In Intraday, some stocks get into breakout mode. And some stocks suddenly take a reversal. You must have thought - How to find such stocks on time? In this article, we'll talk about 5 structural indicators, which can help you with this.
First in our list is - Sector Spread Breakout.
If you do intraday trading, you must know, Sector-Specific moves take
place every day. Meaning, many stocks of a sector rise or fall at the same
time. For example, you can see the "Top Gainers List in NSE"' for today. If
you look closely, you will see, this list consists of stocks majorly from 2
sectors. First is Auto-Mobile Sector, second is Metal Sector. More than half of
stocks here belongs to these 2 sectors.
Because these 2 sectors had Sector-Specific moves today to the upside.
And if you check the "Top Losers List", you will see many Pharma
Stocks here. Because today, Pharma Sector had Sector-Specific move to the
downside. So, in short, if we can find out the sectors-in-action for today for
upside or downside It can give us a huge advantage in Intraday Trading.
We use the Spread Chart. We use 2 types of spread charts for this. In
the first one, we divide the Sector with Nifty 50, and in second, we divide the
Sector with Nifty 500. If you won't know what Spread Chart is, So, firstly you
will need to create a Spread Chart Watch List. Where you have to divide every
sector with Nifty 50 and Nifty 500.
If you don't have the list of all the sectors, you can find it at
NiftyIndices.com Here you can find the list of all the sectors. After making
the watchlist, things are very simple. You have to draw the trendlines in all
these charts. And then you have to wait for these trendlines to break, which
indicates a Trend Change.
You will notice, the day these trendlines are broken, that sector sees a
Sector-Specific move for next 1-2 days. Like today, we saw the breakout in
metal sector chart, then we witnessed sector-specific move in its stocks. Many
metals stocks had a good run today. Similarly, after the breakout in the
auto-mobile sector chart, we saw sector-specific move in its stocks. This
similar concept is applicable to the negative side too.
In sectors where breakout on sector charts was to the downside, sector stock broke out to the downside. This is called Sector Spread Breakout. This technique was only used by professional traders until now. But now, you can also try this. Have you used spread charts before? Did you know about this technique before? How do you pick stocks in Intraday Trading?
Previous Day High and Low.
In day trading, the
high and low of previous day has a huge relevance the next day. Many
professional traders use the high and low of the previous day as a Breakout
Point. If the stock breaks the high of the previous day, they buy the stock.
And if the stock breaks the high from above toward downside, they sell the
stock. You will see this similar pattern again and again.
When stock breaks the high or low of previous day, we see a good
breakout in that direction. You can make good profits in intraday from these
moves. You will find this pattern repeatedly on charts. I won't say this works
every time. No structural indicator works every time. Everything fails
sometimes. But the probability of this working is good enough. Meaning, if you
can integrate this technique into your strategy, you can be benefitted from
this.
I use this in almost all of my Intraday Trading Strategies. This works
for me quite nicely. Do you give weightage to the high and low of the previous
day? Or you ignore them? I am sure you ignore these things. This is a very
famous concept. This is been used for a long time by traders. I don't know
about Support or Resistance in this, but some Pivot Traders observed that the
midpoint, which is known as Pivot Point This is the most important point.
In intraday, this point decides the momentum of the stock. Using this
observation, a concept was developed, which is called Central Pivot Range. It
looks like this. Here, the midpoint has been converted into a Range or a Zone.
This zone decides the momentum of the day. If the price is above this zone,
there is a good chance that the price will stay above this
If the price comes below this zone, there is a good chance that the
price will stay below this. In fact, this zone also acts as a major
support/resistance during the day. And sometimes, this also works as a breakout
point. You can use it in many ways, as per your strategy And I am sure, if you
integrate this into your strategy, this can add a lot of value to it.
This concept was firstly discussed in the book called "Secrets of a
Pivot Boss". If you want to know more about Central Pivot Range, you
should read this book. I highly recommend. In fact, this is the best book for
Intraday Traders.
Have you ever used Central Pivot Range before? Do you think it is a good idea to integrate this into your Intraday Trading Strategy? If you do Day Trading, you must have used VWAP before. This concept is very common now. . If price is below it, we sell. But a concept which is not that famous, it is called Previous Day VWAP. It is the point where the VWAP closed the previous day at closing..
This VWAP closing price of the previous day has huge relevance the next
day. For example. here I have marked this line for the next day using the VWAP
closing point of previous day. You will consistently notice that the breakouts
on the next day are initiated after this line is touched. This line acts as
Breakout Initiator. And many times, this acts as a major Support or Resistance
for the day. So, you can use these points for breakout trading, as well as
counter trading.
I saw many Nifty Derivatives Traders (options & futures) use this concept actively while trading in Nifty. Have you used the previous day VWAP before? Opening Range Breakout. If you do intraday trading, you must have observed wild moves in the first few minutes after market open. The market goes up and down wildly during this time. Many times, you take wrong trades due to these wild moves. Observing this, a concept was developed, which is called Opening Range Breakout.
In this, we do not take any times for the first 30 Minutes. You wait for
the stock to form a High and a Low. After this, if the stock breaks high, you
buy. If the stock breaks low, you sell. And if the stock doesn't break its high
or low, you don't enter into the trade. For example, if you see, this day, the
stock broke the high. So, if your strategy was triggering a buy signal, this
was a good point to buy.
For the previous few days, neither high nor low was broken. A day before
this, the high was broken, and we observed the upside breakout. I must mention
one very important point. Many people use Opening Range Breakout alone for
trading. I highly recommend to not to use the opening range breakout alone for
trading.
Only use this as a trigger point in your strategy Meaning, if a stock is
in buying as per your strategy, and you need a point where you can buy you can
use this opening range breakout as a buying trigger. Similarly, if your
strategy has triggered selling, you can sell when the price breaks the low of
the opening range. So, use it as a Trade Trigger Point, not as a Trading
Strategy.
If you use this as a trading strategy, this might not be profitable for
you. I use this concept in all my strategies. In some strategies, I use opening
range of 30 minutes, in some I use first 10 minutes, and in others I use 1
hour. This depends on your strategy. Have you used opening range breakout
before? If yes, do you use it alone, or with something else. Do Let me
know and that’s all for today
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