Below 2800

A lot of thanks to readers. My post : How I trade for a living has attracted a lot of comments. Your views give me the inspiration to write better.

The Nifty fell below 2800. This was a signal of a downtrend. The first indication came when the Nifty fell from 3150 resistance. A confirmed down move has started once the Index moves below the support line which was at 2800. The trading range (2800 to 3150) was 350 points wide. A pattern target is around 2450. (2800 minus 350) . Since this is a bear market, the down targets can easily overshoot, meaning the Nifty can go below 2450.

How do you trade now ? The safest trades are selling after rallies. There are day trades possible, which is to buy after a day of sharp decline. The buying should be with stops as well as anticipation of modest profits. Please remember that the Nifty is already 450 points down from its intermediate top made just last week. The market can easily have a relief rally, or a minor uptrend.

Here is a simple trading strategy. Determine the market trend. Apply a 2 period RSI on the daily chart of near month Nifty futures. In a downtrend, sell after the RSI goes above 50, then turns down. Buy / Cover short position after the RSI goes below 5 then turns up. In an uptrend, sell/cover long after the RSI goes above 95, then turns down. Buy / Cover short position after the RSI goes below 50 then turns up. Always use stops. Always sell below the low of the previous day, buy above the high of the previous day. This simple rule will often keep you with a trend, preventing you from exiting on a failed buy/sell signal.