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Pullbacks

Nifty: Do I Rely Upon Indicators?For me, an indicator is a tool that provides me a message how the market 'may' behave in future. Which not at all means that the market 'will' behave as has been indicated. Almost all successful traders will agree with me if I say that there are no 'Red' and 'Green' signals in the market. For example in the current market scenario, the index has been drifting down in an oversold environment. Oversold here means that most of the popular indicators like RSI, Stochastic etc. have been signalling that the market is deeply oversold and there 'should be' a bounce-back/pullback. Also trust me when I say that the market may wriggle its way down to nearing supports when the indicators are not just signalling 'oversold' conditions but also showing 'divergence'. You can see the Price-RSI behavior mismatch as the market has been making new lows but the RSI is making higher lows. The markets can do this multiple times for weeks and even for months in some cases. So the indicators are telling me only that bears are getting weaker. But there is no sign of strength on the upside as of now. So what to expect in the coming days? Well !! the picture would be more clear after Monday opening. As of now I can say that it should take some support from 9950-10050 zone as its an important structure support. I can't say as of now if it would be the end of bear phase or not. But in case of pullback it should try to atleast retest the trendline which was broken decisively last week. As per my previous analysis on the index, my instincts have been indicating further weakness after brief pullbacks in the coming days. Below 9950 we have no important support before 9700, and that's 250 points which is a substantial cut and should be kept under notice. Previous post: Hope this analysis would help some traders in making better decisions. Regards
NSE:NIFTYEducation
by Bravetotrade
2
The Play after a Spike and RangeNormally we see that after a spike or impulsive move the price gyrates in a trading range. This is the zone where most of traders lose money coz there is no clear direction to play. We can observe this situation in all time frames. In order to play ranges we have to be patient and wait for price to break down the range. See 'A' in the left figure, this is the point where large funds or those who have some sort of information about news or something are buying..let's just ignore who is buying and remember that price bumps out of range. Why dun we buy at A? Coz we dun know as of now that the price is going to reverse back into the range or up. So when do we buy? We buy as price pops back into the range sharply. Here comes our sweet spot 'B' to buy..for confirmation i would look for a bullish candle shown above (u can use your favorite bull candle). Either just buy above the high of bull candle or into the small pullback that follows the bull candle. Stops here should be below the low of bump 'A'. In case we miss the above play and the price jumps above the range we can look out for small pullbacks that follow. Normally a two legged pullback piercing into the range or touching the ceiling of the range is preferred, in this case I would buy at D. However if price makes a single leg pullback and I find myself in a situation where I can only buy at high (coz trend is very bullish) then I would wait for price to make new high at 'C'. The latter is the least preferred trade as it is much riskier. In these two cases the SL will be below the low of small pullback. For entries I would also look for a bullish candle formation. Yes, it is good to wait till close of the candle and buy above the high of this candle. In all the three cases we have been trying to minimize our risk. We want our SL to be as closer to our buy price as possible but we also dun wanna stuck in a failure move, thats why we use bullish candle confirmation. Sometimes our bearish bias stops us from buying at point A,B,C or D. Why? Bcoz of some falling trendline or some previous important peak or resistance line at those levels in some higher time frames. In these cases 1) I would simply miss the trade or 2) I would use strict stops and trail. The post is for educational purpose and can be applied to any market. I always suggest to minimize risk and never take risk more than 1-2% of your capital. Play safe Stay healthy. Like, comment, share and follow. Thanks
NSE:BANKNIFTYEducation
by Bravetotrade
18