Uptrend or downtrend, it's technically compulsory to reverse trend as profit booking is inevitable. If a trader longs in an uptrend, he will sell to book profit. And if he shorts in a downtrend, he will buy to book profit. The million dollar question is how will we know that the current trend is reversing? There are a lot of indicators for analysing trend reversals. But let's just consider the simplest one which everyone can do. I will just recommend a real time tip here as an example:-
Starting wednesday, the 18th of June, 2008 , Nifty has been closing in the red as -70.60(18th), -78.15(19th), -156.70(20th) & -81.15(23rd) consecutively, keeping nifty at 4266 level. A support was witnessed at around 4226 today the 23rd June & bounced itself closing at 4266.40. So, buying an ITM Call (NiftyOptiDx26Jun2008CE4200 or CE4250) has a good winning probability with less risk involved because it's high time those shorts must be covered up. However, we must have strict exit targets since this technical bounceback may not last long due to the current disturbances (inflation, bad global cues, political uncertainty).
Important : Before entering this trade, see for Buy>Sell volumes in Nifty Futures & Nifty ITM Options Calls and also check for double bottom formation with higher lows trendlines in Nifty intra-day chart.
Starting wednesday, the 18th of June, 2008 , Nifty has been closing in the red as -70.60(18th), -78.15(19th), -156.70(20th) & -81.15(23rd) consecutively, keeping nifty at 4266 level. A support was witnessed at around 4226 today the 23rd June & bounced itself closing at 4266.40. So, buying an ITM Call (NiftyOptiDx26Jun2008CE4200 or CE4250) has a good winning probability with less risk involved because it's high time those shorts must be covered up. However, we must have strict exit targets since this technical bounceback may not last long due to the current disturbances (inflation, bad global cues, political uncertainty).
Important : Before entering this trade, see for Buy>Sell volumes in Nifty Futures & Nifty ITM Options Calls and also check for double bottom formation with higher lows trendlines in Nifty intra-day chart.