An unusual continuation pattern in the Nifty.

There is a time to be old and a time to be bold

There is a time to be old and a time to be bold, but not a time to be bold and old | PeterLBrandt: “The time to be bold is when the markets are clear. The markets were clear to me. It was time to be bold — in trading and in the narrative of this blog.

I am no longer bold. The old adage prevails — when in doubt, get out. I feel no obligation to always have an opinion or a position. I have made this fact clear. Classical charting principles do not always measure a market.”

These lines from Peter Brandt are a gem of wisdom for each trader. When our charts are clearly giving a trading message, we should be bold. If the charts are not clear, then take it easy. Equally interesting is his statement about classical charting principles. Sometimes, market environment may change (for the trader) while charts may not reflect that change. So, be conservative at such times.

Nifty at 4750

In the previous post, I had suggested that the Nifty is finding support at 4750. That view holds. The Index fell to 4750 four times in the past few days. There is now a thin line – 4750 remains support because it has been touched many times. IF it is broken, long positions should not be taken / should be closed.

Silver Pushes against Resistance

short term charts for Silver suggest interesting possibilities for a trade. Currently, prices on the 180 minute chart are pushing against a resistance line – around 53,000. If prices do cross this resistance, buying is possible on a dip with a stop around 51600.

An unusual continuation pattern in the Nifty.

A continuation head and shoulder pattern is a rare pattern. Normally, head and shoulder patterns are reversals. Rarely, we have a head and shoulder which is formed in the middle of a trend. The Nifty has made a bearish head and shoulder pattern inside an ongoing downtrend. Here is the chart:

The neckline was violated for the past two days. We can assume a rally on Friday which is likely to push prices back inside the neckline. If prices go above the right shoulder, this pattern is cancelled. But, the right shoulder is far away, so a stop should be above 4880 – the is the high of the day which was completely above the neckline

Sudden Rally

While Indians celebrate Vijay Dashmi / Dushehra, world markets are going dramatically up. Suddenly, in two days, Risk is back again. So far, it appears that the Nifty could open almost a 100 points higher tomorrow. That would certainly be a gain for traders who went long with a stop under 4750 – which is a significant support for the Nifty (see my previous posts).

But, what about trading tactics? The Nifty closed at the lows of the day (almost) on Wednesday. When an instrument is closing near its lows, remains in a protracted down trend, it is reasonable to expect traders to be and remain short in it.  Therefore, if you are following any trading method, it is likely that you were short over the holiday.

Well, the answer is: follow your rules. If you are short, and your rules require you to exit at a loss on Friday morning, so be it. There will be many days when the same discipline will fetch profits.