Nifty @ 14590 down 50 points: Sharp sell from 14700+ levels
After a strong rally in last couple of days, Nifty opened yet again positively and hit a high of 14750+ levels however it couldn't sustain there and slipped towards 14520 levels ( fall of 200+ points) in a brutal manner.
Now in last few posts we had mentioned that "Nifty need to break below 14250-300 levels ( and after that 13950) for any material and significant bearish options to open. Holding this level could push Nifty up again". Nifty did manage to hold on the 14250 levels and moved sharply towards 14750 levels. However it failed to close above previous high yesterday and even today after touching 14750 levels the closing level is below previous high. Now this is something which is creating some doubts about the sustainability of this last 3 days rally.
We have often seen that when markets opens with a gapup above previous day high but fails to sustain it and move sharply down then it could be a sign of "bull trap". Meaning markets invites bullish traders to form long position and just when everyone enters long, market reverses sharply without giving anyone chance to exit and "trapping' them in long positions.
We need to see how market unfolds in next 2-3 sessions to confirm if its indeed a bull trap. Today was weekly expiry hence its possible that volatility seen today was due to expiry related obligations and nothing else. Having said this a close below 14600-620 is not a very positive sign.
In summary, if, during next few sessions Nifty manages to move back above 14750 levels then probably what we saw today was just a normal correction and in that scenario Nifty is likely move further up ( towards 15K+ beyond). But in case we see continuous weakness in next 2-3 trading sessions and Nifty goes on to break below 14250-75 levels, then its highly likely that what we saw today was a 'bull trap' and in that case we could see a lot more weakness/correction moving forward. So lot depends on how Nifty trades in next 2-3 sessions hence trade accordingly.
Happy Trading
