Year 2016 started with a big bundle of nervousness in Nifty and Sensex. During past seven days of the week market had experienced big attacks from bears. Most of these days market opened with huge gap ups and gap downs. In gap up days market aggressively filled the gap and had return to the negative areas where as in gap down days it continued its fall except today.
Today we have seen an interesting pattern in Nifty charts. Nifty opened with a wide gap down. But slowly it started coming up and even visited the positive territory. Now it is the time to discuss the gaps. If you were an expert in gap trading you could have gained lot of money in Nifty during past 7 days of trading. Now let’s have a look on the gap trading strategies.
How can we tackle with Nifty gaps?
Gap is created when an index or stock open higher or lower than it’s previous day’s closing level. Nifty was experiencing an exhaustion gap. We need to analyse this point. From August 2015 Nifty weekly start indicates the end of prolonged or extended bullish trend in Nifty. Nifty lost 1000 points in month of August. It made a recovery and we had seen Nifty recovering 8300 before it crashing again. In second term of selling bears stopped at 7600 which was the low of previous fall and thus 7600 level became an intermediate support.
From August to December Nifty had made a classic head and shoulders pattern. In this pattern 8000 level became the resistance. At this level bulls experienced a tough resistance in previous reversals. Exactly it happened in 1st day of the year and Nifty turned into red with a gap down at opening. It was a small gap and thus the bears could not sell the fear among the traders. Nifty reversed intraday and closed with a narrow profit.
On 4th of June we have seen the exact gap down opening with a 40 point loss. On that day prior days low or support level were the key. Nifty could touch previous day low but not previous days high. After flirting with this level Nifty started making its down trend and searing for the support of 7600. In that single day Nifty lost 180 points which really a bleeding situation in stock market. We can attribute this to Global or any other macro fundamentals. If you are searching for the reason, please keep on searching. We are trying to find a way to tackle with the gap.
Next huge gap down occurred on 7th of January when Nifty opened with 100 points down. On 8th January we have seen a gap up. But there is an insufficient buying pressure to sustain the rise. This can be termed as partial gap up. To be termed as full gap up it should open above last day’s high. Still it was not a buying indicator. All these days volume was very important to analyse.
Now look at today’s chart. Nifty made another gap down. Traders were really confused as they were not able to take a trading call. Market slowly recovered and touched last days low and made a congestion area between 7580 and 7600 area. Then it started coming down. To be treated at a reversal it should go above the last days high. Many new investors bought Nifty in today’s market.
Nifty still lies in a bearish area. Unless it convincingly breaks above 7600, I will not buy Nifty. I am more concerned with lower side of Nifty. You can see Nifty fell to 52 weeks low today. I am cautiously holding my short positions. I have taken short position in Nifty which was partially covered with profit at 7650 level. Remaining I am keeping with a stop loss above 7700
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Adding to worry many investor favorite stocks seen a huge value destruction. But still there is a hope. We have suggested few scrips for buying even in this catastrophic condition. An intelligent and disciplined trader can make money in all type of market condition. In fact day traders are making more money in highly volatile markets.
Please register with this site to get daily stock picks
Watch my post published last month
Today we have seen an interesting pattern in Nifty charts. Nifty opened with a wide gap down. But slowly it started coming up and even visited the positive territory. Now it is the time to discuss the gaps. If you were an expert in gap trading you could have gained lot of money in Nifty during past 7 days of trading. Now let’s have a look on the gap trading strategies.
How can we tackle with Nifty gaps?
Gap is created when an index or stock open higher or lower than it’s previous day’s closing level. Nifty was experiencing an exhaustion gap. We need to analyse this point. From August 2015 Nifty weekly start indicates the end of prolonged or extended bullish trend in Nifty. Nifty lost 1000 points in month of August. It made a recovery and we had seen Nifty recovering 8300 before it crashing again. In second term of selling bears stopped at 7600 which was the low of previous fall and thus 7600 level became an intermediate support.
From August to December Nifty had made a classic head and shoulders pattern. In this pattern 8000 level became the resistance. At this level bulls experienced a tough resistance in previous reversals. Exactly it happened in 1st day of the year and Nifty turned into red with a gap down at opening. It was a small gap and thus the bears could not sell the fear among the traders. Nifty reversed intraday and closed with a narrow profit.
On 4th of June we have seen the exact gap down opening with a 40 point loss. On that day prior days low or support level were the key. Nifty could touch previous day low but not previous days high. After flirting with this level Nifty started making its down trend and searing for the support of 7600. In that single day Nifty lost 180 points which really a bleeding situation in stock market. We can attribute this to Global or any other macro fundamentals. If you are searching for the reason, please keep on searching. We are trying to find a way to tackle with the gap.
Next huge gap down occurred on 7th of January when Nifty opened with 100 points down. On 8th January we have seen a gap up. But there is an insufficient buying pressure to sustain the rise. This can be termed as partial gap up. To be termed as full gap up it should open above last day’s high. Still it was not a buying indicator. All these days volume was very important to analyse.
Now look at today’s chart. Nifty made another gap down. Traders were really confused as they were not able to take a trading call. Market slowly recovered and touched last days low and made a congestion area between 7580 and 7600 area. Then it started coming down. To be treated at a reversal it should go above the last days high. Many new investors bought Nifty in today’s market.
Nifty still lies in a bearish area. Unless it convincingly breaks above 7600, I will not buy Nifty. I am more concerned with lower side of Nifty. You can see Nifty fell to 52 weeks low today. I am cautiously holding my short positions. I have taken short position in Nifty which was partially covered with profit at 7650 level. Remaining I am keeping with a stop loss above 7700
Click here
Adding to worry many investor favorite stocks seen a huge value destruction. But still there is a hope. We have suggested few scrips for buying even in this catastrophic condition. An intelligent and disciplined trader can make money in all type of market condition. In fact day traders are making more money in highly volatile markets.
Please register with this site to get daily stock picks
Watch my post published last month
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