Our good friend, the trading range.

The Nifty is back into a range – with a breakout at 5370 and a breakdown below 5250. We should expect a move out of this narrow band, sooner rather than later.

Meanwhile, the S&P500, the U.S. Index broke down trading below a significant support at 1040. This is the fourth time that the S&P has come down to test the 1040 support. Just as a breakout above 5400 will be a bullish signal, so also a breakdown below 1040 for the S&P will be a Sell signal.

Meanwhile, the story has started that ‘This time it is different’ for India, since we are going up while the world is going down. My own sense is that it is never different. We will follow the world markets, sooner or later. I am not saying we will go down. But, our markets will align with the other markets. If world markets begin to go up, maybe we will be range bound till they catch up with us. or, maybe we will see a sharp sudden decline to catch up with them. I cannot say. But, we are not decoupled.

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What should you do now

Most traders may not have short positions in the market. After all the Nifty has been consistently strong. Yesterday, it fell below a pivot – 5273. Just barely, since the close was very near this level.

Therefore, the question remains: is this a correction or a new down move?

If you are a short term trader, then understand that the up move has come to an end. Your view should be either to the downside or sideways, which means you are open to long as well as short positions.

If you are a position trader, then also the uptrend is likely to come to an end. I say likely, because today will give that confirmation. An uptrending line will be broken if the Nifty were to close below 5250, an event that seems likely before market opens – but who knows? Assuming this event takes place, you want to close your trading positions, then wait or take short positions on rallies – your choice.

If you are an active investor, this is just a correction. The first signs of a decline will come only if the Nifty were to close below 5140 – 5160 which is a support zone. A final confirmation comes if the Nifty closes below 4786 which is the intermediate low.

Have Fun!
P.S. This is my third post since yesterday evening. The first two can be read from Blog Archives (right hand side).