Nifty consolidates.

I am not sure how many of you are observing what Dow Jones and Nifty are doing last 3 days. Dow Jones, goes past 10900 and falls sharply, and Nifty goes past 5200 and falls sharply.

So what's happening?
It looks it is a place for profit booking for people who had been long at lower levels.

Ok, so if people are selling - Why markets are not going down?
There might be no new shorts getting created, and there might be a good number of people adding onto their long positions as and when they see minor dips and few opening new long positions on these dips.

If you look at the beautiful chart below, you'll understand what could be the next course of action for Nifty.

Nifty is in a wonderful channel. While it moves in this channel it keeps making new "higher highs" and "higher lows". In all probability last weeks 5000 was a a new "higher low" and it seems to be heading up to hit the roof of the channel. So a target of 5500/5800 is easily on cards, unless we go down breaking the 5000 level.

Ok, now lets look at the medium term perspective of Nifty. Below is a beautiful "Inverted Head and Shoulder" pattern of Nifty with neckline at 5230, head at 2500.


In the next 1 to 2 years, we should have Nifty above 7000.... and Sensex above 24000, unless for some extraordinary situation, Nifty goes below the left shoulder, the pattern will be negated.

How do you know when to invest?
1. You can never predict the exact bottom nor the exact top to buy or sell a stock, if you do - you are "God".
2. Invest with money that you can afford to lose or you dont need it in the near future.
3. Invest in small amounts, whenever there is a dip. And when you invest, religiously decide a level below/above which you are ready to book your loss/profits.

Investing in stock markets is not about making money, it's about preserving your capital - day after day, trade after trade.

-Sri