AUTOMATED TRADING

AUTOMATED TRADING

1 May 2013

NIFTY UPDATE

Exhaustion gap
Lots of people would have been expecting a strong rate cut by RBI but technical indicators are giving warning. Lets analyze what is that. First of all we have seen a exhaustion gap on hourly chart which is first reversal signal. An exhaustion gap in technical analysis is a price gap on a chart that usually appears on a strong uptrend and it comes at the end of up move. An exhaustion gap is an early warning sign that the current uptrend is losing steam and it is ready for a major retracement back to a reasonable level.  When the gap occurs this is a sign that the stock is tired and is losing its upward momentum. If the next bar close below the first bar, there is a good indication that that an exhaustion gap is in play. Under this type of situation stop loss can be placed above the high of the first bar and the rest is history is available for see as example.  The stock should immediately begin to fall precipitously without any retracements.  


See this Advance Decline chart. When the price was falling below 5500 and making new low Advance Decline chart was not making new low. Now negative divergence has occured  on daily chart and giving warning sign and it seems that the up move from 5477 to 5960 is corrective in nature and may reverse soon. Now the every eyes are on the RBI meet. As Nifty has given flat closing so there is no changing in technical levels. Nifty is making base around 5870 spot price levels since four days. So breaking this down side base will be first strong reversal sign other wise sideways action is expected till RBI meets. Breaking this four days consolidation range will give a fresh direction. Low risk trading opportunity is coming for option traders. After breaking range minimum 200 points rally is expected either side. Buy 5800 put option and 6000 call option equal quantity around 50 rs price. If impressive Rate cut happen then Market may touch its previous top till 6100 and if RBI fail to full fill market expectation then fast fall may be happen. Domestic political uncertainty may provoke the downside move.
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