Nifty for 10 Aug 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.

It was suggested just yesterday that we have a short term target of 4238. Little did I realise that the market would tank straight through and achieve it within seconds of the opening bell.

A quick glance at the chart shows it like a battle field full of bombed crater holes. Everyday has been a gap open up or down. This type of volatility is dangerous to the health of small traders or investors. In such a situation, it is always advisable to stay away, rather than risk capital.

For the next few trading sessions the Nifty must avoid the grey band between 4210 and 4240. This may allow some recovery. This recovery could lull the senses of bull traders and draw them back into the market. That could turn out to be a mistake. Because I believe that this correction is still not over. The scenario which I foresee is a recovery back into the blue or yellow band. And then, a final shake out.

How deep this shakeout would be is anybody’s guess.

I have been wrong several times earlier, and I could be wrong once again. This brings us back to the importance of planning the trade.

Short term traders may possibly buy on dips with a strict stop.

As far as the longer term perspective is concerned … technically the position remains as a suggestion to buy on dips. Investors could now be cautious about the 4235 level. Profit taking also may be done quickly, unless we are really long term investors.

Plan your trades and trade happy.