Nifty Analysis: Outlook and Trend for 31st Mar 2020

Medium Term Trend: ↓Down (Changes to up above 9900)
Weakness resumes: Nifty opened weak around 8400 and held on to its opening lows but gave up in the end. It closed below 8300 with a substantial loss of 380 points.

There is still a lot of scepticism and nervousness which is visible at high levels ( which is understandable). In last post we had mentioned that short term trend has changed to +ve and we need to see if it has powers to change the medium term or reverses back to -ve zone. Today, once 8300 was broken, chances of short term again going back to -ve zone has increased.

There are couple of interesting observations I would like to highlight in todays post so would request everyone to read carefully (and atleast couple of times).

Regular readers of the blog would be aware that Nifty had posted an 'extracting triangle' (in late Feb) which we had mentioned in our 24th Feb post (same can be read here : Nifty update for 25th Feb). below is the chart which we had put.

Nifty daily ( Feb 2020)

This was a bearish 'extracting triangle' (more about such formations can be read here: Extracting Triangles) which got completed around 12100-12200 and after its completion Nifty corrected almost 5000 points in 4-5 weeks. Now everyone can see the power of extracting triangle and how it formed during this market top.

Now look at Nifty chart for last few days, there is a possibility that a similar extracting triangle ( bullish this time) is getting formed at lower levels. This has been in formation since Nifty hit a high of 10200 level (on the first freeze day). Here A>C and D>B. So far E is smaller than C ( rallies are getting bigger and falls are getting smaller)

Nifty Daily

As long as E remain smaller than C, meaning Nifty doesn't fall below ~7700 levels and then mkt goes on to recover and make a new high above 9100 levels will confirm completion of a bullish extracting triangle. Last extracting triangle created a top can a new one create a bottom? Yes it can provided it indeed turns out to be an extracting triangle ( i.e, E remains smaller C followed up by a faster retracement above 9100 levels)

Now lets see another chart. We had also mentioned a possibility of markets completing a contracting wedge recently.

Nifty Hourly

Breakout point for this contraction/wedge is around 8150-8200 levels so that should act as an support in near term however if it goes down then the next support will be around 7750-7800 levels which is also the starting point of 'B' leg of extracting triangle (or D leg of contracting wedge). Weakness below 8150 and then 7750 will negate the formation of extracting triangle and wedge (both) but as long as these level stands there is always a chance of market staging a comeback.

In Summary if 8150 or 7750 holds and we see a sharp recovery back above 9100 levels then there is a strong (infact very strong) possibility that bottoming out process is over and done and market is ready to scale new heights. However consistent weakness below 7750 levels will push markets again in deep correction mode time wise ( like we have been mentioning in prior posts). Hence one need to be careful and accordingly trade.

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Nifty Analysis: Outlook and Trend for 30th Mar 2020

Medium Term Trend: ↓Down (Changes to up above 9900)

Volatility Continues: Nifty opened strong and even touched 9K+ levels, but gave up all the gains to close flat at 8660 levels.

Nifty might have given up 400-500 point from days high but important thing is that markets have managed to close above 8500 levels. Second successive weekly close has come above 8500 levels which is a positive sign. Though we would have liked to see a weekly close above 8800 levels, nifty did hit that level intraday but couldnt manage to hold on to it. profit booking by traders once the rate cut news was out kept the selling pressure up. Rate cut news was more or less factored in prices already hence markets ignored it today.

Going forward , we need to see if markets is managing to hold on to 8000-8500 levels in coming days. if it does then chances of markets making another move towards 10K is there but if weakness resumes below 8500 and then below 8k levels then probably we are heading towards deeper correction which is likely to stay for some time to come. For now, chances of first scenario playing out is higher than the second but anything is possible in markets so lets see.

Nutshell, short term trend has changed to UP and a move 9900 will change the medium term to UP as well, so we need to see if short term trend has the power and momentum to change the  medium term too. Trading wise will still recommend avoiding short ( as long as 8K level holds).

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Nifty Analysis: Outlook and Trend for 27th Mar 2020

Medium Term Trend: ↓Down (Changes to up above 9900)

Nifty Exhibiting Strength: Nifty opened around 8500 and went on to cross 8700. There was some usual volatility and Nifty threatened to gave up all its gain but fnally managed to close above 8600 and added 300+ points in the process.

Yesterday we had mentioned that Nifty seems to have broken a falling wedge (which is a bullish pattern) hence the chances are that we see some sharp movement from here. We had also advised against going short in this markets and instead advocated going long on dips. Nifty did touch almost 8800 levels today itself.

Also we have been mentioning that correction seems to be done around 8500 levels (Mondays fall had raised a doubt but nifty has managed to climb backup again so it can be ignored). Last weekly close was above 8500 and if Nifty can close again above 8500 ( 8800 preferably) then we will have positive weekly close in many weeks. Then a monthly close above these levels will be a strong indication that perhaps bottom is done already.

So will keep it short today, overall view remains same, the current thrust from the ralling wedge has the capacity to push markets above 9k levels so avoild initiating shorts (as long as 8100-8200 holds). If Nifty manages to hold/move back above 8500-9000 range then the chances of it starting a fresh trend on the upside will increase. Volatility is still pretty high (VIX is 70+ which is insane). Some stability can be expected once VIX start trading below 40 ( which is still very far away). Remember markets will find its bottom and start a trend on the upside much before this Corona issue start to dissipate. Markets always prempts and acts in advance ( thats what make them intresting isnt it?).

From trading perspective we did enter long around 8K levels yesterday,To join our free algorithm based buy/sell whatsapp service during market hours, pls click below link or whatsapp @ 9319321906 

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Nifty Analysis: Outlook and Trend for 26th Mar 2020

Medium Term Trend: ↓Down (Changes to up above 9900)

Back above 8000: Nifty opened flat and quickly turned negative. However buying around 7800 levels helped push Nifty back above 8k levels. It made a high of 8375 and closed at 8320 levels, up by 520 points.

Monday's mega fall ( from 8700 to 7600 levels) had raised doubt if markets were preparing themselves for a long-haul in Bear territory. Market had already finished most of the correction (price wise and on many others parameters which we have already shared in previous posts) around 8400 levels last week and another 10%+ fall on Monday did raise serious question marks. However since we are analysing monthly charts we need to see how and where Nifty finishes the current month. Todays sharp recoery is a positive news for the bulls.

If in next few sessions markets can move above and 8500-9000 levels then probably we can say that correction is over and markets are ready to move up but in case markets gets dragged down to 7500 levels once again and we start spending more time there then it could mean a lot more of pain is still pending.

Price wise correction is mostly done by markets and now the only question is when do we start recovering. Answer is if we see a fast recovering from here quickly then we can see a new trend starting on the upside very soon but if we fail to move above 8500-9000 levels and markets keep dropping below 8k levels then the chances are that we spend atleast 8-10 months in a tight range ( time wise correction). In time wise correction we may not see much fall in prices but it will be test of patience of investors and traders both.

From trading perspective. Nifty seems to have broken a falling wedge/contracting triangle (once it moved above 8100 levels) which is a strong bullish sign and could push Nifty back above 9000-9500 levels in a sharp move. More about triangle pattern can be read at:

http://niftywaveindia.blogspot.com/2018/12/technical-learning-contracting-and.html

Nifty Hourly chart

In a nutshell, move back above 8300 levels is a welcome and positive sign and if Nifty is able to recover and move above 8500-8800-9000 levels in next couple of trading sessions then probably we can expect start of fresh leg on the upside pretty soon. However a drop below 8K levels back to 7500 will tilt the favour of markets going deep in correction mode (time wise). From trading perspective, it seems that markets have broken out of a falling contracting triangle so sharp movement on the upside can be expected in coming sessions. Try to avoid going short and buy on dips. Buying around 8100-8200 levels (if it goes there) with a Sl of around 7900 could be a sound strategy.

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Nifty Analysis: Outlook and Trend for 24th Mar 2020

Medium Term Trend: ↓Down (Changes to up above 10100)

Panic On Dalal Street: Nifty once again opened with a huge gap down around 8000 and triggered a circuit breaker around 7800 levels weakness continued after markets resumed trading and Nifty dropped to 7600 levels. It closed at 7610 down by a whopping 13%.

Its difficult to believe your eyes when you see Nifty trading around 7500 levels. Who would have imagined that markets will see such a sharp fall in matter of days (corona or no corona). This fall has been vicious and spiteful and has knocked the air out of markets lungs. Period.

Last few updates we had mentioned that around 8500 market has attained equality with all the major falls it has seen and its likely that we make a bottom around these levels and try to move up. Weekly close was also above 8500, however todays fall has raised doubts that markets are not yet done with the fall and has more legs to go ( may be timewise if not pricewise). Markets are spending too much time below 8500-9000 and its not a good sign. If we continue to spend time below 9k then we are ruling out a smart recovery immediately. Its not one of those correction which happens just to square off traders position (bear trap) and moves up after doing so. This is wealth destruction and if we continue to trade below 9k the chances of this correction extending for next few months will increase dramatically ( its already increased aa lot after todays fall). 

When one analyse markets for a long term perspective ( in this case for almost 20-30 years) it has to be done on  monthly charts. Now when we look at current month chart, the position does not look good but March has still few more trading sessions to go. If it can make a smart comeback above 8500-9000 levels then some bit of hope of a fast recovery will be rekindled however if we end current month around same levels or around 8k then we are going for a long-long correction (time wise).

When we say long correction it means atleast most of 2020 and probably some bit (1st qtr)  of 2021 as well. Markets are likely to spend next 10-12  months in sideways to weak trend ( like it did between 2001-2003 where Sensex kept trading between 3000-4000). Its Possible that markets are damaged too much to make a smart recovery from here ( another few trading sessions should confirm that).

So even though we were expecting markets to make a bottom around 8500 zone and move up, but after seeing todays move its possible that markets are preparing itself for a long haul in bear territory. Leaders/sectors we had seen outperforming in last few years will start underperforming and new leaders and sectors will emerge. This will make large investors reshuffle or rejig their portfolio. This entire process is its a time consuming process and will happen slowly and take its own sweet time. To avoid such a scenario markets must make a quick recovery and make it fast.

Looking at market PE , currently its sitting at 18. Mean/average PE of market is around 20.Just in Jan we were trading around a PE of 30 and just in a matter of days we have come down to 18. Lowest PE Nifty has seen is ~12 in 2008 & 2003 (mind you PE can continue to come down even when markets moves up like it happened in 2003). For long term perspective a PE ration of anything between 12-20 is very good for investment so one should continue to invest in good stocks, just be mindful of the stocks which did exceedingly well in previous bull run (like banks) as those may underperform now.Alsoa PE ratio below 15-16 has never sustained in India for long so keep that in mind too.

So just to summarise, continuous weakness below 8500 has raised a possibility that markets are preparing themselves for a long haul in bear trajectory( 10-12 months). In case we dont see a smart recovery above 9k soon then the chances are we will spend a lot more time around these levels. For long term investors it is a good news as they will get a once in a lifetime opportunity to invest but not so good news for people who have a large portfolio as it would mean they have to endure a lot more pain for a lot more time and possibly reshuffle their portfolio as well. From trading perspective , better to stay away till VIX cool downs to respectable levels ( less than 30).

Happy Trading! 

Nifty Analysis: Outlook and Trend for 23rd Mar 2020

Medium Term Trend: ↓Down (Changes to up above 10100)

Smart Comeback: Nifty opened flattish but kept on moving upwards and went on to cross 8800 intraday. it closed at 8750 levels with strong gains.

We have continuously been mentioning that at 8500-9000 levels market has achieved correction which in magnitude is already measuring upto 2008 correction ( and that was the biggest correction we have seen in our markets). since volatility is high, a sharp movement can take place from any level, but logically we shouldnot trade consistently below 8500 levels for long. Yesterday markets broke it and close below it marginally but today it has again bounced back. So even if Nifty breaks below it , its likely to be temporary.

We had also mentioned how the long term RSI is already at a level which is only seen during major bottom areas. Now lets just have a look at another data point. This is monthly chart of sensex with 100DSMA.

Sensex Monthly

The last time this moving average was touched was way back in 2008 and 12 years later now in 2020. Which again proves that we are at a vey critical and important juncture from 'All Time Trend'  perspective.

So will keep in short, overall view remains same . We are nearing an important area which could form a bottom for next 10 years perspective hence its prudent to invest in good quality stock at these levels. Those who are predictiong doomdsday kind of scenario and predicting the end of the world are getting ahead of themselves. From trading perspective yesterday and today Nifty offered good levels to initiate buys & we did buy @ 7950 levels yesterday & 8240 levels today again.

We dont recommend holding shorts as long as Nifty is trading above 8300 levels and a cross above 8900-9k levels can push Nifty back above 9500-9700 levels. Final hurdle placed at 10100 above which the medium term trend will change to up.

One more thing, markets will find its bottom a lot before this Covid-19 things begins to dissipate. Market always act in advance hence if  you are thinking that markets will make the bottom on the day a proper solution is found then you are totally wrong. Always rememeber- bullish trend emerges when the story & situation on the ground is still pretty bad.

Happy Trading!

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