After the breakout, market can not go indefinitely in one direction. It has travelled 550 pts (12-13%). How much more you would expect it to travel in one wave ?
It is quite obvious that it will find support somewhere / shorts will start booking profits and we will see the reversal.
As a trader, we can't live with fixed view about the market. We got to make an opinion based on our defined method. Then keep validating if the factors are still intact.
It is important to define our own parameters to identify the trend reversal.
As a trader, we need at the minimum
1) tool set to identify the current trend (up/down/sideway).
2) toolset to identify the end of trend
3) toolset to identify the reversal of trend
It needs to put your thoughts in proper order. You can extend the approach and also start looking a confirmation signals for each of the three points.
Try to keep this simple and avoid getting into analysis - paralysis while doing this.
Take an example -
1) NR7 give us a trigger that new trend is going to start. So we get ready and start watching for entry signal
2) Next day market breaksout and depending on the direction we know that new trends has started.
3) As an example, Lets follow 3 moving averages (3bar/ 5bar/13bar) to guide us as long as trend is in place or not. As long as they are nicely arranged, we are in trend.
4) Lets use same 3 averages to show us end of trend - when we see 3 bar MA changeing direction and penetrating 5bar MA, we know the market is telling us something.
What action to take, depends on individual. Some will book profit on first sign of weakness. Some will wait for 10 more confirmations before changing their view that market has
reversed. Some will just tighten the stops.
5) To confirm the reversal, you might like to see, 1 Higher Low pivot as first signal. For confirmation of reversal, u might like to see the break of downward sloping Trendline.
These are just an example to get u thinking. Please spend some time and define your indicators / signal / market pattern etc and then just watchout for it.
In my view, we have retraced 63% of the move that started from 3500 level to 4700 level. (1200 pts move, 63% gives approx 750 pts . i.e. from 4700 we came down by 750 pts).
Typical fib level where mkt finds support. Various 50/ 200 dma lines are also in the same zone. 4000 is nice psychological support level.
all these factors makes 4000 an important support level which it did nicely.
Generally when we look at big timeframe charts, we need to see the number of bars market has spent below/above a level. In current case, mkt just spent 1 day (friday) below 4000 and bounced back from there. That too was a narrow range day of 85 points. Though it did not flag as NR7 day because of previous days action.. but if we observe the daily range closely, then in my observation, I have found all days with less then 100 pts range (i.e. 2.5% to 2.8% of current price) act as narrow days. and they indicate possible breakout.
And we see the result now.
Hope this helps.
Happy Trading.
It is quite obvious that it will find support somewhere / shorts will start booking profits and we will see the reversal.
As a trader, we can't live with fixed view about the market. We got to make an opinion based on our defined method. Then keep validating if the factors are still intact.
It is important to define our own parameters to identify the trend reversal.
As a trader, we need at the minimum
1) tool set to identify the current trend (up/down/sideway).
2) toolset to identify the end of trend
3) toolset to identify the reversal of trend
It needs to put your thoughts in proper order. You can extend the approach and also start looking a confirmation signals for each of the three points.
Try to keep this simple and avoid getting into analysis - paralysis while doing this.
Take an example -
1) NR7 give us a trigger that new trend is going to start. So we get ready and start watching for entry signal
2) Next day market breaksout and depending on the direction we know that new trends has started.
3) As an example, Lets follow 3 moving averages (3bar/ 5bar/13bar) to guide us as long as trend is in place or not. As long as they are nicely arranged, we are in trend.
4) Lets use same 3 averages to show us end of trend - when we see 3 bar MA changeing direction and penetrating 5bar MA, we know the market is telling us something.
What action to take, depends on individual. Some will book profit on first sign of weakness. Some will wait for 10 more confirmations before changing their view that market has
reversed. Some will just tighten the stops.
5) To confirm the reversal, you might like to see, 1 Higher Low pivot as first signal. For confirmation of reversal, u might like to see the break of downward sloping Trendline.
These are just an example to get u thinking. Please spend some time and define your indicators / signal / market pattern etc and then just watchout for it.
In my view, we have retraced 63% of the move that started from 3500 level to 4700 level. (1200 pts move, 63% gives approx 750 pts . i.e. from 4700 we came down by 750 pts).
Typical fib level where mkt finds support. Various 50/ 200 dma lines are also in the same zone. 4000 is nice psychological support level.
all these factors makes 4000 an important support level which it did nicely.
Generally when we look at big timeframe charts, we need to see the number of bars market has spent below/above a level. In current case, mkt just spent 1 day (friday) below 4000 and bounced back from there. That too was a narrow range day of 85 points. Though it did not flag as NR7 day because of previous days action.. but if we observe the daily range closely, then in my observation, I have found all days with less then 100 pts range (i.e. 2.5% to 2.8% of current price) act as narrow days. and they indicate possible breakout.
And we see the result now.
Hope this helps.
Happy Trading.
