1st August – What Stocks Do After a Drop and Rise? Basing

MarketScientist TV
5th August

12:28pm Today’s gap opening almost cut the point where this trend would rocket up, what was missing was a slightly higher push.
To be more clear, If nifty had opened with a hearty 50points more than where it did it was almost a sure shot rally from there.
You see gaps as you know, play a very important part of my trading strategy.

Also the fall and rise after that only confirmed our idea in the morning that there will be no one sided rally today.

1:52pm 

How Stocks Setup Base Before Going up (In a downtrend)

It happens quite often that within a downtrend you will see the trading instrument fake an upmove, only to eventually breakout and start an uptrend. Now before we begin my language is always metaphoric, I don’t intend to sound that the market is “deterministic”. The market takes the path of least resistance. There are no plans, there is nobody accumulating, there are no “operators”; all these self-consoling ¬†conspiracy toned statements are false.

Anyway, Today’s action in Nifty is what is called basing. In such a scenario you will see
1) The stock is in downtrend
2) the stock fakes an upmove
3) Sideways action + final breakout to form a new uptrend.

I’m attaching a few charts below, I think they are self¬†explanatory, please click on the chart to see them in fullscreen.

 

Posted by Prateek Singh

Derivatives Strategist, over a decade's experience trading the market for a living, you can trade for a living too! I used to update many strategies for several years on popular forums by the name MusicJunkie. Now Marketscientist is my home; and yes, if you are wondering; I am a music addict, shoudn't everyone be?

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