading, culminating in a big selloff in world markets on wednesday, and, a large gap down to 3800 in India (and subsequent recoveries in all markets)
The Nifty may have made an intermediate low as it bounced back from 3800 levels to close above 4000. While the index remains inside the larger trading range between 3800 and 4600, it does give the impression that the short term trend may be up. The long lower shadows in the Nifty on three different days including today suggest an upbeat market.
Traders and investors should make attempts to buy on dips. Always keep stops. Resistance will come in at 4200, and support comes in at 4000. The larger trading range between 3800 and 4650 is intact.
A new trading range may be developing if 4200 resistance holds. Then, we will be looking at a range between 4200 and 3800.
This is not the end of the bear market. We are looking at a possible intermediate up trend like the one we saw in late July - early August. These are rallies in a bear market.

Rules to survive in the volatility.
Trade less. If you have the capacity to trade 500 Nifty, then trade only 200. Never think that you are going to 'recover' any losses made earlier. This leads to overtrading.

3 comments:

gurvi said...

I was waiting for your comments for 18th sep since Nifty has reached 3800 and you suggested earlier there is really no support in that range.

I like your survival rule.

Cheers (we can say this at least for today...no not because it is Friday).

-Gurvinder

niftytrader said...

Thank you for your commentary on market.This acts as compass for me to trade in market.

Shashank Jogi said...

The Greenspan puts now seems to have become the Bernanke-Paulson put!

And it seems to be working, at least for now.

Bear Sterns, Fannie, Freddie, AIG and now everybody else in one bite of the apple. Socialism for the rich maybe, might makes us feel disappointed or relieved depending upon our leanings. But its beyond our control, so we accept it.

And as traders, we respect market action above anything else.

As thinking investors, we wonder if things on the fundamentals have changed or are likely to change.

The Nifty spiked back 12% in 2 days from its low after falling the same percentage over 3 days. Volatile times, these...

And Sudarshan has made a very valid point: Dont try to recover losses!

I agree. The temptation to do so is great. However it is wise to treat every trade as independant of whether the previous one was profitable or not. Dont think about getting back lost money through subsequent trades. A loss is money gone and the money lost is best forgotten(hopefully if risk is under control, the loss would be small). Adopt, in some sense, a Virendra Sehwag strategy: each ball is to be treated independant of what happened on the previous ball. If you were beaten, fine. If you had hit a six, fine as well. Lets face the next ball afresh.