Do not catch the falling knife
As discussed a couple of days ago, breakdown on the nifty was just round the corner, and it confronted us yesterday. We had also warned about a fast fall below 4980 and it turned out exactly that way. The whipsaw again took its toll in between, with a non trustworthy rally till 5160. Today, again given the global cues, the opening is likely to be weak.
1) The Elder Ray readings : Bull Power reduces from +108 to +19, Bear Power increases from +50 to -132, indicating that the Bulls are down but not out yet. Also the Bears have gone too far too fast.
2) The moving averages have started pointing downwards, indicating a continuation of the medium term bearishness in the Nifty. The 8,13 and 21 EMAs have now converged in a 10 point zone indicating indecision.
3) The fast stochastics have gone too far into the oversold zone, with the slow stochastics still halfway down the road. The ATR has regained the levels of 110 indicating high volatility expectations.
4) In the above chart, the MACD has started reducing, but still is in the positive territory. The ADX has not yet confirmed a fresh sell signal.
5) Looking at all the above, we expect a negative opening for the day. We also expect that the bulls will try to fill the down gap formed by the negative opening, and our trading plan will be based on these expectations.
6) Our Trading plan for the day
a) We will avoid taking fresh positions in the nifty for the first 30 minutes. However, we will be ready to cover our carry forward short positions around 4840.
b) If the Nifty continues to trade below the opening, then keeping the slow stochastics in mind, open fresh shorts with a SL of 20 points above the opening mark, and a target of 80 points below the opening.
c) if the nifty crosses the opening mark and trades above it, we will open fresh longs with a SL just below 20 points on the opening mark and with a target of 4920. If the risk reward ration is not more than 1:3 then we will avoid this trade. Above 4940, we will add to our long positions with a target of 4990.
Happy Trading
For cash market recommendations see our Daily Pre Market calls on NSE
As discussed a couple of days ago, breakdown on the nifty was just round the corner, and it confronted us yesterday. We had also warned about a fast fall below 4980 and it turned out exactly that way. The whipsaw again took its toll in between, with a non trustworthy rally till 5160. Today, again given the global cues, the opening is likely to be weak.
1) The Elder Ray readings : Bull Power reduces from +108 to +19, Bear Power increases from +50 to -132, indicating that the Bulls are down but not out yet. Also the Bears have gone too far too fast.
2) The moving averages have started pointing downwards, indicating a continuation of the medium term bearishness in the Nifty. The 8,13 and 21 EMAs have now converged in a 10 point zone indicating indecision.
3) The fast stochastics have gone too far into the oversold zone, with the slow stochastics still halfway down the road. The ATR has regained the levels of 110 indicating high volatility expectations.
4) In the above chart, the MACD has started reducing, but still is in the positive territory. The ADX has not yet confirmed a fresh sell signal.
5) Looking at all the above, we expect a negative opening for the day. We also expect that the bulls will try to fill the down gap formed by the negative opening, and our trading plan will be based on these expectations.
6) Our Trading plan for the day
a) We will avoid taking fresh positions in the nifty for the first 30 minutes. However, we will be ready to cover our carry forward short positions around 4840.
b) If the Nifty continues to trade below the opening, then keeping the slow stochastics in mind, open fresh shorts with a SL of 20 points above the opening mark, and a target of 80 points below the opening.
c) if the nifty crosses the opening mark and trades above it, we will open fresh longs with a SL just below 20 points on the opening mark and with a target of 4920. If the risk reward ration is not more than 1:3 then we will avoid this trade. Above 4940, we will add to our long positions with a target of 4990.
Happy Trading
For cash market recommendations see our Daily Pre Market calls on NSE
No comments:
Post a Comment
Please add your comments here. Comments will be moderated.