Bet for follow through!! Buy dips!

 Date: 11^th March 2013

Such a dramatic rally!! I would have stopped watching movies for entertainment had my positions were not always open in the stocks. I mentioned about expected short term bounce in last week write up. Nifty bounced in style from support levels to form Bullish Engulfing candle in weekly charts.

What’s next? We chartist and analysts become bearish when prices go down and bullish when they start going up. We are taught to listen to price and not to become rigid while forming views and opinions. But this flexibility while doing analysis is not adoptable in trading. I have read many tweets of well known analysts recently while budget speech is going on. I wonder if they would ever be able to trade such flexible approaches!! I don’t know what happened to listeners!!

I believe one should do analysis sufficient to form tradable views unless his business is to provide ‘Tips’!! Over thinking and over analysis will always result in over trading.

Coming to the point, 10 box Point and Figure charts of Nifty are shown below in Figure 1 and 2. I mentioned last week that Low Pole bullish pattern will be formed above 5820. It is formed in both the 10 box charts. This is bullish news and indicating strong comeback by bulls. But should I buy here then? Charts have become bullish but fresh Long trade is not affordable from here. Price horizontal resistance line in close only chart (Figure 1), Anchor point and Internal line resistance area in High low charts (Figure 2) suggests that prices have reached their important point of resistance. 5940 – 5970 is the area of strong resistance and I expect prices to respect these levels atleast initially.

5860 – 5880 seem importance support being previous resistance area. Opposing Poles will be formed if price goes below 5810. This will indicate reassertion of control from bears.

From trading point of view, bullish pattern and Count Direction (6020 in shown in Figure 2) is indicating upward trend so one shouldn’t go short now unless pattern is negated. Wait for some price consolidation or correction that can give affordable trading opportunity. Buy close to 5860 – 5880 area and don’t remain long if it closed below 5840.

     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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