Friday, February 8, 2019

Nifty View: Update for 11th Feb 2019

Near Term Trend:  (UP)

Market update: Nifty opened weak today around 11000 levels and kept trading weak throughout the day and ended the day at 10943 (adjusted close while actual closing was around 10930 which was the lowest point of day).

Todays move was swift and had a lot of momentum but like we always say, one day fall in a bull trend ( or one day rise in a bearish trend) usually don't mean much and one shouldn't take them too seriously. Having said this todays fall has made a big dent in the overall structure of the last 7 day uptrend. When market breaks a range which was active for a long time then prices should trade above it ( previous resistance should become a support) but if prices fall back into the range once again then it raises a question if the breakout was a 'false breakout'. It will be interesting to see how Nifty react during  next 2-3 trading sessions. Continuous weakness from here below todays low and then breaking below 10800-10830 levels would mean the  upmove has ended and market has started a new leg on the downside.

On daily charts it appears as if Nifty has made an "Evening Star" pattern. Evening star pattern is a topping pattern comprises of three candlestick( its a 3 days pattern).  Day-1: sees a  strong Bullish move ( Wednesday we saw 132 point up move) Day-2: Doji type candle where market opens strongly but give up all its gain before closing ( yesterday market opened strongly but gave up all its gain before closing & closed flat) & Day 3: is a strong bearish candle which breaks the low of Day 1 candle and that's precisely what happened today (Nifty not only broke below yesterdays low, it even broke and closed below Wednesdays low).We had mentioned in our post yesterday that once market start closing previous days low consistently that's time one should be cautious. and today market not only closed below yesterdays low, it even broke below prior day close as well.

While there are plenty of indicators pointing towards a weak market there are many indicators which are suggesting that up move is still intact. short term RSI is giving a positive divergence and key technical indicators and oscillators on daily chart are still in 'buy' mode. Bank Nifty which had been giving a negative divergence till date has given a positive divergence today ( & it fell just 0.34% while Nifty had fallen 1.14%). So there is a possibility that move today was just a 'calibration' of indices or indices catching up with each other. Also inspite of such a massive fall the VIX didn't rise at all and still lying around 15 which is really surprising ( goes in favour of bulls). Even the OI in Nifty futures didn't see any increase ( on the contrary saw a fall which suggest long unwinding). PCR dipped slightly but its still in favour of bulls.

In nutshell, its a mixed bag out there. Though for now the uptrend remains intact, it has weakened considerably and is hanging by a thin thread. The risk on downside have increased manifolds since yesterday. Nifty need to make a strong recovery in next 1-2 trading session to cancel out the negative impact of todays fall. On the other hand continuous weakness below todays low and then breaking below 10800 level would mean the 'break out' we witnessed during last 2 days was a false breakout and Nifty has opened another leg down.

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