Nifty Technical Analysis: Outlook and Trend for 01st Sep 2020

Medium Term Trend:  ↑UP (Changes to down below 11275)

Manic Monday: Nifty opened with a 100+ gains around 11800 levels, but it was short lived and Nifty soon started cracking and lost more than 400+ points from its day high ( driven by India china situation at LaC and profit booking) to close at 11390 down 260 points.

Todays turnaround mark ( specially the area from such a sharp reversal was seen) does make an interesting and significant change on the overall chart patterns. In last few posts we have maintained that 11300-11650 is a significant zone and if Nifty manages to cross above it then we can forget about any major correction in near term. We had also explained why this area was important. Last Friday market closed at 11650 levels and today it opened with a 100+ gap which indicated(for a short while) that perhaps markets wants to runaway from here however it couldn't sustain there and dropped to 11350 before day close. Markets tendency to open with a gap ( especially from a crucial resistance level) and then erasing those gains and going down deep in negative is indicative of ' bull trap'. 11300-11650 was a big range and market almost covered this entire area in just session today.

Todays ferocious downmove does raise serious doubt about the sustainability of the current uptrend. Questions are being asked if trend is reversed and markets are ready for a major correction which is not seen since last few months. In our opinion, one should not form an opinion basis just one day movement. Nifty has to sustain below todays low ( and below 11275) for near term trend to change. So unless we see sustained trading below todays low, it will be premature to assume that uptrend has finished. Having said this, we don't recommend going long at current levels too. Long position should have been exited today once 11550-11600 levels broke. If some one is still holding on to longs then 11275 (closing basis) should be final SL.

So to summarise, its time to be cautious but not bearish (not yet). Todays fall does have the capability of changing the near term trend and push markets in corrective territory however we need more weakness below todays low and then below 11275 levels to conclude same. So its time to observe markets and wait on sidelines before taking a trading call.

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