How to Buy the Dip in a Bull Market

Hello viewers. Welcome to the Fast Profits Daily. Myself Brijesh Bhatia.

Well, this is a roaring bull market. We are trading at all-time highs. 16,500 levels. We might soon see 17,000-18,000 at the higher levels because if you look at the trend, it's been very, very bullish now.

Although June and July were slightly sluggish but since the start of August, Nifty has been on a roll and heading higher and higher.

Well there is a common problem for traders. When to buy the dip? At what level should you buy the dip?

As a trader the risk-reward plays an important role. When you're looking at trading per se, the amount of loss is very, very important. So in this video, I'll be discussing how I do on buying the dips. The levels which I look at. The set ups I look at when buying the dips.

So I have three parameters here. The first will be Fibonacci. In in case you haven't watched my Fibonacci video, look at my proven trading set ups when I have recorded a video on a scientific way to judge the market or analyse the market, and you will get an overview on how Fibonacci works.

The second is RSI which is generally the relative strength and third is stochastics. So these are very important for buying the dips. So let's look at the chart over here.

 

This is the Nifty chart on your screen. I'm using three Fibonacci levels here, 38.2, 50, 61.8. These three are important Fibonacci numbers for me when I want to look at the retracement levels.

Although sometimes it happens that when you look at the shorter time frames on Nifty or whatever instrument you are using, generally retrace 78.6 or 88.6 whatever but for the trend to continue on the bullish momentum and for the trend to be very, very strong, I generally look at 3 retracements, 38.2, 50, and 61.8.

My second step is to look at the RSI. If you look at the RSI there are 2 red lines over here. The first is 50 and second is 40. So first, the retracement should be between 38.2 to 50 or 61.8. Second my RSI should be between 40 and 50. So this is the second criteria. Again the RSI I'm using is nine period on daily chat over here. I'm not using 14, the default one. So you need to change to 9.

Third important parameter is stochastics because I also want to look at the moment with the strength. So the momentum should be very, very strong. I've recorded the statistic video as well where I have discussed the strategy on that. So do watch that video as well in the proven trading setups.

Well for stochastics I have changed it to 5, 3, 3. Generally, the defaults are 14, 3, 1. I have changed it to 5, 3, 3 because I also want to look at the momentum, faster momentum, where I can get quick ins and outs. Again, I'm not looking at intraday per se over here. I'm looking at a trend where I can buy the dip and look at the momentum.

So now if you look at the chart of the Nifty, to identify the trend, it is bullish or bearish, I have taken 200-days average. So the price, whatever instrument you are trading, it should be above the 200-days average. So if you look at the orange line, it's above the 200-days average.

Now the first criteria of Fibonacci, I have taken the swing lows to highs. I have plotted 38.2, 50, and 61.8. The price took support over here at 38.2%. RSI back in the range of 40-50 between the two red lines. If it's below 40 it's okay, but I generally prefer looking for RSI between 40 to 50 because it indicates the strength is really there into the instrument.

Third stochastics. It should be below 30 now, between 20 to 30 is also fine but I generally look at near 20 levels which indicates the oversold level. It tested over there. We got a buy trigger and then from around 11,550-11,600, we have witnessed a huge rally to 13,500.

 

Look at his second example over here. Now again, the swings have been taken. Now if you look at the momentum, the price retraced to 38.2, though it was slightly above 38.2, the 38.2 average was placed somewhere around the 13,550-13,560 level, and low was made somewhere around 590-596 levels. So it was very much near.

Now look at the RSI. Between 40 and 50, slightly below 40 as well, went down to around 30 levels. If you look at the stochastics diluting again into the oversold zone and we witnessed a positive momentum after taking support. The next day was again a big rally with momentum and then it went on to the higher level.

The third chart I showing you is a stock. So you can use it on stocks as well. This is Tata Steel.

 

Again I've taken the swing. Prices above 200-days average. Again the bull phase is there in this stock. I have taken the swings. If you look at the price, the support is around 38.2%. RSI between 40 and 50 at the same time and stochastics again going into the oversold zone and we it came from the oversold zone to the higher levels we entered the trade.

 

Again Tata Steel another example. Now this just watch it carefully. Price retraced to 38.2 level, RSI between 40 and 50 but here the stochastics was not at oversold level.

So even though my RSI and Fibonacci levels were meeting my criteria, the stochastics was not meeting. So I will ignore this trade because it didn't meet all my three criteria.

So you can try this on various stocks. Sometimes it might happen that some of the stocks have a tendency to retrace to 78.6%. So you can add 78.6%. For example, Reliance. Generally, it retraces to 78.6 or 88.6 sometimes and generally, it wants to retrace from those levels.

So you need to keep a watch. Just try to back test some of the numbers over here on the stocks or instruments, whatever, you're trading. But these systems generally helps you to buy the dips at good levels, favourable risk reward ratio, and most importantly, the stop losses are much smaller.

You tend to get bigger rallies because you're playing with supports, with Fibonacci, with the strength of the trend, with RSI, and the momentum which stochastics? So I am playing with all three what traders need and that's the way I generally buy the dips.

You can use this on any stock. You can use this on any commodity, on any currency, on any crypto. So this is a universal system, which I generally follow in equities and commodities. For commodity traders, if you look at copper, generally, it has a tendency to retract 50 to 61.8 point and other criteria are met on 2-hours chart.

So you can look for short-term medium term trades, on 2-hours chart of copper. Generally the system works there. So you need to slightly modify it. What kind of instrument and type you are using.

So that's all. Signing off. Brijesh Bhatia. Thank you.