A big gap down:
FED spooked the market in Jackson Hole symposium as some people had anticipated. By character, Indian market does exactly the way US market does but at a larger degree. Looking at current SGX level, we will open at least 150-200 points gap down on Monday next i.e., on 29-Aug-22. Once market opens with such a gap down, most intraday traders believe that there is nothing left for them on the table. But, interestingly, this happened on a Friday and by the time, India market opens on Monday, lot of retrospection/introspection from various trading communities will have its impact too.
So, below are some possible moves that market can give and our trading strategies to take advantage of that. This includes something for every type of trader.
If market opens around 17350-17400 and world market indices (specially, Dow/S&P/Dax) show green tinges (when our market starts and remain so), chances are that market will recover upto 17500 and beyond very fast and hang in there throughout the day.
This happens because most retailers and HNI will try to close their profitable positions (seeing that there is no follow-up selling in world market) and short again at higher levels. So, this can be a tactics for the day
- Book existing shorts, if any. Carry on (do not average) any existing long position.
- Scalper can go fresh long at the beginning (after few minutes of opening when day high is crossed after an initial small downmove) with SL of day’s low. Keep booking profit and close ASAP (as this trade is against trend).
- If market holds high level at least upto 1:30PM, then positional traders can start making fresh shorts for rest of the week. Overnight longs from Friday last, may be showing minimum loss or some profit even. Close those too.
If market opens around 17350-17400 and world market indices (specially the ones mentioned above) show red tinges (when our market starts and remain so), chances are that our market will recover briefly (for 20 mins at the max) and then again break days low.
This happens because, most existing short sellers, seeing followup selling in world market will hold on to their shorts. Very few will close their shorts at the beginning and then those trapped long will start closing their positions bringing the market down again. So, this can be a tactics for the day,
- Carry on existing shorts (amount of profit might reduce temporarily) from Friday.
- Wait for market to recover some way and no fresh long trades there. Close overnight long positions, if any, with loss here.
- Go fresh short or add to existing profitable shorts, when day’s low is broken again. Keep on booking quick profit and close at around 17200 (max downside for the day). Positional short sellers can book most profit here and carry some for Tuesday.