Good time to cover short positions: Ashwani Gujral

In a chat with ET Now, Ashwani Gujral, Fund Manager, Ashwanigujral.com, talks about the strategy traders may adopt in the coming sessions.

ET Now: Am I to presume that you believe that there is a possibility that there might be a bit of a bounce in the market from current levels?

Ashwani Gujral: That generally happens after a big decline. Nifty has fallen from 8,470 to about 8,000 levels. There had been five days of relentless selling. The selling halted on Tuesday. Now sometimes, post five-six days of downside, these sort of days lead to a bit of short covering rally. These rallies (on Nifty) tend to be 100-150 point in nature as shorts take profits at some point, particularly closer to strong supports of 7,950-8,000.

While traders should not try to trade immediately on the long side, covering of shorts seems to be a good idea. Tuesday was a day of narrow range. I would look for any reason, why the market does gap up or gap down because you will get follow through of that move, given the kind of tight range we have traded in throughout the day. I would look for 70-80 point gap on Wednesday and trade would in that direction.