We had a wide range day (WR) seen on Friday when the Nifty had a range of 140 points (including the gap). This is the widest range in many days, hence it qualifies as a WR7 (widest range in 7 days). What happens after such wide range days? Markets will usually consolidate giving rise to noise and choppiness. The correct way to trade such noise is by using lower time frames.
What is the trend? We measure the intermediate trend is different ways: (1) The TA-Insync(55-5) is up (2) Zero Lag Moving Average 34 is moving up (3) Ichimoku is in an uptrend with the red line above the blue line. Now, readers should use any one of the three methods to measure the trend. If you use Zero Lag then check the direction. Moving up means UP trend, and, moving down means downtrend.
My point is: trend is up, no matter what you use. Second point is: do not fight the trend. If you feel that the rally is unjustified, then stay away, but selling short is not a good idea. Traders can take short side trades only when their intra day charts give a short signal in any of the above trend methods. Volume should be low since the short trades will go against the trend. If the trade appears to work out, then add volume. The correct trade is to buy on corrections. use 5 minute or 15 minute charts to get buy signals from any of the three methods. When you get this siganal, go for it.
Is the Nifty making an inverted head and shoulder pattern? Answer is: Yes. The neckline is sloping up, currently at 5700. A close above this number will confirm the pattern. I will give the chart on tuesday evening.
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