Consistency of support and resistance levels is the best confirmation of trade. However, this is a very basic form of confirmation. When technical supports are being consistently hit it means that the combination of price, volumes and buying conviction is coming together to make the point an ideal buying level or selling level. However, it needs to remember that this is a basic level of confirmation and it needs to be backed up with more such data points and indicators.

More often than not, volumes are an indisputable trend catcher. Watch out for whether the volumes are showing a sharp rise around the supports and resistances. That is a better confirmation of the price trend than just look at prices and the supports and resistances. When you see clear volume spurts around the supports and the resistances, it is a much clearer indication that the price trend is sustainable.

At least for stocks that are on the F&O list, the build up in open interest can be a good indicator. Remember, OI build up has different implications. It could imply positions being built up, positions being unwound, it could also short covering and it could be pure hedge positions. However, it is useful as an additional level of trade confirmation.

What are the big traders in the market doing? Are we seeing a sudden spurt in the bulk deals and block deals in the stock? Are these bulk deals and block deals happening above the CMP or below the CMP? Are we seeing genuine long-only fund interest getting built up in the stock? These are some of the questions that big trades can answer and can give you useful inputs into a trade confirmation.

As we said earlier, don’t underestimate the power of news flows. Normally, stocks sustain their rise when there is a consistent flow of news flows that is positive. Take any sector like banking or realty. The rally in the last one year was largely backed by positive news flows. On the other hand, IT and pharma have been under pressure because the news flows on these sectors have been largely having a negative impact.

Volatility can make or break a trading idea. Focus on how the volatility in the stock is trending. A sharp rise in volatility can give you ample trading opportunities but you also need to be wary that stop losses could get triggered. That is the downside of volatility. Also volatile stocks typically tend to trend down. Stocks become more predictable when the volatility falls to lower levels. You need to impute this metrics into your trading.