The Yuan Rally.

An intention to float the Yuan (partially, within controlled limits) set off a large rally in equities on Monday, today. The rally was most pronounced in Asia, which is geographically close to China. Somehow, Europe and the USA do not seem to be impressed with this announcement.

They should not be. China’s action was anticipated, to the extent that the whole world was demanding some action on its undervalued currency. Markets went up, mainly on excitement, and, the chances are they will cool down quickly.
What next?

The Nifty is within striking distance of crossing its current bull market high of 5400. We should remember a saying “There is many a slip between the cup and the lip”. Two weeks ago, the Nifty was at 4970, within 20 points of breaking below a significant support level at 4950. I assumed the breakdown was sure. But, nothing is certain in the markets. Regular readers will remember my dismay on becoming ‘sure’. Such is the way of the market. Now, we have the Nifty, almost ready to cross 5400. If the Nifty closes above 5400, this will be a sign of continued strength. Let it do so.

The trend is up. Most momentum and breadth indicators suggest the markets are in extreme zones, likely to see some correction / consolidation. When your chart setups give signals, the trade is to buy on dips.
Trading a Gap open
A big up gap in the morning was a problem to traders who wished to take on a long position. How do you enter? The answer lies in the 15 minute rule, referred to many times here. There is a lot of information on this rule inside this blog. Just do a google search using the search box in the right column.