Nifty for 31 Jul 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.

The next two days could be the moment of truth. These 100 points on the Nifty could decide the ultimate fate of the Nifty for the short term. So far we have had a classic buying setup, where there was a sharp news related dip, two higher bottoms, and subsequently, a higher top.

Normally, when the market brushes aside substantial news, it suggests strength. It also suggests that the market does not want prices to go lower, as it would mean putting in a lot of effort to rise again.

I am stating this due to a very simple fact. The market buys today, in the hope of selling later at higher prices. To buy, it needs a lot of money, and hence, a lot of effort. Selling is easy. We do not need any money to sell. That is the reason why we see that the market moves up slowly, but moves down very quickly.

So far, there is no evidence to suggest that the market has sold whatever it has bought earlier. That is the reason which leads me to believe that last week was not a major top. But it does not matter what I believe or don’t. What matters is that we keep our trading plan in place, and trade according to the plan.

We now have had a scenario of higher tops and subsequent dips, which have made higher bottoms. This suggests that we may see even higher price levels.

As far as the longer term perspective is concerned, I can only repeat my suggestion of many days … technically the position remains as a suggestion to buy on dips. Of course, the last bottom of 4403 is significant, so stops may be placed at 4400.

Plan your trades and trade happy.