How to Profit from Swing Trade in Oversold Bearish Market

In our last blog we looked at “How to Profit from Day Trade in Oversold Bearish Market”. And explained – with real trade and brokerage result – how Superior Profit traders could adapt trading style to switch to Day Trade and earn income even in that confusing situation.

Why confusing? You would remember that in Bearish market a trader is not bold (or foolish) enough to take Long position. And as it becomes Oversold, she is also not confident to take Short position. She is utterly confused into inaction. And that inaction is the right thing to do. Except …

Except if we have a robust signal that tells us – with sufficient probibility (not 100% but sufficient to attempt a Low Risk High Reward trade) – to take a trade against prevailing trend. A Long trade in Oversold Bearish Market.

In CUE charts such a signal is the Headwind Signal. And some of our traders used that to gain more than 140% profit from a single instrument within one day using Options on Bank Nifty Index; which is the Banking index in National Stock Exchange of India (Bank Nifty Futures symbols for Thomson Reuters is NBNc1).

Let us look at Bank Nifty Futures (NBNc1) daily chart through Superior Profit’s powerful Hop On template.

We will see how our traders took very profitable Short trade; booked profit and reversed position to take a Long trade and again booked large profit. Confidently and easily.

We can see from the chart above that on 4th Jan, 2016 Bank Nifty bounced down from the Memory line (the automatically calculated and drawn smart trend lines in CUE charts) and signalled a Go With Flow Trend Following Short trade – we can see that easily from the magenta color Candle on this day (marked as point A in the chart). This was a clear Shorting point.

Once she Shorted Bank Nifty on 4th Jan, profit booking point would be at Lower Boundary – which was hit on 7th January (marked as point B in the chart). Using At The Money Monthly Option that trade easily yielded more than 100% profit. And she exited the trade. Without being greedy more and more. This is Superior Profit way of taking money off the table once it is there.

Now, Bank Nifty became Bearish. And Oversold. That it was Oversold could be seen from price hitting Lower Boundary and also from Stretch signal (not shown on this chart). And as we mentioned, this is not a time to take Long or Short trade … unless …

Unless there is a Headwind signal. Which came on 21st Jan (marked as point C in the chart). The green diamond Headwind signal indicated that downward Acceleration, Speed, Momentum were slowing and that the instrument had a chance of going up.

Stop Loss would be just below the Candle with the Headwind signal. A pretty narrow Stop Loss as you can see.

Also, on that Headwind signal day, Activty was Very High (marked as point D in the chart) indicating buyers were aggressively buying.

With all these signals aligned, our traders took a Bank Nifty Call position on the Headwind day (using Jan 15000 Call).

Next day (the last bar in the chart) Bank Nifty Opened with Gap Up. And the position had more than 40% profit. The Option was already In The Money. Our traders – well, smart traders as they happen to be (being in Superior Profit Community – we don’t expect much else) – closed the entire position at 40%.

​And they watched Bank Nifty Fine Tune Real Time Chart to see if they could re-enter a position again. This Fine Tune chart is shown below.

As again can be seen from the 5 Minute Real Time chart above, on Friday, 22nd Jan, marked Opened with Gap Up. That was the point our traders booked 40% proift on Bank Nifty 15000 Call.

And they watched that price did not go below Early Range Low (which would mean a potential Gap Short trade). Instead, it moved inside Early Range for a while and then went up. At this point (marked as piont A in above chart) our traders entered Bank Nifty Call Option again – however, they used higher strike of 16000 (January expiry). this Option costed about 20 INR each.

Intraday Stop Loss would be on the lower end of Early Range. Which was never touched.

As per Superior Profit guideline, our traders also put the profit taking order – and looking at the momentum of Bank Nifty (and other indexes like Nifty and Sensex – which are not shown here), they put the profit target at 100% and placed the order to close partial position (usually half position) at that profit target.

During the day Bank Nifty went up and at the peak (marked as point B in chart) the same Option sold at above 50 INR. Thus hitting our target price and booking 100% proift on partial position. Rest of the position is still being held. And it is a virtually guaranteed profitable trade from here onwards.

Thus went the result: within a span of one day, our traders could achieve profit 140% profit and actually book proift in their account using the Headwind signal and then Fine Tune Real Time chart.

Did our traders look at anything else? Yes. They also had looked at the sector wise performance of National Stock Exchange ‘s main Index – Nifty index – before deciding to enter/re-enter the Bank Nifty Call Option. Below is a snapshot of that.

[Note: .NSEI is the Thomson Reuters symbol of Nifty Index. ]

As you can see, Financials was the best performing sector of all.

Similar strength of Financials was displayed both on Headwind day (Thursday) and also on Friday. This gave our traders more confidence to take and re-take the Bank Nifty Call Option trades.

This real life example illustrates that once a trader learns how to use the Superior Profit signals, they can take a profitable Low Risk High Reward trade in almost any market condition. In other words, Superior Profit provides trade setup for all market conditions based on unambiguous color coded signals and and easy to follow rule book.

The Signals and Rule Book are available in the complimentary bookset in the Education Center.

One more note. When watching that Financials was the stronges sector on Thursday, our traders also drilled down (they are a curious lot !) to see which stock inside Financials was worth taking a position in – if any.

They had found Bank of India to be the most appealing stock to take a Long position and had in fact entered that trade as well. As is common for a true Superior Profit trader, once a clear signal comes, she does not hesitate to take a position.

Result? On Friday Bank of India went up by 5.7%. Pretty good profit in a day for a stock investment !

As you may see, be it using Stock or Futures of Options, once we identify the direction of an instrument. We are able to profit from it. In a consistent manner.

Does your investing system allows you to do the same?

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