Wednesday, July 22, 2009

Nifty in narrow range

The Nifty took some rest, as it paused after five days of strong gains. Such a pause is natural in any trend.
The Nifty has made an Inside Day as well as an NR7 day.
(Hat tip to Rajesh Jain, Rohtak for pointing this)
The patterns suggest uncertainty. Now, the question comes: unceratinty about what? Since we have already seen 600 points of gains in the Nifty, the uncertainty is about continuing the winning spree.
What may happen next?
Scenario One: A move below today's low - 4436, will tell us that the majority of traders have decided to become safe. They are not buying. Then, a correction could easily begin taking the Nifty down to 4350.
Scenario Two: The Nifty continues its winning spree. A move above 4510 - today's high will suggest that bulls remain in full control and confidence. This should suggest a target of 4700 which is the next resistance.
Since the trend is up, there is more risk in selling than in buying. But, we have to follow the market momentum anyway.
For Investors, a corretion is not a cause for worry. After all corrections will come and go. The trend remains up.
For Traders, a move below 4436 i a warning to lighen up or maybe close long positions.


rani said...

How is it an inside day? nifty made a higher high and higher low. please explain. Also what is NR7??

kram said...

The Alternate view:

What if the Nifty faces resistance at 4500-4550 and then starts declining?

Can we then assume that the BEARISH H&S pattern is alive and well and the right shoulder is 4500 rather than the Budget day level?

In that case, can we make a case for the decline from the (new, lower) neckline to be around the 3550 levels?



Rohan Shenoy said...

When you say "A move below 4436" (or high above 4501), is it any intraday level or the closing level only?

Thank you,

TOOCOOL7610 said...

dear sudarshan ji

its been only about 15-20 days since i am following ur blog but i have got so many new things to learn from it i cant express in words thank you for bloging and please keep doing so.

few days back you had told about how to use stochastics in ranging markets & also in trending markets{in the direction of the main trend} , but how to use it in direction opposite to main trend?? is it advisable?? i think not but i also think it can be done with the help of divegences that occures, kindly throw some light on it, any book will be helpfull, today there was a divergence in stochastics and prices and markets tumbled,i didnt short on it, phew .....