Monday, April 26, 2010

Shallow Corrections

The Nifty seems to be unwilling to go through a significant correction. The upmove from 4675 to 5400 has not seen a 'normal' 50% or 61.8% correction. At least, not yet. What we saw was a dip to the area between 23% and 38% retracement. This is a shallow correction.

The message is: The Market is not ready to go down. At least, not yet!

Will the Index cross 5400? Given the strong momentum, it does seem likely. I have been writing about a bubble like move from 5400 to 6350, an area which has little resistance. While this move is possible, we should not expect the market to continue going up until it goes through a more normal correction.

So, how do we trade? Assuming that the Nifty is in a trading range, buy dips and exit on rallies. We avoided byung breakouts and this saved us a lot of unneccessary trading last week. (Saved us from whipsaws!).

On Saturday, the Association of Technical Analysts organized its monthly meeting with a presentation by Dr S.K. Sinha from Patna. His topic was to explain entries when the C wave is completing. These are the lowest risk entries for the trader. The presentation was not heavy on Elliot Waves. It was easy and simple to understand. Outstation members ill get access to the presentation soon enough. We have recorded the event, and we will try to provide the DVD at a nominal cost to members.

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