Nifty had a Gap up opening of nearly 80 points in today’s trading session and prices touched intraday high of 8151 levels. So is it time to initiate longs or this is just a part of upside correction?
Forming a trading strategy is most critical for any traders especially when volatility is on rise. VIX Index rose from near 12 levels to near 17 in just few days. Nifty made a low near 7960 and now trading near 8100. It is prudent to be aware of the pattern that is under formation from trading perspective. We advised our clients to trade in direction of downtrend as soon as 8500 followed by 8460 – 8430 levels were broken and asked to follow trailing stop method. This helped to capture the trend right from 8460 to 8134 levelswhich is nearly 326 points in just few days period on Nifty let alone stocks.
It is now time to cherish the earnings and wait for another trade setup. When not to trade is the key to trading success and trust me it is not easy to stay out of the market amidst lot of optimism and euphoria.
Read below a gist of research from daily report “The Financial Waves short term update” published today morning.
Bottom line: Nifty continued the downtrend and touched intraday low of 7960 level. Some buying was seen at lower levels but there is no positive confirmation.
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Nifty 60 mins chart:
(a part of research published today morning to paid subscribers)
In previous update we mentioned that “Existing short positions should now trail stop towards 8210 levels. This will ensure locking in the profits from 8500 – 8460 zone to 8210 in just few day’s time. …Volatility can be high and sharp reactions on upside cannot be completely ruled out. One should therefore use 8210 as very important stop level and follow the trend on downside!”
Nifty opened in red and touched an intraday low at 7960 level during first hour of trading itself. The movement was very fast and sharp. After touching the low there was sharp recovery and index entered into green territory momentarily. This was more than 200 points movement on intraday by 12 pm itself. Such type of movements are common during downtrend and it is exactly the reason why we mentioned in earlier update that volatility can be high and there can be sharp reactions on upside. After 8 days we are seeing some buying emerging at lower levels but as long as the downward sloping red channel is intact one should hold on to the short positions as there is no positive confirmation for now.
High volatility was also seen in Bank Nifty. It touched an intraday low at 17502 and high at 18051 during the day. This is why it becomes prudent to have the strategy in place before market opens to avoid any impulsive trades.
On smaller degree, we are refraining for doing the internal counts of the current fall. The reason being there is no clear subdivision and there are multiple ways in which the internals can be counted. It is better to follow the channel during such movement and the internal structure should become clear over next few days. Existing short positions can now trail stop towards 8135 levels. Any move above this level will break the red channel and can result into sideways or upside correction.