Thursday, October 6, 2011

Sudden Rally

While Indians celebrate Vijay Dashmi / Dushehra, world markets are going dramatically up. Suddenly, in two days, Risk is back again. So far, it appears that the Nifty could open almost a 100 points higher tomorrow. That would certainly be a gain for traders who went long with a stop under 4750 – which is a significant support for the Nifty (see my previous posts).

But, what about trading tactics? The Nifty closed at the lows of the day (almost) on Wednesday. When an instrument is closing near its lows, remains in a protracted down trend, it is reasonable to expect traders to be and remain short in it.  Therefore, if you are following any trading method, it is likely that you were short over the holiday.

 

Well, the answer is: follow your rules. If you are short, and your rules require you to exit at a loss on Friday morning, so be it. There will be many days when the same discipline will fetch profits.

5 comments:

Rakesh Shethia said...

a doubt - suppose a head & shoulder pattern is confirmed. However, it doesnt hit the target and closes below the right shoulder. Does it have any further targets on downside?

uday kumar said...

sir are you giving advice on any channel, if yes please tell the name of it.I have searched all the biz channels but I am not able to find you.Missing your advice.

rohit said...

Sir but nifty may also open up 150-200 pts, should one wait for some downside to cover your shorts and reduce losses? because anyone who was stort from 4900 also may lose all his profits, or should one book losses immedieatly? all markets have rallied almost 7-8% from their lows in a matter of 2 days, so nifty may also go to 5050- 5100 in 2-3 days. The last 2 trunkated weeks have not been good for the markets.

bkmm said...

Sudarshanji,
Our nifty has fallen mainly due to SBI downgrades, hence banknifty falling which has major weight on nifty.DLF,JPasso, ITC,Tatasteel,HDFC,INFY,Tata,ITC,TCS,RIL gained or did not lose much and are candidates for major upswing and if banks bounce for uprally ... nifty/sensex could see a rally of 150/500 points rally.
currently SGXnifty is 4880 exactly where you mentioned in the chart as right shoulder.
As per your view of nifty on 25 september 4700 to 5300 range should hold as long as global index oscillates between similiar range of their own.
bkmmodi

bkmm said...

Sudarshanji,
Our nifty has fallen mainly due to SBI downgrades, hence banknifty falling which has major weight on nifty.DLF,JPasso, ITC,Tatasteel,HDFC,INFY,Tata,ITC,TCS,RIL gained or did not lose much and are candidates for major upswing and if banks bounce for uprally ... nifty/sensex could see a rally of 150/500 points rally.
currently SGXnifty is 4880 exactly where you mentioned in the chart as right shoulder.
As per your view of nifty on 25 september 4700 to 5300 range should hold as long as global index oscillates between similiar range of their own.
bkmmodi