Om Sri Ganeshaya Namaha

Om  Sri  Ganeshaya  Namaha
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Tuesday, March 10, 2009

Inside day

Dow Chart "Inside day" Breakout
as on close of trade, 10th March

Nifty Daily Chart, close 9th March

Sensex Chart showing "Inside Day"

Monday , 9th March was an "Inside Day". I am showing this on the Sensex charts as it depicts the candle chart patterns better than the NSE's Nifty charts . It is best known to the NSE why the open price is always shown the same as the previous day's close. So, I have used the sensex charts wherein the "inside day" is clearly visible. The nifty chart too shows monday's trading as an inside day .

I repeat, (I had already defined it in an earlier post), an Inside Day is a day that has a lower high and higher low than that of the prior day.Simply put, the high and the low of the previous day are not violated. Inference of this is, the market may be catching its breath before another up or down day. It could be indecision between bulls and bears . Or, it may be hesitation by the market players who are wary whether the current trend will continue .

The "inside day" can become quite powerful when it occurs during a long-lasting trend, and can therefore signal a reversal. Could this be applicable now? We cannot say till confirmation of other signals and the breakout direction. At the time of writing this post, On wednesday,11th March, the Dow, on 10th March, has already broken on the upside and the stochastic has broken its earlier high and is in buy mode. We have the advantage of seeing whether this has follow up buying or a false breakout, as today is a holiday in our markets.

For trading purposes, the close of the inside day does not matter. The next day "coiling" is important . The trade is to be taken on the break of the range of day one, whether upside or down. For the nifty the levels for thursday are at 2626 on upside and 2539 on the downside. So wait for the breakout to occur and trade accordingly.
Happy trading !!
Lakshmi Ramachandran


Sujatha said...

so, u mean to say above 2626/28 may go up for short term?

Lakshmi Ramachandran said...

Yes that is the probability