I place here few important thoughts about today's trading session. This morning I had a plan to go short in Ramco Cements stock. In the previous session, the script had closed at 978, which also was a Day High. Please refer the 5-minute chart below to find the resistance zone marked near 985, whence I assumed the stock could potentially fall.
The Gap Up opening candle was a High-wave candle that
clearly signaled indecisiveness at the start. I decided to wait for the price
to take off either Low or High of the first candle. The second bullish candle
confirmed the presence of bulls. I hastened to find the next level of
resistance which fell near 1000 levels marked by upper horizontal box. I continued to wait actively looking for a short trade opportunity.
A first opportunity to sell occurred near 995 where a
shooting star was confirmed by a bearish candle. The opportunity also offered
10 points bargain from the planned short trade earlier. It was difficult for me to
pull the trigger in this opportunity.
Then, price slid down nicely. Though I sat at the fence, I continued to wait. Price retraced up to 50% of the fall in a Zig-Zag fashion on which channel is imposed. That's when I took the short trade. The trade details are as follows. The entry is @ 989, Stop placed @ 991.35, and target was @ 975.
In fact, first 5-10 minutes I was really hesitant to place the stop. I was in two minds deciding the point of stop. I desired a higher stop allowing the trade to have another point of cushion. But finally decided to place the stop at the planned point come what may.
Then as seen in the chart, a big red candle took the price down. Once this fall came, scanning the RSI, I could sense the intentions of bulls fighting back to take over the price as the indicator was stubborn near 40 levels. So, I decided to close the trade manually and was out at 980. Overall, this trade resulted in 9 points gain.
Lesson:
It's dangerous to debate the stop after the trade is on. Take the trade with complete backing from technical study.
What about Nifty 50 index?
Nifty 50 index opened Gap up by about 60 points and put up yet again another all time high @ 16700. Please refer the 5-minute chart of Nifty index below.
In the above chart we can see the confluence of weekly pivot 'R2' and the current day pivot 'r1' marked by the horizontal box. Once Nifty was below this confluence zone, we had a beautiful short trade opportunity. A pull back to the confluence level with RSI being resisted at mid-line 50 level was a favorable RR ratio short trade. Nifty went on to decline for the rest of the day.