Tuesday, November 20, 2012

Consolidation or Reversal

Narrow, tight ranges suggest indecision in the market. These ranges will soon resolve into a breakout or a breakdown. Moves out of trading ranges are often, fast and furious. They offer excellent opportunities to the short term trader but require quick response to fast changing market conditions.

Here is a 15 minute chart for the cash Nifty which shows three such ranges, two of them offered profits while the third is poised to break out / down. Traders should search for tell-tale signs that provide early warning of the direction in which these ranges will break out.

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1 comment:

Dinesh said...

Dear Sir,
Sometimes, there is a fake break out/down or people perceive it a break out/down but it turns out to be fake. For example, today when Nifty lost around 18 odd points I took that as a breakdown but it turned out to be fake and Nifty changed its mood. That is part of the game but should have followed some rules. It would be great if you could please guide on some parameters to confirm break out/down from your perspective?
Regards,
Dinesh