Wednesday, August 2, 2017

How to trade Nifty post RBI policy announcement and rate cut?

RBI finally changed its status quo and cut repo rates by 25 bps. This time Mr. Patel has managed to be predictable.

It is interesting to see closing of Nifty post the monetary policy announcement. Prices traded in a narrow range for most part of the day until it finally gave away during the final 30 minutes.
The reason prices have been struggling at the current zone is due to the series of channel resistance all in the near zone.

Look at the below chart of Nifty which shows why prices have been failing at higher levels even though the overall tone is still bullish…

Nifty 60 minutes chart:

News or events do not drive the markets but only results into short term volatility or random movement which will last for few minutes to few hours or few days and then the original trend resumes.

The above chart clearly shows that RBI policy announcement did result into short term movement or volatility on intraday basis but prices eventually closed that the short term moving average support.
Now how to trade using Trendlines or channels?

Nifty is moving in the overall expanding pattern shown by blue trendline and within that it is moving in red channel. The reason markets are getting nervous at the higher levels is due to the upward sloping blue trendline. Also as this trendline is shifting higher the resistance will keep moving upside.
So, best trading strategy will be to buy when prices move towards the channel support and also RSI near the support zone. This technique will be valid as long as the short term red channel is intact.
So even if you do not use any other method but this basic technique you can trade profitably provided risk reward is favorable and the reason for trading is objective!

Now imagine the power when you combine these basic techniques with Elliott wave and other methods like Bollinger Bands, indicators and much more.

“The Financial waves short term update” is our flagship research report that shows trading strategy and detailed analysis using Elliott wave, cycles and indicators applied on Nifty and stocks. To subscribe visit Pricing Page.

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