NIFTY today had a strong positive closing giving cheers to its global counterparts. With the broad market on all time frames in the trending mode, moves either way are likely to be profitable. Today we had a failed trade in the add on short entry, but our trend short made a gain of around 45 points.
While the daily charts are in the bearish side, hourly charts have turned bullish. What are the possibilities now? Daily charts seems to be in a turnaround stage. Markets are connected to a hour long rubber band which expands & contracts. In that sense now the daily chart needs a pull back to value zone. The value zone for today on Daily NIFTY is 5000-5080, so the bullish move can settle anywhere between here and resume its bearishness from there. By the time it reaches here, it will start showing weakness. Only then will it be followed by a good bear move.
Sometimes even without a followup or re-test of lows, the market turns up. There are various examples of this pattern and a very recent one would be the February move after budget. When Daily chart makes a pull back to value zone it is bullish consensus for the hourly.
Hourly charts have a good bullish divergence on the MACD lines and Histogram and most important is that the chart is in trend, a reversal in trends tend to give a fairly good move, which we had seen on 10th May 2010. When this is what the charts say on today's close, a complete opposite of this scenario or even a pattern totally un-relevant also is a possibility.
So, let us trade the signals which have the highest probability and the keep our self the cushion of stop loss, which is like a brake in an automobile. Like how we would not drive any vehicle without a brake, let us not trade without stop loss. It is so very important.
Hold to long positions with stipulated stops and we will keep updating on a regular basis.
Thank you fellow traders for giving immense support to our writings here with regular readings, criticisms, pointing out mistakes and asking questions. It is being an amazing experience writing here, which in turn also makes us learn more. More about human psychology and more about trading.