What happens the day after a 3% move

What a massive move it was today in the markets with Nifty gaining more than 3%, something that was last seen in September 2013. Since we started trading Nifty futures, this is the 99th occasion wherein Nifty has closed above 3% .

Its interesting to note that of the 98 occasions, the next day has seen momentum continue only on 52 occasions (i.e., 53% of the time) while on 46 occasions, we actually saw the markets reacting.

When it comes to average gains and average losses (using Geomean), the swing turns to the negative side with average loss being to the tune of 1.98% vs average gains of 1.71%.

With statistics being divided more or less equally, I believe that the better way to approach the situation would be to continue to hold on (if one is already long) to their position and exit only on a signal they can trust (or use). 

Since we shall see the final phase of elections on Monday and the results will be declared (more or less) on Friday, coming week should continue to remain volatile with both sharp rallies and falls being equally possible.

 

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About Prashanth

Have been a full time participant in the stock markets since 1996. Run a Yahoo Group where focus is exclusively on discussions of the Indian Markets using Technical Analysis as the tool (groups.yahoo.com/group/technical-investor)
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