Near Term Trend: ↓ (Down)
Market Update: Nifty opened 90 points up at 10800+ levels but couldn't sustain the momentum and after fighting 10800-825 levels throughout the day finally closed at 10780 levels up 50 points. Though it gave up most of the gains it still ended on a positive note. On intraday charts while Nifty was not successful in crossing its opening high , it did not trade below yesterdays high either. As a result now we have a small gap on intraday chart ( 10750-10765) which Nifty must protect (if it wants to go up). A close below this gap zone and continuous weakness would suggest Nifty down move is about to resume again.
On the weekly charts too Nifty is making a 'hanging man' type of pattern ( which suggest buying and support at lower levels) however we still have tomorrows day left so lets see how it shapes up and how weekly candle is finally formed. Interesting thing to note is that last week Nifty had made ' shooting star' on weekly charts which is exact opposite of 'hanging man'. However taking a trading call merely on candle pattern doesn't wok out but it does show a big fight going on between Bulls and Bears and both are looking to defend their territory at the moment.
Coming back to technical patterns, and charts, few days back, I had pointed out a possibility of Nifty breaking below 10340 in next 3-4 days. That probability is almost over now, what we are seeing is a complex corrective in the process and Nifty might spend some more time in the range before it decides to break free. Overall charts are telling that Nifty remains in a downtrend ( though it may spend some more time making zig zag moves and consolidation).
Those following Moving Averages, there is one very interesting development happening since last 2 months. 200 DEMA is trading flat since last 2 months. Historically speaking whenever 200 DEMA turns into sloping trend (i.e, start moving downwards) it remain in a downward trend for a long time ( because as the name suggests its an average of 200 days). Last time I noticed a sloping dip on 200 DEMA was way back in 2015 ( around Aug /Sep) and once it turned downwards it remained so till Aug 2016. As a result we did see some correction price wise and time wise and nifty remained weak for almost a year after that happened. Now reason I brought this point up and why 200 DEMA is trading flat is that I believe big market players and bulls are trying their best to support Nifty at lower levels and thus not allowing DEMA to turn down cause they know once it turns down it wont be easy to support Nifty afterwards. 200 DEMA is generally watched by many institution and a downward moving DEMA may not impress or give confidence to new investors and FIIs to bring more money in India . So right now bulls are firing on all cylinders to prevent 200DEMA from turning lower question is will it be enough? Just a food for thought.
So in a nutshell, if 200 DEMA turns down now then the factors supporting market currently might stop doing that ( I say might) as it will be pointless (which would in turn give Bears a free hand). Please note that its just a possibility and merely one factor among many others. I brought this to your knowledge since its important and you should know. this doesn't mean you go and start shorting Nifty left right and center. Trading is a game of possibility and one must weigh all probabilities before choosing the best one. So for now it remains a possibility and we will keep it at back of our head and see how its developing.
Trading recommendations: Part shorts have been exited and we have made decent profit and the balance short which were initiated around 10684 level are still open and is currently in red. I don't recommend going short at CMP. For new shorts one must wait however if someone is long and bullish then he should take an exit at now, wait for market to show more strength and then enter again later.
