Listening to the Market - 10 Jun 2009

We seem to be at an interesting juncture. While the intermediate up trend is still intact, there is a debate whether Nifty will immediately break out above 4650 or whether it will take rest for some time and head towards a resting place around 4000. 3800 etc.

No one knows.

And yet we must act in some way. This is where your own sense of the market comes in.

Given the fact that we are at a significant resistance, it may be prudent to trade the next few days with a negative bias. Is there a contradiction between saying the intermediate trend is up and trading with a negative bias?

Not really, since we are talking about two different time frames - several weeks to months for the intermediate up trends vs. trading now for the next few days.

For today I will watch the 4520 -4530 Nifty level - this is a level Nifty tested several times yesterday before finally breaking above 4540 and racing towards 4560.

If this level breaks, then Nifty might begin to drift towards 4490 for the day. It might make sense to trade with two lots ( Nifty or Mini nifty ) - close one for quick gain and allow the other to develop. This is if the market is kind to you. If not, the stop loss must be at Nifty 4570.

Conversely, you can use the strength of 4520 support to go long with a SL at 4490 - the choice is yours !!! Today's Pivot points are as follows: PP:4493, S1:4423, R1:4620, S2: 4296, R2:4690.

What would be the biggest mistake that a trader with a negative bias can make? The biggest mistake is to get hooked to the negative bias and not listen to the market if it does race towards 4650 and above. If that were to happen, either stand aside or participate on the long side.

This is what listening to the market means - be right or wrong in your bias but correct yourself when the market proves you wrong.

If you have any comments please write to me at stockmarket.methods.in.madness@gmail.com

Disclaimer: The above analysis is just that - my analysis. If you choose to trade on the basis of this analysis, you will be solely responsible for the outcome of the trade - profit or loss. Please keep in mind that trading and in particular day trading is not for the novice and there is significant risk of loss of capital in trading.