Medium Term Trend: ↓ Down (Changes to Up above 11500)
Volatile day: Nifty yet again opened with a gap down at 11920 levels and went on to touch 11850 before a huge bout of short covering pushed it more than 200 points up. it hit a high of 11070 before dropping yet another 100 points from there. Finally it closed flat at 10997.
Nifty has become very volatile and is moving 200+ points intraday in both direction which is giving traders (on both sides) a tough time. If we keep the volatility part aside, the overall direction of market remains down and today even though markets have closed above 10985, the fact that a second consecutive closing has come below 11040 (that too weekly) is pointing towards a trend which is on the downside.
Like we mentioned yesterday, the only way Nifty to reenter bullish zone is to move back above 11200-250 zone swiftly. Today it made an attempt however lost steam towards the end. Need to see if Nifty attempts another shot at 11100 levels. Earlier in the year ( Apr-May) Nifty had broken above 11K levels after a very long consolidation of around 3 months now, moving back below this range has caused serious concern.
Todays pull back could be attributed to News flow coming from PMO office that tax on FPI could be reviewed going forward, however one wonder if its too late for that and damage is already done.We had also been mentioning that Nifty future overall OI is pretty light at ~1.6 crore however its not that light now. Its gone back to ~1.9 crores and this OI has been added on the way down.
Nifty is falling continuously and seeing these intraday pullbacks which are not supported by follow up buying the next day. We need to see Nifty reclaim 11100 and then goes back above 11200. If that happens 12K can be visited again however if it fails to do that then it can crash to 10500 and below that 10K is easily possible. Nifty is at a crucial juncture now and if todays pullback was entirely news driven then it should not last for long.
Another thing worth mentioning is that global markets were moving up while Nifty was moving down. Now that Nifty has already moved below its previous low, Dow Jones and other indices have started moving down and nearing their previous low. So we need to assess if Nifty had anticipated such a fall in the global markets already.
Happy Trading!
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