Monday, September 1, 2008

Volatile Nifty: Just one more day in the office

First, information on other posts.
I have discussed the concept of Strength and Weakness in a post called 'Signs of Stength & Weakness' .

I have also given a brief explaination of My Blogs - Personal Note on My Blogs. This one is just below the current post, you can scroll down and read it.

The Nifty
The trading range was narrow, suggesting some indecision. The Index found support at lower levels bounced back to close at 4360, the top of the day's range.
As the Index continues to move in a narrow band, there appear to be opportunities for buying on breakouts and selling on breakdown.
The Nifty has two distinct trading zones. The first is a larger range, between 4200 and 4500. A move out of this range will offer a significant trend.
The second range is between 4360 and 4200. This is the range which can easily be broken out from, tomorrow. If this happens, traders should go long, with proper stops.
Inspite of small daily ranges, volatility continues to be at the higher end. Current 10 day historical volatility is 85% of 'normal' long term 100 day volatility. I say that this is at the higher end, because a low volatility situation develops when current short term volatility is 50% or less than long term V. Therefore, it is possible that the market may continue to move in a narrow range for a longer period.
The trading idea from this information is to accept that a strong trend may not emerge soon. Trading should be focussed on small profits.

No comments: