Has Nifty made up its mind to go down for now?

In my blog posting on June 28 - not too long ago - I revisited the case of positional shorts in Nifty. Here is what I wrote:

""
The prudent thing would be to watch if the resistance at 4452 or somewhere near - meaning in 4452 to 4700 region - and to short only if that resistance holds. Conservative trader may even wait for 4200/4100 to be broken before shorting.

Summary: Right now the uptrend seems to have resumed. Therefore, no point in shorting. However, the case for shorting may re-emerge if the uptrend reverses at 4452-4700 - we need to wait for price action to confirm the shorting scenario at that point.

""

Yesterday's price action seems to have reopened the case for shorting. I had discussed the target for the down move in this post where the target was mentioned as between 3874 and 3591. Some more time has passed since then, the revised target is between 3970 and 3690.

Of course the market can do whatever it wants, but the case for renewed uptrend is arrested for now and the down move is likely to continue now.

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.

Support Levels - Universal or Personal?

For sometime now, I have believed 4200 Nifty was an important support level and its breakdown will take the Nifty down much further.

There were others who believed that 4160, 4140, 4100 were the levels to watch for support.

In yesterday's trading, the market frowned on me and smiled on the second group - meaning 4200 broke but the market reversed from around 4140.

This brings us to the important question: which support level should one believe in?

Here is the answer that surprises a lot of new traders. There is no single unique mathematical number that can be calculated by everyone and described as support.

One of my revered mentors, Sudarshan Sukhani, - from whose writings I have learned a lot - has put it beautifully in his blog posting when he says "all said and done, support and resistance levels are personal numbers, used to determine risk. We can have different levels and trade successfully". You can read his posting here.

I would like to add that any support level breakdown is again a probabilistic event - the very fact that it is being called a breakdown means that it is a high probability event , BUT of course once in a while it will be a false breakdown or a breakdown that will see a whipsaw before going down again.

What is therefore important is to develop your own approach to determine support levels and do that consistently - without regard to others levels - this consistency is single most important thing in ensuring that over many trades you will come out with more money ( not necessarily with more number of winning trades) from your winners over your losers.

For myself, I had a bad bad day on Tuesday. On Monday I ended holding a long thinking that 4200 will hold. Of course it did not hold and Tuesday morning first thing I did was to exit that trade and went short at 4180 with SL at 4215. Of course I suffered a loss AGAIN, but then it finally dawned on me that 4160 AND 421O were acting as support and resistance for that part of the day. I successfully used these facts to finally end the day with negative -37 as opposed to -79 the situation I was in after the second trade.

Again for myself, I accept that Nifty has found support at 4140 - accepting that means I will not go short around 4200 any more until that4140 level or even 4100 level is broken. I may choose to go long now or not depending on my reading of the market - remember that for day trading, you have to read the market during the day!!

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

Like this post? You can receive it free by subscribing. Just click on this link

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.

Breakdown in Dow Jones - 22 June 2009

Yesterday was a big down day in Nifty - Even though Nifty held above 4200, it did close decisively below 4250. And it seems now it is only a matter of time before 4200 breaks and if it does we will enter a deep correction - this was discussed in previous posts in terms of opportunities for positional trading in nifty and you can read about it here.

Now increasing the probability of 4200 being broken is the price action in the US market and I want to analyse that in this post.

On June 22, Dow Jones Industrial Average (DJIA) had a serious break down. The magnitude of the breakdown can be seen in the 5 days chart.



First it broke through 8500-8475 support and then it went into a tailspin breaking 8400 with elan and then resting a while at 8360 before ending the day at 8339 - a solid 2.35% lower ( equivalent to almost a 100 nifty point drop at today's Nifty).




Fine. But where is it - the DJIA - likely to go in the next couple of weeks?


Lets now look at the 3 months daily chart of DJIA. The picture is not pretty. Looks like 8200 is waiting to be broken, if ( and perhaps when) that goes, next two targets at 8000-7800 and 7400-7200. Not a pretty picture at all. It is therefore safe to sell now and safer to sale after 8200 is broken.

Now, what if there is support at 8200? It is important not to be fooled by that and buy around that. It may just be a resting place. Looking at the chart it seems that only if DJIA closes above 8900-9000, do we have a chance to arrest this downturn. The probability of that happening - I am sticking my neck out here - is quite a bit less than 50-50.

All this increases the chance that Nifty will go down now and stay there for sometime ( a few weeks, if not months and not a few days) - in other words this is likely to be a deep correction in Nifty.

For myself, I had a bad day yesterday; made some mistakes for which I paid yesterday and may pay dearly today also. More of that later. Stay Tuned.

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

Like this post? You can receive it free by subscribing. Just click on this link

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.