Shorts have been piling in since 5400 because, the last few...

Shorts have been piling in since 5400 because, the last few times people shorted 5400-5430 range (since the last RBA surprise cut), the markets moved down by 100-200 points.

Hence, a lot of 'patient' shorts started to short 5400 level and continued to average as the market moved up sharply and raced to 5550 yesterday. There are shorts who are also stuck after post brexit recovery from 5200.

At current 5500 levels, we have shorts stuck as deep as 300 points. Somehow I think, in the short-term, the market is going to hold the 5430 level even in the worst case. The market will probably move down below this level only after it has completely destroyed these shorts .

Essentially, we may be moving down for few days, but not as far down as the trapped shorts think that the market will fall. We're most likely to go to 5600 first before moving to 5300.

I think there are 2 kinds of trades here

1. Difficult but rewarding trade is to buy and hold (short-term pain) as the market dips, but it is most likely to rocket up and you'll reap profits.

2. Easy trade is to short this market on the way down (may get some profit in short-term), but long-term less rewarding and there's a chance to get trapped and lose money as the momentum is upward.

I suspect most will go for #2. It's people's nature