Window of Opportunity in Positional Trading in Nifty - I

I posted a short and basic FAQ on Position Trading yesterday. It can be seen here.

Today - before the market opens - let us focus on and analyze Nifty. We will analyze Nifty Cash price movements - of course any trading has to be done in the Nifty Futures ( near term recommended).


Here is the chart of daily movements for the last six months. What we have plotted are 20 day Weighted Moving Average (WMA) of highest prices and 20 days WMA of lowest prices in this time frame. Since lowest price is always less than the highest price on any given day, these two curves do not intersect - instead they form "waves" which are very useful in positional trading.

What do we notice?
First of all, note that yesterday Nifty has closed below the "lowest value" WMA. Notice also, how infrequently the price closes above or below these channels. In fact - here is the second observation - it crossed the channel last when it closed above the "highest value " WMA on March 16th and we all know and can see here in the chart too what happened after that.

So it is possible - and by possible I mean that there is a more than 50-50 probability - that the nifty will drift down from here.

But since this is a game of probability, we must keep Stop Loss. What would be a good place for that? 4700 will be a good place because it is just above the highest level reached in the last week and moreover any break out has to cross that. Also, note that the Stop Loss is a good 350 points away - this is a characteristic of positional trading. Do not take the trade if you are uncomfortable with such a large stop loss and wait for other opportunities, OR, cut your position to suit the large SL amount. ( Please refer to my earlier post on placing Stop Loss - they can be found here and here.)

If we short Nifty here, what is the target?
In the next post we will analyze the same from a bigger picture and that will help us to make an initial guess at the target of this possible down move.


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.