Tuesday, June 22, 2010

The Challenge of 5400

Since the bull market started in 2009, a roof has been placed on the upside movement, at 5400 in the Nifty. This resistance is now undergoing a challenge with the markets seeing a sharp rally, reminiscent of previous bull market moves.


Let us consider some possibilites:


1. The Nifty may move up, breaking out above 5400, then slowly moving up with a pattern target of 6000 at the minimum (assuming trading range is 4800 to 5400).


2. The Nifty may move above 5400, but does not get the momentum to move much higher, ensd with a retracement that is higher than 4800. The market ends up in another trading range with support higher than 4800 and resistance also higher than 5400.


3. The Nifty crosses 5400, then falls to create a false breakout. Markets remain locked in the 4800 - 5400 range.


4. The Nifty fails to cross 5400, begins its much awaited decline.


There are more possibilities but these four will suffice. The key question here is: How do you trade? The answer lies with the trader since there are as many ways of trading as there are traders.


One possible strategy could be:


A breakout above 5400 is taken as a breakout! Buying is done with a stop loss identified on charts.
AND,
If, the Nifty closes below 5300, a short term pullback is assumed. Short selling will be done with a stop that is approx 2 ATR above entry price, th ATR calculated on 120 minute charts.


A strategy, any strategy will make trading easier and profitable.


A key question that comes up for traders is the use of Fibonacci retracements in our trading. While these retracements make a lot of sense since they represent 'Buy on dips' or 'Sell on rallies', how do you actually use them.


Now, this Free, educational video discusses Fibonacci Retracements.


A key question that comes up for traders is the use of Fibonacci retracements in our trading. While these retracements make a lot of sense since they represent 'Buy on dips' or 'Sell on rallies', how do you actually use them.


Now, this Free, educational video discusses Fibonacci Retracements.


Click Here to Begin the Video

2 comments:

Sunil said...

Dear Sir,

Most of the times i admire yr views. But sorry to say, this time my views are different then yours.

1. Why sud we say the rally since mar 09 has stalled @5400 and nifty is trading in a range of 4800-5400
2. Why sud we hope for a decline "its much awaited decline" in your words.

My views are: since mar 09, nifty has been consistently moving up, making newer highs, but has never even touched (leave alone breach) the major lows.

In Oct, we could have said, nifty got stalled @ 5180 and is trading 4550-5180. The in jan 10, it made new high @5310, and corrected upto 4675, we could have given similar argument. This time also the same thing is being said. For me, range cannot be higher highs and higher lows, i m sorry to say that, Sir.

As regards to much awaited decline, you have often said ( might be in different language)let the screen say for itself, rather than we make up our mind b4 hand.

I hope to get your kid advice on my views.

Regds

Sunil

ANAS said...

respected sir,
just dropped in to clarify , that, WHAT WILL BE THE PERIOD OF ATR?? IN 120 MIN CHARTS

IS IT 2(TWO) PERIODS..

KINDLY DO CLARIFY.

THANKS A LOT!!