Medium Term Trend: ↓Down (Changes to up above 11550)
Nifty Meltdown: Nifty went under a hammer today ( owing to Yes bank fiasco and weak global markets) and opened more than 400 points down. It managed to cut its losses to less than 300 points to close around 11K levels.
Yesterday we had mentioned that 11100-11380 range is important from near term perspective. Now the logical target below 11100 was around 11800 .Which was near to the opening levels hence it becoming more & more difficult to trade ( thanks to ever rising volatility).
Now the overall trend of the remains down no doubts about it but at the same time its possible that we do try to make some sort of bottom around these levels. We have been saying so since last few days and today (even after a gigantic fall) our views have not changed. There are couple of reasons why we feel this area is important ( 200-300 point here and there is no big deal especially considering the volatility).The key reason is that this zone has always supported markets in last 5-6 years. Lets see the chart below
Nifty Meltdown: Nifty went under a hammer today ( owing to Yes bank fiasco and weak global markets) and opened more than 400 points down. It managed to cut its losses to less than 300 points to close around 11K levels.
Yesterday we had mentioned that 11100-11380 range is important from near term perspective. Now the logical target below 11100 was around 11800 .Which was near to the opening levels hence it becoming more & more difficult to trade ( thanks to ever rising volatility).
Now the overall trend of the remains down no doubts about it but at the same time its possible that we do try to make some sort of bottom around these levels. We have been saying so since last few days and today (even after a gigantic fall) our views have not changed. There are couple of reasons why we feel this area is important ( 200-300 point here and there is no big deal especially considering the volatility).The key reason is that this zone has always supported markets in last 5-6 years. Lets see the chart below
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Nifty Weekly Chart
Whenever weekly RSI has fallen to 40 or below, market has always made an important bottom ( which is not breached in months to come) and again we are trading around same levels. Its only 1-2 times in a year that weekly RSI drops to around 40
Now unless something material is changing which is impacting the long term picture then there are chances that we try to make a bottom here. Agreed we have come down to 11K which is disturbing but its too soon to conclude if everything is finished.
Also, usually in one down-move we see max 4 down-gaps (we have mentioned this fact in many previous updates as well) and after 3 gaps its highly likely that the 4th gap is filled in next few trading sessions ( and becomes exhaustion gap). Todays gap down was indeed the 4th one and its a classic case of markets going deep in 'oversold' zone'. We need to see if market tries to fill this huge gap ( which stands in 11050-12250 zone). If it happens then again it will be a sign ( a strong one) of markets attempting to form a bottom ( permanent or temporary that will remain to be seen) around these levels.
For now we continue to see it as a normal correction which can finish around current levels. Further weakness from here could be indicative of change that are happening on long term charts. For now there are doubt but not enough evidence that things are changing from long term perspective.
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