The Market continues to go up. We go with the flow, which is UP.
The Nifty touched 3100, which makes this rally gain 560 points, 20% in a few weeks. Now, markets do not go up forever. (Niether they go down forever..) With 20% behind it, the Market is ripe for a period of consolidation / correction. But, such corrections do not take place on our demand. We may feel that the Market is overextended, but the Market may continue to move up, making it even more extended. Finally, when we give up, begin to buy, the market crashes. Sounds familiar ?
While day traders or even swing traders should take long positions, position traders who plan to keep positions for more than 2 days, should wait for a correction. The risk reward ratio is now skewed against buyers. Reward is unlnown, but risk is known and high.
Tushar writes:
"This is the first time since November 2008, that oscillator signals are not working properly.I mean various oscillators are overbought now since 2830 levels, but still nifty is rising. Why? "
When the market begins a trend, the oscillaltors fail to keep up with the new momentum. Therefore, they become 'overbought' while the strong trend continues to push up the market. That's why, always follow the market first and keep the oscillaltors as a secondary signal. If the market is going up, then ignore the oscillators. There is likely to be two or even three divergences before price and oscillator begin to move in the same direction.
Tushar continues :
"Sudershanji you might have seen such moves in past. Tell me what happens next?"
My Notes:
Markets go thorugh periods of irrational exuberance. Such periods can last longer than we initially imagine. Inevitably, there is a day of reckoning and markets will eventually go through a process of massive correction. But we do not know when that will happen so we stay with the flow.
Finally, Tushar says:
" I think today we will get a strong SELL signal provided Nifty doesn't breach 3100.But is it worth to play on the short side against the tren"
My Notes: NO. Never go against the trend. A sell signal needs to be convincing. There must be a black candle, lower close, breakdown of intra day support. Only then can a short position be considered.
Have Fun!
July 2 2010
4 weeks ago
Posts
6 comments:
Thanks for answering all my queries, sudersanji.
I think I was giving more emphasis to oscillaltors then to trend.
Besides technicals that are showing strong momentum on upside.
What do you think is driving the market higher?
I mean today afternoon I was watching CNBC Closing Bell and you said that "infact retail traders were short and they lost money".
So if retail was bearish(like me) then who is driving the market with such a momentum.
Ya I know you may say that our job is to go with trend, as you usually say.
But still throw some light on this topic.
Also the Charles Nenner prediction you posted on February 6, 2009 are nearing true.
Can you please clear one doubt .
A lot of times our markets go in the direction of US market , there was a time when Indian markets were up if US was up and down when US was down .
So Asian markets behave like US markets . Some day totally reverse thing happens . I remeber on the day when Dow was 750+ points down (many months back). I shorted no the opening of markets and markets close in GREEN that day .
So the question is, when do we rely on US markets and how to use them as some kind of indicator ?
Hello Sudarshanji ,
I want to be good trader . Can you please guide me on the steps that I should to fulfill this dream . I am a regular reader of your blos , try to learn from your articles.
Regards,
Gaurav
HAPPY NEW YEAR SUDARSHAN JI,I WISH U ALL THE HEALTH AND WEALTH WITH MORE FUN.
WARM REGARDS.
Dear Sudarshanji,
Sir an unusual request. I subscribe to your blog feeds in my RSS Reader which is enabled in your blog.
Could you please enable the feature of subscribing to RSS Feeds for comments in your blog. Every time to check comments we have to click link and visit blog. Besides comments keep coming in for no. of days so we cant visit the same post again.
Sir,
Thanks for your slide show on momentum trading.
It's working on all time frames.
To day it gave buy signal @ 3085 and exit @ 3130.
Thanks again.
Please provide us more educative material.
Nitin Damle
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