Saturday, December 8, 2012

Trading Range Intact

A three day range was expected to breakout after the Lok Sabha Vote. See earlier post Here.

Markets being what they are, the eventual outcome of a  trading pattern can never be predicted with any certainty. We work with the probability that the eventual outcome from a trading range will be a breakout or breakdown.

This week, the Nifty did not oblige. The trading range appears to be intact, with failed breakouts as well as failed breakdowns.

More worrying for the bulls is the absence of follow through after the big 100 point intra day rally that occurred on Thursday. This is a warning signal. It is not a sell signal, but traders should avoid long positions till new patterns merge.


Pi said...

I've mostly been a day trader, occasionally taking swing trades for 2-3 days, but rarely longer than that.

But over the past week looking at individual charts, I am increasingly getting the feeling that there is money to be made outside index trading. Base making and breakouts, rounded bottoms, double/triple bottoms, head and shoulders all are so very visible. Big spurts on large volumes are visible on overcoming resistance areas.

I am then tempted to trade a few of these. Buy on breakouts or dips and hold for multiple days. Want I want your advice is on, what kind of stop/trailing stop/exit strategy works better for individuals stocks specially mid-caps with slightly higher beta.

Dinesh said...

Dear Sir,
After Mayawati's commitment to vote for Congress on Thursday, the market assumed confirmation on FDI in multibrand retail & rose 100 points as you said. So, it got priced in. So, after the formality was over in Rajya Sabha, the market did not react positively. I think people got worried about earthquake in Japan and more importantly about talks from opposition parties on Retail FDI which may discourage people to do FDI in India. I think the next trigger should be the hope of interest rate cut, a case for which (in the early 2013), is getting built. Resolution of Fiscal Cliff is another trigger but that is almost priced in, the way I understand.
So, taking your advise, we have to wait for the next pattern to emerge before taking short/long position.

Dinesh Rishi said...

Thanks Sir,

Will wait for clear signal till than intraday :D