Gap-Up:
With hindsight everyone views gap-ups like today as a huge opportunity to make money. but then the current negative environment makes it quite difficult to find points of entry where best RR can be located and instead of locating proper thresholds/logic for long-short entries, people start taking trades under the influence of sentiment/FOMO etc.-- basically ending the day overtrading and knee-jerk reacting.
This post is an attempt to show how noises can be cut and best entries can be located.
Let us try to innumerate the instances that are possible when a gap-up occurs:
Instance-1:
Gap-up
Open=High
Price sliding down but not closing the gap
Instance-2:
Gap-Up
Open=Low
Price slides down but O=L remains intact
Instance-3:
Gap-up
Price-wanders up/down
neither O=L nor O=H respected
but gap-up remains unclosed
For long trades, our key logic/condition/preference is that after 5/10/15 minutes (as per individual's comfort) the gap should remain unfilled.
And herein too, instance-2 wherein O=L is observed,should be the most preferred one. Also stocks from segments which are outperforming Nifty have to be preferred (currently FMCG & Pharma).
So, Lets see what FMCG stocks fulfilled following two conditions:
1.First 15 min candle didnot fill the gap (vis-a-vis last day's close)
2.High of first 15 min candle gets breached
So at 9.34am we had Britannia fulfilling the above condition.We had
Gap-up
Open=Low at 2640
First 15 min high at 2680 was breached.
So our trade set-up was:
Long with SL at 2640 and target RR=1/1.5/2
https://prnt.sc/ruuw78
Similarly, in Pharma sector we had Sunpharma
https://prnt.sc/ruux5a
By EOD these stocks had shown huge gains. But it depends upon the individual trader’s temperament/appetite/ability to play as per RR or TSL
Note:
1.This is a simplified version of scanning and then trading a set-up. Participants are requested to fine-tune the concept further and build-upon it .
2.When the gap doesnot remain open,then it has to be dealt with differently.
With hindsight everyone views gap-ups like today as a huge opportunity to make money. but then the current negative environment makes it quite difficult to find points of entry where best RR can be located and instead of locating proper thresholds/logic for long-short entries, people start taking trades under the influence of sentiment/FOMO etc.-- basically ending the day overtrading and knee-jerk reacting.
This post is an attempt to show how noises can be cut and best entries can be located.
Let us try to innumerate the instances that are possible when a gap-up occurs:
Instance-1:
Gap-up
Open=High
Price sliding down but not closing the gap
Instance-2:
Gap-Up
Open=Low
Price slides down but O=L remains intact
Instance-3:
Gap-up
Price-wanders up/down
neither O=L nor O=H respected
but gap-up remains unclosed
For long trades, our key logic/condition/preference is that after 5/10/15 minutes (as per individual's comfort) the gap should remain unfilled.
And herein too, instance-2 wherein O=L is observed,should be the most preferred one. Also stocks from segments which are outperforming Nifty have to be preferred (currently FMCG & Pharma).
So, Lets see what FMCG stocks fulfilled following two conditions:
1.First 15 min candle didnot fill the gap (vis-a-vis last day's close)
2.High of first 15 min candle gets breached
So at 9.34am we had Britannia fulfilling the above condition.We had
Gap-up
Open=Low at 2640
First 15 min high at 2680 was breached.
So our trade set-up was:
Long with SL at 2640 and target RR=1/1.5/2
https://prnt.sc/ruuw78
Similarly, in Pharma sector we had Sunpharma
https://prnt.sc/ruux5a
By EOD these stocks had shown huge gains. But it depends upon the individual trader’s temperament/appetite/ability to play as per RR or TSL
Note:
1.This is a simplified version of scanning and then trading a set-up. Participants are requested to fine-tune the concept further and build-upon it .
2.When the gap doesnot remain open,then it has to be dealt with differently.
Great analysis
ReplyDeleteNice analysis, sir
ReplyDelete