Tuesday, August 25, 2009

Trading Range Resistance

In earlier posts, I have explained the nature of the trading range. When prices hit support and begin movin up, there is a sense of euphoria ("this is it!'). Soon enough, prices touch resistance, stall and begin a decline. The sentiment quickly turns to pessimism. These alternating bouts of euphoria and pessimism continue till the trading range holds prices.

My point is: the up move or the down move inside the range are just that - small price movements. The only way to determine the direction of the breakout is to actually wait for the breakout / breakdown to take place.

The Nifty moved out of a narrow trading range between 4380 and 4500. The targets for this range were 4620 on the upside which were exceeded yesterday. Now, the larger range remains with resistance at 4730 and support at 4350. A move above 4730 will tell us that the Nifty may be ready for another 400 point of gains. In the same way, a break below 4350 gives us a downside target of 3980 or so.

Markets move through a cycle of contraction and expansion. We just saw a small expansion in the Nifty over the last 2 days. We may well see a day or two of contraction, which means random . narrow range movements.

BullsEye - the Game
I am participating in this stock market show on CNBC. The idea is to maintain a portfolio of four stocks (long or short) with at least two stocks o be shuffled every day. The show started on Monday and runs for five days, ending on Friday.
In comments, Men wote: "Mr. Sudarshan, it is good to see you play the game on cnbc, all the best, I will personally be tracking YOU."
That's fine. But readers should understand that this is a game, and enjoy it as such.

9 comments:

anshul said...

breakout from inverse head and shoulder pattren if we draw trendline from top of 21may08 at 513rs...MY QUESTION IS IF WE PUT SAME CHART ON LOG SCALE BREAKOUT FROM INVERSE H&S PATTERN WILL HAPPEN IF STOCK TOUCH AROUND 277-280 LEVEL IN COMING SAYS....WHAT CHART U PREFER FOR SHORT TREM TRADING..LOG SCLAE CHART OR ARTHMATIC CHARTS???????..IT WOULD BE VERY HELPFULL IF U EXPLAIN IT IN DETAIL.....
REGARDS
ANSHUL

pucchhu said...

i have one small query.
i recently ventured into nifty futures,and had a sleep less night yesterday.
Pls advice

Thanks

men said...

Mr. Sudarshan, the market will do what it wants to, this is known to me. Yesterday you suggested Orchid and today it is up 5%, well the proof of the pudding lies in the eating, infosys is worth watching also, though it is touch and go here.

Rajiv said...

Mr. Sukhani you have become Dukhani for me. You said dont buy Rolta. In panic I came out of the stock at Rs.159 and look where it has gone today. Shame on your so called skills.

pratik said...

mr RAJIV,
MIND YOUR LANGUAGE PLEASE. SUKHANI JI IS MY GURU . I CANNOT TOLERATE YOUR IMMATURED COMMENTS. A ANALYSIT DOES NOT OPERATE THE MARKET . HE JUST TRIES TO PREDICT THE MOVEMENTS. MOREOVER , EVERY HOUR NEW CALCULATIONS HAS TO BE MADE. IT IS THE CLIENT WHO SHOULD EITHER LEARN THE CHARTS AND REVIEW IT or take the help of some analysit every hour for analyis. mr. sukhani never told to sell the stock. as you told, he only advised not to buy more at that time. BUT THE MARKTET MOVEMENTS CHANGED AND THE CHARTS CHANGED FROM SELL TO BUY MODE. HOPE IT IS CLEAR TO U NOW. IF NOT TELL ME. RAJESH JAIN .

pratik said...

RAJESH JAIN PH/ 01262 245499. rjportfolio@rediffmail.com

Ashish said...

I personally dont expect anyone even Mr.Sukhani to defend the comment above but out of curiosity I tried to dig up for his recommendation that day as I remember watching him commenting on Rolta...and here is what I found :

Sukhani told CNBC-TV18, "My sense is that the rally seems to have been over done. Firstsource, Rolta, Sasken have given sharp breakouts and moved way beyond their earlier resistance levels, so while quite obviously you don’t sell these stocks, I don’t think there is any way you want to buy them

link : http://www.moneycontrol.com/india/news/technicals/dont-buy-firstsource-rolta-sukhani/21/45/411769

Forget technical analysis and all that, somebody needs English lessons here...

anshul said...

sudarshan ji my question was log scale or arthmatic chart on short trem trading with example of ge shipping

men said...

Pucchu, why don't you try mini instead of the regular nifty? Only jump in if you know how much you can loose or if you have the holding capacity in case you go wrong, if you cannot carry forward your position then a SL must be in place and then IT MAY BE JUST A matter of time when you may loose your entire capital.
And Mr. Rajiv, TA is not a science but an art, just because an indicator shows o/b does not mean that it will NOT go higher, and vice versa. Just ask your self this q nearly everyone knows how to read charts, then why are v all getting different results, and Mr. Sudarshan has been openly saying that there are some days when his trading haa failed, so instead of blindly following one person some home work is also needed on our side, for eg. Mr. Sudarshan had said that JSPL was worth buying and after that it fell and today it has gone above the suggested buy price, so one needs to have patience.