Monday, October 12, 2009

Nifty is up, inside the trading range

The lesson is to try and stay with the main trend. Just in case we forget, the main trend is up. But, with all of the up and down moves, the Nifty remains inside the trading range between 4950 and 5100. Given today's strong up thrust, we should expect the support to shift up and probbaly create a new trading range. As of now, it is not easy to visualize a runaway market. This could mean a slow and steady upward shift rather than a big sudden up move.
Of course, I could be wrong. But, nothing is lost if a big thrust comes instead of a steady up move.

What are the prospects of a reaction? Now, the markets can correct any time. As the days go by, a sense will develop that 'this time it is different' and the markets will not correct. That will then be a danger point, because extreme optimism is the beginning of a deep correction.

Now, if you do not go short and the market suddenly corrects, you are certainly left out. But, much worse is your position if you are short and the market resumes its up move, as it did today. So, while it is thrilling to sell at the top, it may NOT be good trading.

I will try to set up one more post tonight. Cheers!

3 comments:

Digvijay said...

Dear Sir,

What you are saying makes lot of sense, but will it not be prudent to book profits around 5100 to 5150, and go short in tht range with stop above 5150.

men said...

Mr. Sudarshan when would you say that the uptrend has changed, normally as a thumb rule is a close below 4920-4950 (Now) for 3 days a signal, if yes then on the 3rd day we may be way below if that were to happen. Should one consider valuations now? and are historical pe's of any use now? Also have you got any targets, as calculating fibo nos. will only take the targets more higher from here on. Could you please explain with a chart.
Thanking you,
Regards,

Student Of Market said...

Sir,

I have a question. In situations like this with a uptrend in the background, what to do when a day trading system gives a sell signal? Would it be advisable to ignore the sell signal and only take the buy signals?

This is how I currently try to deal with this: I do take the sell signal also but try to exit quickly with small gains or loss. Whereas for buy signals, I try for it to ride the trend a bit longer.

Would appreciate your thoughts on this.

Warm regaqrds,