In the 30 minute chart, there is strong resistance zone near 650 levels which is marked by red box in the chart below. Price is attempting to break this strong resistance zone. So far buyers have been unsuccessful twice. This fight generally happens. A prudent trader needs to have patience. Below is a 5-minute chart.
The opening candle for today [22nd] has a large down wick indicating the strength of buyers in the beginning of the day. But buyers couldn't even take the price to yesterday’s high marked by horizontal line.
The arrow marks show the down wicks at different times throughout the day. They indicate buyers attempt to take price higher. But there are a lot of indecisive candles followed each time. This was the indication that buyers were failing.
Novices are buyers here. They are thinking that price is taking support at the strong red resistance zone. This is early judgment. They have their stops just below the down wicks.
Even though there are few candles with good lengthy down wicks, there is lot of sideways move near 650 - 651 level indicating that the buyers have no strength.
Finally at 2:15 sellers took over and wiped off all the stops of buyers placed below these down wicks. The 2:20 candle is a strong red candle which indicates professionals taking off all the stops of novices.
From professionals’ angle, they always take 1:2 trades. So, entering short at 648 their stops are at 651. Calculating the profit target by 1:2 Risk-Rewards is 644. Easily price pierced this level later the day.
What did I do?
I entered a buy trade at around 1:00 p.m. But, next 30-40 minutes I sensed lot of indecisiveness in the trade. So, I just exited the trade little above entry. I paid brokerage which is a loss to me.
What about Nifty 50 index?
Today Nifty 50 opened Gap down and throughout the day inched
higher and higher to close near 14400 minor Resistance zone marked by box. A strong Support zone marked in the light green box
near 14200 - 14250 levels. Please refer the 5-minute chart of Nifty 50 below.
An interesting thing to notice is that the broader index and Sunpharma moved in opposite directions.
Lessons:
- Active trade management is one of the important keys to keep losses small.
- Be always ready to see negative correlation coefficient between broader index and scrip to play on certain days.
- Practice to take confident trades that are in sync with market even in the face of first loss for the day.