Medium Term Trend: ↓ Down (Changes to Up above 11220)
Weakness to the Fore: Nifty opened below 11900 and kept sliding down through out the day. It made a low of 11700 levels and closed at 10741, down a whopping 180 points.
We had been mentioning that markets may have hit a short term bottom around 10780 and its possible to see a move on the upside from these levels. Though Nifty moved to around 11150-75 it failed to sustained there and today even broke below 10780 (prior low) and made a new low. So 10780 was definitely not the low as we were expecting and now since it has been broken there is every chance of market falling a little more from here.
However inspite of such a brute fall today, there is a still a possibility of markets attempting to form a bottom around these levels. RSI for starters is not supporting this fall, on daily chart we saw some strong positive divergences. Also if we look at the entire pattern, the impulsive upmove started from 10583(in Feb) to 12103(May) has been retraced by almost 90% now. Impulsive move in its first leg often gets retraced by 90% ( though 75-80% retracement is more common).
We are reading the move from 10583 to 11850 as an impulsive leg and the move from 11850 to 11100 to 12103 and now to 10720 as a corrective (ABC) move. The fall from 12103 is now in its 12th week, usually the fall in our markets last for 9-10 week and any move stretching more than this is stretching things a bit far and could be living on borrowed time .
Another imp thing to notice is the weekly RSI is sitting at 34 now and when was the last time weekly RSI was seen at this level? answer is October last year when Nifty was at 10K and prior to that in 2016 when Nifty was at 7K. So its very rare for weekly RSI to drop to such low levels and whenever that happens markets usually make a bottom. Now of course this time could be different and market and RSI can go on to make new lows, but the history suggests that inspite of widespread weakness, these are not the levels where one should be shorting Nifty.
so keep a watch on 10700 levels, if it holds and Nifty start moving up then 10850 is first resistance area to watch out for above 10850 we can see 11100 once again. On the downside weakness below 10700 could push Nifty back to 10600 (which would negate our most favored and likely scenario)
Happy Trading!
Weakness to the Fore: Nifty opened below 11900 and kept sliding down through out the day. It made a low of 11700 levels and closed at 10741, down a whopping 180 points.
We had been mentioning that markets may have hit a short term bottom around 10780 and its possible to see a move on the upside from these levels. Though Nifty moved to around 11150-75 it failed to sustained there and today even broke below 10780 (prior low) and made a new low. So 10780 was definitely not the low as we were expecting and now since it has been broken there is every chance of market falling a little more from here.
However inspite of such a brute fall today, there is a still a possibility of markets attempting to form a bottom around these levels. RSI for starters is not supporting this fall, on daily chart we saw some strong positive divergences. Also if we look at the entire pattern, the impulsive upmove started from 10583(in Feb) to 12103(May) has been retraced by almost 90% now. Impulsive move in its first leg often gets retraced by 90% ( though 75-80% retracement is more common).
We are reading the move from 10583 to 11850 as an impulsive leg and the move from 11850 to 11100 to 12103 and now to 10720 as a corrective (ABC) move. The fall from 12103 is now in its 12th week, usually the fall in our markets last for 9-10 week and any move stretching more than this is stretching things a bit far and could be living on borrowed time .
Another imp thing to notice is the weekly RSI is sitting at 34 now and when was the last time weekly RSI was seen at this level? answer is October last year when Nifty was at 10K and prior to that in 2016 when Nifty was at 7K. So its very rare for weekly RSI to drop to such low levels and whenever that happens markets usually make a bottom. Now of course this time could be different and market and RSI can go on to make new lows, but the history suggests that inspite of widespread weakness, these are not the levels where one should be shorting Nifty.
so keep a watch on 10700 levels, if it holds and Nifty start moving up then 10850 is first resistance area to watch out for above 10850 we can see 11100 once again. On the downside weakness below 10700 could push Nifty back to 10600 (which would negate our most favored and likely scenario)
Happy Trading!
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