Roaring Markets

A 5 percent gain in the Nifty has set the markets on fire today. These gains have come together with up moves in world markets, all over.
Is this a bear market rally or the beginning of a bull market ? The answer is not relevant to traders who should follow the trend. The trend remains up, so go with it. For Investors, buying should always be done on dips (when there is a perception of value). Buying now, after a 400 point (15%) rally may not be a good idea. Investors should now wait patiently for a decline. It will come.

My response to queries:
Chandu said: “we rally today we will come in to overbought zone, can we sell there ”
My notes: No. Markets can stay ‘overbought’ or ‘oversold’ for many days. Selling is done only after clear signs of weakness. i have noted such signs in the blog section “Practical Technical Analysis”.

Neel said “If it is at all bear market ,what wil be the possibility to nifty touch below 2500 and at what point it wil get support”
My notes: If the Nifty does break out of the 2550 – 3150 trading range, then the possibility of coming back to touch 2500 will diminish.

Rakesh asked: “So sir, What should be the strategy, Can I go long on Bharti?”
My Notes: You buy when the trend is UP. You can trade in the Nifty, or go for individual stocks. I cannot comment on any one stock, but traders should go for momentum stocks which are performing well currently.

Sweety has a problem, that many of us have faced. This is what the comments say:
am writing this during market hours (Monday 1.27pm) – as i have a serious dilemma.
(1) I did not have any open position and i had to start afresh during this morning.
(2) Nifty opened up at higher level.
(3) I use 5 minute chart – RSI & BB . So, as per my trade rule I will initiate trade only when the price crosses RSI 50 and also BB mid-price; whether it is short or long depends upon from where it is crossing.
(4) To day morning there was a gap up – and till now I am unable to initiate any trade on nifty, because my trade set-up does not allow me to do so.
(5) Due to this i am missing some good gains.
My query is: U must have also met with such situation many times in the past… and what did you do?

My Notes:
You may not realize it, but you are among the few traders who will be very successful in this market. You have a trading strategy. That’s good. Then, you have the discipline to adhere to it. Excellent. So what if you could not participate in today’s move. There are and will be hundreds of other moves where your strategy will enable you to participate. Your discipline will also protect you from many losses.
There are two ways to approach this issue: First, You can modify your rules to take care of gap open. use the 15 minute rule or extend it to 30 minutes. Second, you can keep your system as it is. It is your choice. In either case, it is your discipline that will win, not the actual tactics.

Strange but True

While the American markets fell on Friday. Monday morning is a different story. Asia is up, while the SGX Nifty suggests a strong rally is coming in the Nifty. A decisive close above 2800 will suggest a breakout from a trading range, leading to 3000 or even 3100. Short term traders should not fight the trend.
Is the bear market over ? This knowledge comes much after the event. I assume this is a rally in a bear market.