Coming Soon: Resistance ?

The Nifty continued its up move today closing at 4502, with an impressive gain of 107 points.
What Next ?
My software gives a target range of 4480 to 4610 for this up move. We have already touched 4480, thus we may be looking at 4610 approximately. Now, these numbers are just targets. They are not a definitive future event. We can build two scenarios based on these target numbers.
First, the Nifty does touch 4600+ and faces resistance. This is a likely scenario since there is a lot of previous resistance around the 4600 number. Second, the Nifty touches 4600 then continues to move up. This is an overshoot – prices going beyond the target. Such an event tells us that the trend is stronger than what is ‘normal’.
Of Course, a third, less likely scenario is for the Nifty to suddenly fall, not touching 4600 at all. If this happens, we will have to wait for the index to go below 4400 to confirm a short term down move.
How do you trade such moves ? Analysis is just one part of the trading business. Much more important is tactics (when to enter, how to manage the stops, exit rules), position sizing (increase volumes when trading with the trend), stock selection (Buying Hindalco in a bull market still loses money). Reading, learning and education is also an important part of trading.
The rewards from trading are (a) An independent business (b) pursuit of an intellectually satisfying work, and, (c) money to do something that you always wanted to do. (How many people have work that they enjoy ?).

Change is the Essence of Life

Question for me:
For the past week or so, you have been suggesting buying. Come on Sudarshan, you have been so bearish, what changed in the past few days ?
Answer:
Well, the charts changed.
To critics of change, I quote Keynes:
“When the facts change, I change my mind – What do you do, Sir ?”
The intermediate trend is UP, so traders should buy. The primary trend remains down.
When will the primary trend change ?
The classic method is when new highs are made in the Nifty, that is when the Nifty goes above 6350. That event should be a long way ahead. So, why worry ? Enjoy the up trend while it lasts.
The daily chart for the Nifty suggests a bullish pattern in the making – an inverted head and shoulder. If confirmed, we may be looking at a target of 5100 plus. Wow !
[I hope to add one or two more posts today evening, so keep visitng.]