Seen above is the daily chart of the Nifty along with the Directional Movement ADX Indicator. As mentioned in earlier posts, the Nifty is locked inside a trading range inside 4200-4650, as is shown in the green rectangle. The directional movement ADX indicator is the speedometer of a trend. Like the speedometer of a car measures the speed of the car, the ADX indicator measures the speed of the trend. We get a rising line when a trend is in place, irrespective of whether it is a downtrend or an uptrend, and a falling one when the market slows down and is going through less volatile patches. Values below 20 means that the markets are currently inside a trading range and a move outside the trading range should be profitable. Values above 25 should be traded depending on the direction of the trend. Values between 10 and 15 are considered to be extreme values and rarely does the ADX indicator fall below this range. A rising line from these levels seen in conjunction with a breakout may be a good time to enter the trend.
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