Medium Term Trend: ↓Down (Changes to up above 11975)
Weakness to the fore: Nifty witnessed a massive slide on Saturday and dropped 300 points to close at 11660 levels. It gave a small bounce today from the oversold territory and Nifty managed to close just above 11700 levels.
Last 3-4 days have been brutal for the bulls and bears have absolutely ruled the markets. Nifty even broke the 11800-11770 levels and closing of last 2 days has come well below this level forcing us to change our overall trend to 'Down'. We had been bullish on Nifty for quite some time (right from 10600 levels) and were expecting Nifty to hold on to 11850-11900 levels. However market has not respected these levels & that means the overall pattern has changed now from bullish to bearish. The upmove which started from 10600 odd levels seems to have finished now and market may spend some more time in 11500 territory before resuming the uptrend.
As per our analysis there is no point in holding on to long positions now or in bottom fishing expecting a bounce back ( a bounce of 100-150 points can come any moment) but it needs to be seen if market is able to sustain those bounce. as a trader one must move in tandem with the markets and the strategy should change from 'buying on dips' to 'sell on rise'. No positional buy should be initiated till the time price confirmation is visible on the charts.
Whenever market falls big it usually doesnt give a 'V' shape recovery but spend some time consolidating and correcting a bit more.The upmove which comes after consolidation is generally the move which is sustained. If market start moving immediately from these levels then there is a chance that it wont be able to sustain ( as selling is likely to emerge again at higher levels). There are quite a few traders who are stuck in long positions and expecting markets to move up again in next few days and till the time all pre budget longs are not squared off, markets may not move much on the upside.
Having said this, the overall OI in nifty future is still pretty low and markets are not top heavy so a big fall from these levels is highly unlikely but choppiness and sharp movement on both sides is totally possible so keep that in mind.
In Nutshell, the upmove which started from 10600 odd levels seems to have finished now and market has gone into a corrective/bear trend from near term perspective. Though intermittent bounces are possible, they are unlikely to be sustained and market needs to spend some time at these levels (It might even fall a bit more from here). We can expect the resumption of uptrend only when the correction gets over and for the overall health of the markets it will be good if markets grinds and spend some more time ( 2-3 weeks) in consolidation mode so that remaning longs are frustrated and forced to square off. An upmove which follows after such a conslidation will be sustainable and a strong one.
Happy Trading!!
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