Nifty Trading - The Day After ....the breakout ....

We live and learn. The market is supreme. When the market shows her hand, you gracefully accept that hand and prepare to follow her.

Ok, looks like the market has broken through 5150 with a lot of force. True that it is now in a congestion zone and therefore trading still needs caution. But what about the breakout? How to trade that?

First thing first. This is not a market to short unless you are a genius - very few of are by the definition of genius. So, no shorting for me not even intraday.

You can take a call to go long- As SS has pointed out many times including the last posting here, the moment of break out is also the moment of maximum risk.

One way to reduce the risk ( and of course the reward too!) is to go long on a pull back which will come in 80-90% of the cases, if not today, sometime tomorrow or later this week or next week.

Question is how do you identify a dip? Here are a couple of suggestions:

1. The indicator that you have been using to detect breakout must have a support line - it could be a trend line or a 200 minute moving average or a 100 minute EMA whichever. Now, usually, the pull back to this level even breaking this support is usually a good indication that this the correction you have been waiting for. The logic is simple and works for a forceful breakout like this. The indicator that is in use and signals trend reversal is likely to have a false indication this time around. The bet you are taking is that the trend is intact.

2. Or, you can simply look at the slow stochastic on the 5day yahoo chart. and wait for the time when the signal screams oversold and then buy there. Here is a chart on the left that illustrates this point.

Now what about SL? Any sensible SL will have to be around 5140-5120. And it might be more profitable to let the trend run and not necessarily close the position before the end of the day.

That is all for now ..... Cheers

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

Nifty Trading - what is the trend now? may be up, ..may be not !

Ok, despite the huge move on the budget day, Nifty gave up about half the gain and closed right at the 20 High EMA.

My own sensing is that it is too premature to think that the correction is over and that the up move has resume. May be it has, but it has to be confirmed.

I guess the up move will be confirmed, if Nifty were to close above the high of the last Friday. Alternatively, if you go short, your stop loss should be above that high say around 5030.

So the options are: if your hunch is to go long, either wait for it to close beyond 5030 or wait for a correction to enter on the long side around 4940. The trailing SL for longs should begin with 4780 and can be moved up steadily.

If you hunch is to go short, then you SL should be 5030 to begin with and then moved down steadily. The targets could be 4940 and then 4890 and then 4780.

Only the market knows what she will do. You can trade both ways, but a.) you need to know what your plan is and b.) exit with small loss if you are proved wrong by the market.

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

State of Nifty - 19 February 2010

I guess it is a matter of debate whether the intermediate trend is down or not and also whether it is time to buy for long term now.

Focusing on Nifty, it seems that as it has fallen below the 20d EMA low, 20d EMA high will provide resistance. Therefore , safe trade is to sell on bounce up as long as the 20 d EMA high is is not breached on a daily closing basis. The picture will change if and when it closes above this resistance which is located around 4930-4950 now.

In other words, on a daily (or 5 days) 5 min chart, look for the Slow Stochasitc to go up to the overbought zone and go short as it comes out of the overbought state. The natural stop loss will be the last swing high. If the trade goes wrong, wait patiently until the market shows her hand. Never fight with the market.

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

Trading Opportunity* - Intermediate Term - Amtek Auto

**** Please read the disclosure below before reading the rest and BEFORE any action****

Amtek Auto has been , is, and perhaps will be an important company in the space of Automotive Components manufacturing in India. Like most of these companies in this space, it too took a severe beating in 2008, falling from a high of 540 in 3Q 2007 to about 45 in Nov. 2008.

Since then it has been turning around - The Hindu Business Line has recommended it twice - both from the fundamental and the technical point of view. You can read these here and here. The technical call made in their Feb 27, 2009 suggested buying it at 73 with SL at 59 and target of 100. Snce then the stock has raced to 237/- in early Oct and began to correct and of late has been moving sideways.

Now, this is what I call a potential pull back in an uptrend. Also, note that we are not talking about a fly by company with shady records - we are talking about an established company with good record and one that will not disappear tomorrow. This in my mind is an important criteria for trading in intermediate time frames so that we do not lose money unnecessarily on unknown companies.

Ok, so let us look at the price action of the last six months.


Even an untrained eye might notice that there is a significant support at 160-170 area. The Slow stochastic is entering oversold area and the width of the BB band is steadily shrinking. The time is ripe for a sharp move - which way we can not say with absolute certainty but we can take a low risk bet that if the level 170 continues to hold, the break could be on the upside with target of210 to 230

Therefore, there a trading opportunity here to buy Amtek Auto between 180 and 184 with SL at 170 and targets of 210 and 230.. This means that maximum loss is about 8% and potential gains are about 14% and 24%.

Now that is not a bad risk reward ratio.

The time frame for this opportunity to be realized is about 3-6 months.

*This opportunity will be tracked for its performance in this blog.


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