Medium Term Trend: ↓Down (Changes to up above 12250)
Black Monday: Nifty opened with a huge gap down of 130 points at 11950 levels. It consolidated a bit around 11950 levels and gave up during last couple of hours of trading to close at 11830. Down by whopping 250 points
Todays fall was important from many perspective & it changes quite a few things. It has also conclusively settled things in the favour of bears hence we have changed the overall trend to 'down' with a reversal pegged at 12250 levels.
Originally, the bounce which Nifty generated after the budget day fall, was a V shaped recovery and once it crossed above 12150 levels, was considered a start of a fresh up leg. The fall which followed from 12250 to 11900 levels was previously seen as a corrective move (complex correction) post which nifty was supposed to open a fresh move on the upside. However we had also mentioned the possibility of entire upmove from 11600 levels forming as 'extracting triangle' . Bearish extracting triangle is a pattern where falls keep getting bigger and bigger and rallies keep getting shorter and shorter. Faster completion of last leg ( i.e, E leg confirms the completion of extracting triangle). Extracting triangles forms rarely and are indicative of distribution. Markets are initially pushed higher which is used by smart money to offload their holding as a result each subsequent rise is smaller than previous rise and eventually when the distribution is complete, markets reverses and start falling. More about extracting triangles can be read here Extracting Triangles
The other important thing which should be observed is that Nifty had formed a 'gap-up' area near 12010-12040 zone couple of days back which got filled today and interestingly enough through a 'gap-down' move only. Such patterns are called 'island reversal' and in this case its an bearish island reversal.
Now because of these 2 developments we have been forced to change our medium term trend signal to Down ( even though the previous reversal area of 11750 is yet to be tested).
Going forward nifty is likely to continue the downmove ( which is still a correction only on a larger time frame). Now this downmove can form a simple zigzag A-B-C like pattern ( currently we are assuming larger B leg got over as abcde extracting triangler and larger C leg has started) or a triangle ( ABCDE). A triangle can further be contracting or descending ( wedge). If its a contracting, then Nifty is likely to protect the lows of 11600 and the last 2 down legs ( i.e C & E) will form above 11600 only. However if its a descending triangle then its likely to hit new lows below 11600. Will have to keep an eye and observe how the pattern is shaping up in next few trading sessions.
So in nutshell, we were expecting Nifty to complete a irregular correction around 11900 ( especially after seeing the fierce bounce) and then start a new leg on the upside however todays open ( at 9.15 it became clear) confirmed that Market remains in a correction mode which is now likely to extend (both in terms of price and time) on the downside.Global markets are not in great shape and markets everywhere are tumbling hence expect the weakness to continue for now. Only silver lining we can see for bulls is that markets are a tad oversold on short term charts hence a bounce back is always on cards.
Happy Trading!
Nifty free buy/sell
Black Monday: Nifty opened with a huge gap down of 130 points at 11950 levels. It consolidated a bit around 11950 levels and gave up during last couple of hours of trading to close at 11830. Down by whopping 250 points
Todays fall was important from many perspective & it changes quite a few things. It has also conclusively settled things in the favour of bears hence we have changed the overall trend to 'down' with a reversal pegged at 12250 levels.
Originally, the bounce which Nifty generated after the budget day fall, was a V shaped recovery and once it crossed above 12150 levels, was considered a start of a fresh up leg. The fall which followed from 12250 to 11900 levels was previously seen as a corrective move (complex correction) post which nifty was supposed to open a fresh move on the upside. However we had also mentioned the possibility of entire upmove from 11600 levels forming as 'extracting triangle' . Bearish extracting triangle is a pattern where falls keep getting bigger and bigger and rallies keep getting shorter and shorter. Faster completion of last leg ( i.e, E leg confirms the completion of extracting triangle). Extracting triangles forms rarely and are indicative of distribution. Markets are initially pushed higher which is used by smart money to offload their holding as a result each subsequent rise is smaller than previous rise and eventually when the distribution is complete, markets reverses and start falling. More about extracting triangles can be read here Extracting Triangles
The other important thing which should be observed is that Nifty had formed a 'gap-up' area near 12010-12040 zone couple of days back which got filled today and interestingly enough through a 'gap-down' move only. Such patterns are called 'island reversal' and in this case its an bearish island reversal.
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| Nifty |
Now because of these 2 developments we have been forced to change our medium term trend signal to Down ( even though the previous reversal area of 11750 is yet to be tested).
Going forward nifty is likely to continue the downmove ( which is still a correction only on a larger time frame). Now this downmove can form a simple zigzag A-B-C like pattern ( currently we are assuming larger B leg got over as abcde extracting triangler and larger C leg has started) or a triangle ( ABCDE). A triangle can further be contracting or descending ( wedge). If its a contracting, then Nifty is likely to protect the lows of 11600 and the last 2 down legs ( i.e C & E) will form above 11600 only. However if its a descending triangle then its likely to hit new lows below 11600. Will have to keep an eye and observe how the pattern is shaping up in next few trading sessions.
So in nutshell, we were expecting Nifty to complete a irregular correction around 11900 ( especially after seeing the fierce bounce) and then start a new leg on the upside however todays open ( at 9.15 it became clear) confirmed that Market remains in a correction mode which is now likely to extend (both in terms of price and time) on the downside.Global markets are not in great shape and markets everywhere are tumbling hence expect the weakness to continue for now. Only silver lining we can see for bulls is that markets are a tad oversold on short term charts hence a bounce back is always on cards.
Happy Trading!
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