Nifty Trading - Range bound ... For how long?

Whichever way you look at it, whether it is the daily chart or the weekly chart, Nifty has been trading in a 15% range (4000-4600) since the big gap up post election.

Thrice it has tried to breakdown below 4200/4100/4000 and thrice it bounced back - the last time it bounced back it made a fool of people - including me - who had discovered the head and shoulder and thought that the market was about to go down and close the gap.

On the upside it tried to take out 4700 and failed; again in the last week and this week it is trying to breakthrough 4600, and right now it is faltering a bit ( who knows what will happens today and tomorrow and next week ..... ).

Clearly, one possibility is that it will breakout above 4700.

The other possibility is that it will be range bound between 4000-4600 for another 10 weeks!!!
now, why did I pick up that number 10 weeks?

If you look at the weekly chart, you can see that Nifty - after the break down in October 2008 - entered in a range of 2500 and 3100 on a closing basis for 23 weeks!!!! Of course in percentage terms that was a bigger range of about 20% but that was also because of the low base effect. In other words, it will not be unusual for Nifty to be range bound for another 10 weeks (since it has already spent 10 weeks in this range).



Now, people like excitement - for many of them range bound movement is boring and worse still, it catches them off guard apart from tasting their patience. Just when they think the market is going to break out or break down, the market reverses and reenters the range!!!

So lets recap the two possibilities.

1. Break out above 4700. You know what to do. Buy on dips with SL at 4500 perhaps , if you are trading on a weekly basis.

2. Range bound movements - here you sell at the upper end 4600-3700 and buy at the lower end 4000/4100 with SL above and below. It may be boring but then you have to decide whether you want to be entertained by the market or you want to earn money.


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