Medium Term Trend: ↓Down (Changes to up above 12100)
Bounce Back Continues: Nifty continue to move on the upside and even tested 12150 levels today. It closed at 12135 (up 50 points).
We had changed the medium term trend to down and the reversal level was pegged at 12100. We have had one closing above 12100 levels already, needs to see if Nifty can close above 12100 again tomorrow as well and if that happens then probably the near term trend has changed to up as well. Hence for now we are holding the trend as down only.
Nifty has put on almost 500 points in last 5 days ( one can argue that as much points were lost too in similar time) and that is suggesting that buyers are ready and buying at every opportunity possible. Usually after a big fall, we dont like to see a V shaped recovery but prefer to see some sort of grinding and sideways movements as sometimes the V shaped recoveries are often fuelled by sentiments and greed rather than genuine buying.
Now today Nifty has made an doji like candle and the movement of last 3-4 days is appearing like a 'evening star' pattern on intraday charts. Evening star pattern is a bearish pattern however the confirmation for this pattern will come only if Nifty breaks below 12K level in next 1-2 trading sessions.
In Nutshell, though markets are looking strong they are also turning overbought and the pattern on intraday chart is looking like a possible 'evening star' hence some bit of caution is warranted at these levels. If market continues to move up and make a close above 12100-12150 tomorrow as well then there is very little will be left for the support of bulls. However till that happens, there is a chance that a strong move down is also witnessed in next 1-2 trading sessions
Happy Trading!!
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