Disclaimer: These are my personal thoughts and not trading advise. To view the full chart, right click on the thumbnail and open in new window.
Yesterday, it was stated in this column that the Nifty was expected to move downward in a ranged move till mid session. How wrong the Nifty proved me. It did open weak, but spent very little time regaining strength and powering itself up 50 points in an hour.
The bearish blood seems to have been eradicated within the first five minutes. On the face of it, the Index was extremely positive. It did all the right things to retain the bullish flavour.
Midway, it encountered the red trendline and collapsed a good 40 points. On the way down, it tested the earlier swing high, and also rested on the fibonacci level. After that, there seemed no looking back, and it went and retested the red line. The manner in which this particular trendline is offering resistance, the Nifty needs to do something very spectacular to break out from that region.
So far, the Nifty seems still on course to its projected level of 3250+. But the effort required now will be huge.
Depending on how the market approaches the overhead resistance levels, we could draw up our further strategy.
As of now the ideal thing would be to keep using swing lows as trailing stops to book profit.
While trading, it is also advisable to look at the other side. On the flip side, there is a cycle in time occurring today. Normally these cycles in time are pretty accurate to within one or two days. In that case, today or tomorrow could turn out to be exhaustion days. Therefore, as a short term trader, I would be extra alert tomorrow, especially with my trailing stops. Also, I could be tempted to add to my longs on a substantial breakout, but only with hedged positions.
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