In search of clarity.

In the last week, after giving bearish view, Nifty gave big surprise on last Thursday by turning positive, and again today i.e. on Friday Nifty turned weak again. In such choppy scenario what should be our stand as a trader? I will try to answer your query. As I am not being paid by you, so please expect genuine and unbiased view from me, and still if you find mistakes than you are most welcome to put your comments.

way2profits, way2profit

Nifty as on 15 March’13 – 5872.60

Let me start with giving one bold statement, Nifty has not turned its party with Big Bears, still there is a hope and I am hopeful,,(I am talking in respect to slightly longer term view), obviously in short term correction can happen and you have to stay with trend, even in short term also. So my bold statement is, I am not extremely Bearish on Market”, If I will turn I will let you know. (Caution, prices are standing very close to turn whole game).

Now coming to recent price development.

As you can see in attached chart, twice Nifty tested 5971 and turned lower, so it becomes good resistance point to watch for. And with that I have drawn Fibonacci Retracement in corrective leg from high of 6111.80 to low of 5663.60. Golden Fibonacci Ratio 61.8% of this move comes at 5940, so you have another strong price point to resist price movement.

Taking above retracement, 38.2% ratio comes near 5835, where in past prices made swing high near 5815, so all in all you have a good support here.

Momentum oscillator RSI (14) exhibiting bearish tone, but still it needs confirmation from price movement.

What should be trading strategy?

I am risk-averse trader, and I would always like to take safe bets. Traders can go long once prices moves above 5970 mark, or go short below 5835. Now, stop loss will be based on your risk appetite, but ideally if you are keeping stop loss of 40 points than now you have to keep stop slightly higher, considering high sudden high volatility in market. If you entering in to trader once prices close above or below, than your stop loss should be previous day’s low or high (keep margin of few pips).

Let me also tell you, according to Elliot Wave Analysis, current price action is corrective nature, and I also agree with that, but rather preempting I would like to go with flow, because anyways, even if we know right wave, we are not going to ride wave based on principles, so better stick with what you are comfortable.

I will be waiting for your replies….


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