7 January 2021 (8:38 am IST)
SGX Nifty is trading more than 100 points up at this time. If Indian stock markets and Nifty follow this lead then we may see Indian stock markets open near yesterday’s high levels.
Today happens to be the weekly Options expiry in Nifty and Bank Nifty, so the intraday trend could stay highly volatile.
Yesterday, Nifty showed weakness for the first time in many weeks. After falling in the second session, this index failed to recover “all” losses and closed negative. In the recent many sessions, Nifty had fallen in the intraday sessions but closed positive after recovering all its losses. Also, Nifty closed just below its 20-day Moving Average on hourly charts for the first time in many sessions. These two factors indicate a weakness in the index and day traders should stay alert about any possible correction in Nifty.
How To Trade Nifty:
- Before markets open and Nifty starts trading, we can only assume the possibilities of its trend.
- But the real trading would be to watch the trend “after” Nifty starts to trade and the profitable trading strategy would be to follow that trend instead of having any opinion of our own.
- Right now, the possible scenario is, Nifty will open with higher numbers, then turn rangebound as the RSI signal will become overbought on smaller timeframe charts such as one-minute and 5-minutes.
- Day traders should wait and watch Nifty to correct so that the RSI signal becomes normal.
- After that, If Nifty makes a “lower high” trading set up, it will signal weakness in the index and trading short would be a better strategy.
- If Nifty makes a “higher low” trading set up, it will indicate that the index is getting buyers’ support and trading long would be profitable.
Indian stock markets are expected to open with higher numbers and trade rangebound within this week’s range. If yesterday’s high levels are crossed, we can expect more gains in major indexes. If the previous low levels are broken, more losses could become a possibility for these markets.