Trade Supports and Resistances this week, Avoid Breakouts

Date: 1^st April 2013

As I wrote last week bounce of Monday in Nifty didn’t sustain and it is witnessing sideways trend. I also mentioned that Nifty will respect the support levels atleast once.

Truncated week with lack luster sessions have made P&F charts move very little. Point and Figure chart moves only when price moves. Time consolidations are not plotted in P&F charts.  

Overall setup of the trend is negative with multiple bearish formations. Figure 1 and 2 are 10 box charts. Figure 3 is of 25 box High Low chart for observation of intermediate trend of Nifty. Multiple count direction, bearish formations and trend line breach suggests that lower levels in Nifty is quiet possible. But price is trading near support levels at the moment hence fresh short selling needs to be done at weak bounces or strong downward breakouts to make trades affordable.

Nifty has strong resistance at 5740 and 5790 levels from here. Supports are near 5630 and 5600 levels. Shut your monitors if it trades below 5600!!

I expect Nifty to remain within a range and don’t think that it’ll trade below 5600 immediately. But I am not an astrologer; I am a trader who does all sorts of analysis only to find the levels that can give convincing and affordable trading opportunity. Trading breakouts in sideways trend often proves expensive and trap the traders. Avoid them and trade supports and resistances.

From trading point of view, Aggressive traders can buy Nifty at lower levels near 5630 only if it doesn't close below it. Resistance is at 5740 and 5790 levels.

For those who trade P&F charts, wait for formation of higher ‘O’ from here and then buy when column of X forms. That will provide you affordable buying opportunity. Sell if double bottom occurs because trend is negative.

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

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

    Figure 3: Nifty 25 x 3 HL Point and Figure Chart

-          - Prashant Shah

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