Trade long unless closed below 5830. Panic below 5800!!

 Date: 25^th Feb 2013

We are heading for very important event of annual Budget this week. Let me take another opportunity to tell about my experience of trading such events. I have speculated a lot on guessing the outcomes by reading reports ahead of budget and studying them hard to only to burn my hands in the end. I am fan of affordability and let me assure you that trading on such days is very expensive business. One should stay away especially on the event day except he is very experienced professional with rigid system and rules. Other days will make you trade better.

Coming to P&F on Nifty, Have a look at charts with absolute box size of 10 (Figure 1 and 2). As told last week Nifty is trading at Anchor Point support levels of various charts. The anchor point zone shown in Figure 1 is suggesting 5800 – 5840 as a strong support area. It is also trading near lower band of 10 day Bollinger bands. Trading double top buy signal after lower band test is advisable pattern to buy. Don’t miss if it occurs from here.

10 box high-low chart (Figure 2) is indicating the toppish Head and shoulders pattern in prices. Neckline of the pattern is around 5830. There is also 45 degree internal line support coming around same level. One horizontal and vertical count activated target is around 5750. Achievement of that will be more bearish for the prices. Breach of entire formation suggests target around 5450.

Trend seems weak but near support levels. Taking fresh shorts around these levels does not seem affordable but close below 5800 might make bulls press panic. Bears should not miss the opportunity.

For fresh trades, longs seem more affordable from here than shorts. One can bet for this support zone to be taken for a while and trade with stop loss at 5830 on closing basis. Go short if 5800 is broken with same stop loss level on closing basis. On the higher side, 5930 – 5960 is tested band. But picture will be interesting if they are tested again.

    Figure 1: Nifty 10 x 3 cl Point and Figure Chart

    Figure 2: Nifty 10 x 3 hl Point and Figure Chart

-          - Prashant Shah

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