SEBI registration No. INH000006235

The last few weeks have been bad if you are a bull in the stock markets. With several banking scams like the PNB scam coming into the limelight, market sentiment has turned very bearish indicating a clear lack of confidence amongst the bulls to carry forward their buy positions lately.

However, a telling sign that markets are currently in a bearish mode are indicated in the form of gap formation in charts. Gaps are generally a difference between prior closing and current opening price or one could say a place where there are no trades. There are primarily 2 types of gaps which are gap up & gap down as indicated in the picture below.

Gaps are a perfect reaction to either an extremely positive or negative sentiment prevailing in the market. Ideally as per Japanese candlesticks, the place from where the gap starts in a gap up becomes your support as it indicates confidence amongst traders to trade long and a gap down indicates a thumb down by traders indicating further short positions are being added based on the negative news or sentiment in the market. If you click on the link given here, you would understand the 2 most important gap down resistances i.e. 10586 & 10784 have not been breached on a closing basis by the bulls. Unless Nifty starts trading above 10586 on a closing basis, this bull market will not continue and we could see further lower levels in the coming few weeks.

Gaps generally occur in intraday i.e. 15 minute & 5 minute charts and hence serve an ideal purpose to make easy profits both in long & short positions. Hence good technical knowledge coupled with strong understanding of candlesticks & indicators can go a long way in helping you profit irrespective of a bull or bear market.

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