The market is at an interesting juncture. The upward momentum has been arrested at Nifty 4700. The market has fallen to its intra day low of 4222 yesterday before closing at 4251.
Is this a correction? Is the correction over? Or is it beginning of a downturn?
No one knows.
And the fun of trading is the joy of decision making in the face of uncertainties, based on some guiding principles.
One of the guiding principles is when things are not clear - stand aside until the market reveals its hands. Since many traders are addicted to trading, they find this difficult to do - standing aside that is.
Ok, if you can't stand aside, what do you do? Since the market has fallen almost 6 days ( with a small +ve Doji in the middle ), an operating assumption can be made that it will take a rest.
Therefore, for DAY TRADERS, it may be OK to trade with a positive bias with SL at yesterday's low which is 4222.
FOR POSITION TRADERS, they need to wait. If the market goes up today then they must wait for a few days to check if the up ward moves halts before reaching 4700. If it does, then that will be the cue that the down ward momentum is resuming. Therefore position traders will need patience or risk taking a trade with a large stop loss.
For Option trader, they can probably do the same as the position trader - that is wait for the cue and then buy a July Put.
Please note that these are indicative strategies - I hope they help you in formulating your own plan of action. I prefer that at this juncture than giving exact entry and exit points for two reasons - 1. the situaion is at a cusp and can go either way, and 2. Trading is an art in which the psychological make up or temperament plays a big role which is why each needs to formulate his/her own detailed strategy.
If you have any comments please write to me at stockmarket.methods.in.madness@gmail.com
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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.
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