Nifty for 26 Feb 07

These are my personal musings. These are not in any way meant to be trading advise. To view the full chart, right click and open in a new window.

As was warned in my analysis of Friday, the market was extremely volatile, and warned us in the first hour that it is unable to break out upwards. As a result, we had another tanking session, till the 3850 levels. After that, an amazing 100 point recovery must have left most traders gasping for breath.

In volatile times, it is extremely difficult for a trader to time the market, except to anticipate a reversal. As the market keeps progressing, various forces come into play, and we can only try and anticipate a reversal level. This time it was around the 3850 level, which can be seen on the chart as a dotted line. It is not a great thing to mark out a level. As some sceptics are fond of saying, place enough lines on a chart, and somewhere or the other, we will find a support or resistance.

What is more important is that we have prior knowledge of a particular level. How we monitor the price at these important levels, and trade it, is the name of the game.

At present the Nifty has tested an earlier congestion zone, around the grey shaded portion on the chart. This zone is very important, as we have two earlier gaps. Also the previous swing low is also occurring in that region. The next anticipated move of the Nifty can be that it moves back above the yellow line, just enough to lull bulls into a false sense of security, and then snap the trap. The next level of resistance could be around 4050.

From there, we may see another fall, which could place the final stamp of doom for over-leveraged bulls. It may be too early to say, but the projected level of this fall could last till 3800, and then we would evaluate the next course of action. Short term players could utilise any rise to exit losing positions.

Till then, trade happy.