Trade Journal - Missed Trade in SBIN [20 - 04 - 2021]

Today the market generated a make or break trade opportunity in SBIN stock.

Frankly, my bias was for bullish side. I was expecting a bounce from 334 levels [Opening 5-minute candle low]. Because of this bullish bias I was hesitant to go short. Please see  the 5-minute chart of SBIN below.

As we can see price breached the low of Open candle proving my presumption wrong. Once this break happened, price meandered around previous day high for some time. In fact, the hammer created apprehensions in me about the target. However, price inched lower to touch the next support near pivot 'p'.

Another explanation for the break of morning first 5-minute candle low could be as follows:

• Let's say, looking at the Gap up open in this scrip few novices in a hurry would have gone long in the first few minutes.
• Their Stop Loss must be just right below the opening 5-minute candle low. [333.5]
• Later the day at around 12:15 professionals bulldozed those stops taking price further lower.

Misguiding Hammer:

We can see a hammer after the price break of 334 levels. Let’s see what happened there.

Few novice traders would have booked their profits in a hurry on that hammer candle. Surely, the price fall had not yet finished.

Taking cue from this hammer, few novices would have entered in the scrip long. Definitely, they would have placed their stops just below the low of Hammer.

But, price kept giving warning that this hammer is weak buying signal. The presence of small candles for next 1 hour 15 minutes taking price nowhere was itself fishy.

Later, at around 2:15 professionals bulldozed the stops of novices again to take price lower.

What about Nifty 50?

Broader index Nifty 50 opened Gap up. But the first candle was a huge red candle. For the whole day, index inched lower step by step. Please refer the 5-Minute chart of Nifty 50 index below.

I expected the index not to break the previous day high. I even expected the market to not touch those levels, in which case, impulse formation would have formed. The stars I have placed in the chart tell my presumption.

But the market broke previous day high and kept sliding down. This break in Nifty also augmented sell side opportunity in SBIN. Nifty touched the important support zone near 14200 levels towards the end of the day.

Lessons:

• A trader must be flexible and ready to follow the market.
• A quick decision making ability firmly based on quick reading of confirmations is necessary.
• In the hindsight I wish I must have checked 2-minute chart for more confirmation.