Nifty @ 14240 down 130 points: Previous swing low broken
Last week had suspected Nifty forming a "bull trap" (It had then closed at 14590 levels) and had discussed -
"We have often seen that when markets opens with a gap-up above previous day high but fails to sustain it and move sharply down then it could be a sign of "bull trap"
"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".
Now since then, in last 2 trading sessions, Nifty has lost about 350 points and even broken below (marginally) previous swing low of 14240 which is now lending more credibility to theory that Nifty indeed formed a bull trap at 14600-700 levels. Overall the trend still remains UP but its hanging by a weak thread. Having broken below 14250 the next support level for Nifty is around 14050-14000 and its possible that we see Nifty testing this level in next few trading sessions.
Also we have seen a faster retracement of last rally ( 14250-14750 took 3 days and same is 100% retraced in 2 trading sessions) which is also indicating towards bears getting stronger in the markets.
If Nifty manages to break below 14K levels then that will put an even bigger question mark on the current rally and as per us could mark the beginning of a larger degree correction (eluding since last 5-6 months). If on the other hand 14250 is held and Nifty start moving up then first resistance is at 14450 levels. Nifty need to move above this level for Bulls to gain any comfort.
In Nutshell, more and more factors (including the price charts) are indicating towards Bears getting stronger and Nifty needs to make a move above 14450 very fast for bulls to come in play else Bears can run away pretty quickly. 14K is the final support and hope for bulls and if that goes as well then we can see some extended fall in next few sessions. As a trader don't be in hurry to buy dips for now, let this weakness playout first.
Happy Trading
