Medium Term Trend: ☝UP (Changes to Down below 12400)
Much Awaited Correction: Nifty has been moving relentlessly and after rising for 12-14 trading sessions gave a small correction today. It gave up almost 200 points from day high to close at 12770 levels.
In one of the older post (11th Nov when Nifty had dropped to 12575 levels intraday but moved to 12750 levels before close), we had mentioned that even though Nifty has moved up it is giving advanced warning sign that probably the run-up is about to complete and we might see some correction or halt soon. Since then , though we didn't see any fall we didn't see any meaningful rally as well. Nifty may have gone to 12950 levels but today again it dropped back to 12750 levels. Now what we saw today is similar to what we had seen on 11th Nov.
11th Nov market had posted a 'hammer' pattern and today it posted an 'inverted hammer pattern' which again indicates that for short term this rally seems to be over and market might begin some sort of correction soon. Actually to us it seems that markets are in correction mode only since 11th Nov. momentum is consistently slowing down since last few trading sessions and even though we are hitting new highs, its showing negative divergences (with RSI) on hourly charts since last few days.
Now moving forward, levels around 12600 ( lows of 11th Nov) assumes a lot of significance as a break of this level could push Nifty towards 12400 levels. Any small correction should ideally be finished around or above 12600 levels and below that it can extend towards 12400 levels. Further weakness below 12400 is highly unlikely but will change the medium term trend to down if that happens. Mind you overall trend still remains up hence don't try to short this market ( not yet).
As far as our trading strategy is concerned we have exited all our longs today (initiated around 11700 levels) and booked 100% profit. Now will be observing markets for few days and will be taking a fresh trading call later ( depending on which way market is moving).
Happy Trading
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