Medium Term Trend:☝(UP) - Reversal level @ 15800
Nifty @ 16870 up 240 points- Nifty exhibiting strength- likely to move further up in near term
In our last post we had posted a weekly Nifty/RSI chart for last 10-12 years where it was shown that generally bottom were formed when weekly RSI touched around 35-37 levels. Weekly RSI had dropped to around 36 last week ( when Nifty was around 15700) but recovered a bit to close the week at 40. Today its sitting at 45 levels which in many ways suggesting that probably correction we had been witnessing since last 3-4 months is ended now (or about to be ended soon).
We had also mentioned that if Nifty start moving above 16700 then it could mark the beginning of a fresh upmove. Nifty did move above 16700 levels last Thursday and retraced back a little however not much selling was observed after that and today it has moved back again above 16750 ( high of Thursday) which again is indicating that probably time has come for Nifty to move back again above 17K levels.
16900-16800 was an important support level for Nifty and same was broken after 3-4 months of multiple testing where markets dropped and took support at these levels many times. Such important supports when broken should not be tested again and again. Now what we are seeing is that markets dropped towards 15700 and now in a matter of 4-5 days has again come back to test this resistance (16800-900) zone. Now what is market trying to tell us here? If it was actually weak & wanted to go for a major crash then it would not hang around important resistance zone for too long. Is it waiting for traders to go short at important resistance level so that it can go down and all the traders can make money? no sorry to say but it does not work like that. Markets are not that easy. What we are observing is that market could try and trap short traders ( around 16800-17K levels) and move up sharply from there. If its not a short trap then market needs to move down below 15800 really really fast (looking slightly improbable from here).
In Nutshell, it seems markets has changed its medium term direction and can move further up from here hence traders should be cautious in going short at these levels. Volatility is likely to remain high for some more time and sharp moves on both the sides are likely to continue but instead of 'sell on rise' traders would do well to 'buy on dips'.
Happy Trading!
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