Simple Trading Based on Trend and Support/Resistance Levels

[sachin_jain3]

We will be revising the stop loss to 2850 if this condition is met today:

Nifty closes below 2830 (keeping 20 point buffer as confirmation of the resistance is broken)

Sachin

 

[sachin_jain3]

The market has bunced back quite sharply confirming that there is support at 2850. For those who want to book their profits can book the profits on the rest of the position as well.

 

[sachin_jain3]

Some of you would have closed the entire position 2 days back as suggested by me. For those who closed the 2/3rd position, you can take the 2/3rd short position again at around 3000, because the market has bounced from 2820 to 3000 now; close the 66% of the total downfall from 3100 to 2820 is retraced. That gives us an opportunity to go short again. For those taking fresh short position at 3000, keep the stop at 3150.

For those who didnt close the position 2 days back (I didnt), our stop loss continues to be 3150 and we are still open 2/3rd of the position.

Dont confuse these minor bounceback to saying that the downtrend is over. the downtrend is pretty much intact (the 100 DMA is still sloping down). Its only a matter of time when the next big downmove will happen. We need to be open with our short positions to take advantage of that.

Thanks,
Sachin

 

[sachin_jain3]

A VERY HAPPY NEW YEAR TO ALL THE READERS OF THIS THREAD.

My New Year Resolution:
"I will not loose money trading in this year" - Remember guys every trader should first protect his capital before thinking of making any profits.

Lets continue with the last discussion. Nifty is glaring at our last identified resistance of 3100-3250. Some very important points to note:

A. This is going to be the third time this resistance is going to be tested. What does that mean -- This means that the resistance is getting weaker and may get taken over.

B. We may need to rethink our initial understanding that the trend is down if 3250 is taken over. I know that only in the last post i have said that the downtrend is intact. But here I am only saying that the understading is getting tested again. There is a technical reason to believe that my friends. If you see all the previous downfalls from Jan 2008 onwards, the high formed in the first pullback is never taken over. So this high of 3250 formed by the first pull back following the Oct 2008 crash should NOT be taken over to confirm our belief that the downtrend is still intact.

So what do we do now. For the existing short position the stop loss continues to be the 3150. If we gett stopped, then we have to wait and watch to see who wins the battle in the region of 3100-3250. So we will only do a breakout trade. If the bulls win a we enter after 3250 is taken over. If the bears win we enter once 3050 (50 points buffer to confirm the down trend) is broken down.

Have patience guys. Dont rush to to make money. It will come but only if you know what you are doing and why you are doing that.

Sachin

 

[sachin_jain3]

Satyam presents a very good opportunity to short i think. The stock has hit the resistance area of 165-185. So keeping the stop at 185 you can short Satyam now (175 level) with the target of around 140. thats a risk reward of 1:3.5.

 

[sachin_jain3]

Thanks to Ramalinga Raju, our Nifty SL at 3150 was not triggered. So we are still making money on the 2/3rd position. What do we do next. Continue to stick with our plan. A third position to book at around 2600 and another third to be booked below that around 2250. Dont bother much about the resistance at 2800-2850. That will be taken over pretty smoothly I think. The market will move decisively downwards this time. Remember to lower the SL to 2850 once 2800 is taken over on a closing basis.

For the short on Satyam that i had mentioned didnt work because the stock did trade above 85 and then crashed. Alas, only if i had told that that the resistance is 190 we would have made a ton of money yesterday. No worries. Remember protecting your cash is more important then making profits out of it.

Here is the total P/L for the 2 trades completed till now:

Stock Trade Initiate Target SL Outcome P/L P/L % Strength Portfolio P/L
Nifty Short 2800 2600 2850 SL Triggered -50 -1.79% 0.5 -0.89%
Satyam Short 175 140 185 SL Triggered -10 -5.71% 1 -5.71%
Total P/L -6.61%


Thanks,
Sachin

 

[sachin_jain3]

With the Nifty closing below 2800, we move our SL for the 2/3 position to 2850. Target is 2600 for 1/3 and below 2500 for another 1/3.

If somebody wants to take fresh short position take it above 2800 with a SL of 2850. The position should be small because the downtrend has happened quite a bit.

Sachin

 

[sachin_jain3]

Although Nifty was above 2850 for a few moments yesterday, but the Nifty future never crossed that level yesterday. Now the question is whether the stop loss is triggered or not. So its time to clarify that all the levels that i talk about here are Nifty levels although you trade them using the current month future. But can we say that the SL was broken? I would say no because generally i wait for Nifty to achieve a level 15 points above the said resistance to confirm that the resistance is broken. So in yesterdays case i wont say that the resistance is broken. But if today Nifty achieves 2865 then we will say that the resistance is broken and SL is triggered.

thanks,
Sachin

 

[sachin_jain3]

Hello All,

The battle is over. The bulls have won over the 2850 resistance. Please book your profits on the 2/3 position on Nifty.

thanks,
Sachin

 

[dr_euphoric]

Hi Sachin,
so...now what?? Nifty spot could not close above 2850 today...Are we in for another shot at 2950?? i do not think so..Even Obama factor will be dampner...and likely to be a sell off...In any case I have shorted at 2850 exact...and with Sl of 2900...will see tomorrow.Max...2950 will see selling pressure...Thanks for the posts and some views