Indian Stock Market Today Sideways Trend, Breakout Ahead or Trap?
Indian Stock Market Today Sideways Trend, Breakout Ahead or Trap?
Today Indians stock market looked like an extraordinary one where the Nifty 50 first opened very strong with a gap-up and then entered into a tight sideways movement. Most traders, from their point of view, decided that the bulls would continue their momentum but instead of going higher, the market slowed down and consolidated in a range. Such behavior leaves newbies in dilemma but precisely it is one of the phases when market stabilizes the changes.
The first figures around 24,160 and the peaks near 24,270 unmistakably revealed the market strength in the very first time. But, although the start was so promising, the index was not able to top the resistance zone. By the way, at the same time, the support was firm around 24,140 meaning that the buyers were still willing to purchase at low levels. Thus, buyers and sellers waged their battle in a fairly balanced manner during the whole day.
One of the major factors leading to the sideways movement has been the profit unlocking. After opening with a gap-up, traders who had bought before usually get out to protect their profits, causing the selling pressure at higher levels and hindering the market from breaking further higher. This is the reason why prices get capped in a range which means there is no uptrend and no downtrend.
Another chief thing done was premium decay. As the market didn’t make a solid directional move, selling both call and put options to buyers turned into a loss for option buyers since option prices were declining with time. This is a typical situation in range-bound markets, wherein option sellers get the benefits mostly.
On sectoral basis, the market was neither bullish nor bearish. Stock like Adani Ports and Special Economic Zone along with Power Grid Corporation of India stayed strong and holding the index to a positive level, but on the other hand bank and IT stocks like HDFC Bank and Infosys faltered. Due to this sector divergence, the index was range bound again. Technically speaking, the nearest resistance level is around 24,280 with a strong support at 24,140. Getting above resistance may result in sudden buying spurt, however falling below support level can lead to the downward movement and probable gap filling. So the next day’s trading session could be quite interesting by closely observing these two levels.
For day traders, one major take-away from today’s trading session is that trading within the middle of the range should be strictly avoided. Initiating trades without the right confirmation is usually the main cause of losses, especially when the market is going sideways. The most effective strategy is to patiently wait for a breakout or a breakdown before entering a position.
Overall, today’s trading session was an archetype of market consolidation phase following a sharp movement. It is true that many traders end up getting trapped during such phases, yet experienced traders take advantage of this time to gear up for the next significant move. It looks like the market is being energised and a breakout in the near future could present excellent trading opportunities.
