Nifty for 11 May 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 of Friday, 11 May, we can term the short term trend to be down. This is strictly from a technical point of view. However, if we separate the black and white from the grey, the freak tick on the Nifty at the opening registered the low, without actually having really traded through. This suggests computerised basket selling.

I already hear whispers of market manipulation and conspiracy. I would suggest readers to forget those conspiracy theories, as the market is not conspiring against each of you as individuals. It is just a matter of some fund manager or managers assuming that the market is going to trade lower.

There is a popular saying in the West, “sell in May and go away”. As we see the market getting more correlated with world markets, we also notice that we have had major corrections in May 2004, March 2005, May 2006 and now possibly May 2007. Now that the earnings season is over, it is pragmatic to expect some profit bookings.

From a trading point of view, where are we in the trend? The long term is up, the intermediate is up, and the short term is down.

In any case, the low of Monday 30 April (4028), which was suggested as a stop, would have been triggered. We see the Nifty taking support on another zone with the low at 3981. For the adventurous among us, who are tempted to buy, the low of 3981 may be used as a stop.

However, for the conservative among us, who wish to follow our bullish set up example (see link on the right), it would be advisable to wait for a break above 4095, and then buy on a dip, with an appropriate stop.

The candles are still small and the shadows are large. This tells us that even though the trading range for the day is large enough, the market continues to be uncertain about the direction.

And as I am fond of repeating … now is the actual time to Plan the trade and trade happy.