Nifty View: Update for 15th Jan 2019

Near Term Trend: ↔ (sideways)

Market update: Nifty opened with a slight gap down at 10750 levels and dropped sub 10700 levels intraday trading before closing at 10737 levels down 60 points.

10750 has been a formidable support for nifty and today Nifty broke it and even the contraction channel was broken on the downside still we have changed the near term trend to 'sideways' from 'down'. Lack of impulse or momentum in the current fall is raising question if its indeed the start of a fresh downmove or just a corrective move (which is extending time wise and price wise)

From trading perspective we decided to cover our remaining shorts around 10700 levels in the morning. There were many traders who went short today once the 10750 level was broken ( and market gave a breakout below the contraction range) thinking downmove has started. However for a downmove to begin there has to be an impulse which is clearly missing since last few days. Thats the reason we decided to exit. But it still doesn't mean that Nifty is turning bullish and should immediately go long. Market can still fall from here in next few days but the chances of same have reduced a bit for the time being.

So for now we need to watch Nifty movement closely for next few days and then see in which direction to trade. If we feel strength is returning to markets then we wont hesitate from taking a long position. As per our view, nifty should have seen the start of a downmove trend by now but since its still stuck in a range and that could mean one more leg on the upside is pending.

Technically speaking, we are still in a complex corrective and all we are saying is that probably Nifty will spend some more time in the correction zone before the actual downmove actually begins. So lets see how Nifty behaves in next 2-3 trading sessions we will accordingly see what needs to be done.

Trading Recommendation: We exited our balance short position @10700 levels and currently have no open positions. Like mentioned above we need to observe markets for few trading session to decide what needs to be done. 

Happy Trading to you!

Nifty Trade Update -14th Jan 2019

Update 12:26 PM:  Nifty CMP  10704 - Nifty cover balance short now. Position NIL

Open short Positions:
NIL

Nifty Weekly Charts: Inside bar pattern

Nifty View: Inside bar pattern on Weekly chart

In the morning I tweeted about Nifty making a "inside bar" pattern on weekly charts. Inside bar patterns occurs when Market trades between the high and lows of previous trading session. Here we are discussing weekly charts ( one candle for one week) hence 'inside bar' means for entire week Nifty failed to take out the highs and lows of previous week. This again point us in the direction which says markets are contracting and usually all contractions are followed up by expansion which might begin with an violent action.

Now why this pattern assumes significance is because this is something which is not very common, in 2018 it happened just 2 times and you can see both times it followed by a trend movement in Nifty.  Another point worth noticing is that last week candle was actually a Doji candle  (Doji signifies indecisiveness where open and close rates are almost same). So there are more than 1 or 2 factors which are saying that markets are ready to move from here now. 

Nifty Weekly chart

Markets can not remain in a range, off course they can spend some time in a narrow range but sooner or later they have to break. It happens because traders and investor get bored of seeing same prices day in day out. I do not want to predict the direction of the breakout however regular reader of my blog are aware that I have been bearish on Markets for quite some time so I wont be surprised if the breakout happens on the downside. I am bearish because charts and prices are telling me so but if charts changes tomorrow so will my views. As a trader, we have to be prepared for all scenarios ( including bullish ones) and while today charts are pointing down it can change anytime.

Just one word of caution, this contraction of range has become too obvious and most traders are now aware of it so don't be in any hurry to trade the breakout even if that means losing 40-50 even 100 points. I don't think it will be easy to trade going forward even though you  knows that break out is going to happen. Reason I say so is that  Initial break out may be (I say may be) a false breakout so first let market show that its actually broken out and trend has begun. No one can time the markets and no one can buy at bottom and sell at top so don't even think about doing so.

Nifty View: Update for 14th Jan 2019

Near Term Trend:  ↓ (Down)

Market update: Nifty opened at par and as the trend has been recently, failed to add any points above the opening price but at the same time support came when Nifty turned lower and touched 10740 levels. Market finally closed at 10795 levels down 25 points.

Bulls are supporting market whenever market turns lower and 10740-10750 area has turned out to be a formidable support for Nifty. Please note its in line with our view that market is in 'contraction' mode and support area is moving up and up ( 10340 /10530/10630 now 10740).  Similarly the resistance area is also coming down. Bulls are supporting Nifty at every drop but at the same time failing to take Nifty higher above the opening prices.

Overall it was again a lackluster day of trading where Nifty didn't make any kind of move and volatility was missing. This calmness in the market is probably just the silence before the actual storm comes. One should keep light position and trade with a strict stop loss. Divergence continues between Bank Nifty and Nifty and key oscillators still suggesting that Nifty remains in a down trend. Nifty made a lower low today and made a closing below yesterdays low which is definitely a weak sign. However markets have a tendency to bounce back after 2 bear candles (today was the 2nd bear candle on intraday chart). So we need to observe markets for signs of strength in the next 1-2 trading session.

Technically speaking- diametric is still in formation, prices remain in contraction mode and trading range is getting shorter and shorter everyday. Going forward it will not be easy to trade as there is every likelihood that this contraction will first see a 'false breakout' first to suck in the traders. So pls don't get carried away after seeing a sudden spike out of this range, observe the markets and then only take a trading call.

Trading Recommendation: We exited our one part short today @10810 levels (initiated at 10840)now just carrying one part. Still don't suggest going long at this stage. For now one  should carefully observe the markets and then only take a trading call. Like I said volatility can increase anytime trapping you on wrong side so pls be very careful. If you must trade then trade with a strict stop loss.

Have Nice weekend!

Nifty Trade Update -11th Jan 2019

Update 10:40 AM:  Nifty CMP  10810- Nifty cover one part (50%)short now. Hold balance short ( 1 part)

Open short Positions
Trade 1 @ 10840 ( 1 part)
 

Bank Nifty, RSI and Nifty

Strong Negative Divergence- Bank Nifty with RSI & Nifty

This is one important development taking place since last few days.Bank Nifty is consistently showing negative divergence with RSI and Nifty. Divergence happens when Price move upwards but the oscillators ( like RSI) moves downwards. This shows even though the price is moving up the strength is missing  and such up moves are not to be trusted with.




Bank Nifty Divergence with RSI & Nifty

Here you can see bank nifty is consistently moving in upward trajectory while the RSI ( relative strength index is making lower high. Similarly even the Nifty is making lower highs. With so many negative divergences all around, this is the time to be careful off course divergences can continue for long and sometimes even reverses too. But this is not something one can ignore and should be definitely be part of your analysis while you are devising your trading strategy.

For a genuine bull run I would ideally like to see no divergences.

 

Nifty View: Update for 11th Jan 2019

Near Term Trend:  ↓ (Down)

Market update: Nifty opened at par ( even though SGX was indicating a positive open) and kept drifting in a narrow range today and finally closed at 10825 levels  (down 30 points). It was a pretty listless trading session ( yes you may call it boring) and Nifty made an "inside bar" meaning high and low of yesterday were not breached.

Even though todays session was boring, it assumes lot of significance. I had mentioned in my yesterdays post that " the sharp pull back in last hour has potential to change the trend for Nifty for short term" Bull needed to trade strong above 10870 levels today to bring some strength in markets however they failed once again. Even though Market didn't fall, the inability of bulls to take market higher above the opening prices ( since last 4 days) is weighing heavily on the markets and it assumes a lot of significance in the near term.

There were also a probability if the sharp pull back witnessed yesterday was indeed a 'bear trap' but now the chances of same are almost zero.

Bank Nifty is consistently giving divergence with Nifty, looking at bank nifty chart ( even though I don't track it) I can see its looking much weaker and today while Nifty fell 0.3% Bank Nifty fell 0.7% generally its not very often that one see divergence between bank Nifty and Nifty and sometimes when its there ( not saying always)it might be a sign for something bigger which is cooking in markets.

Another point worth noticing is the negative breadth of the market. Since last few days the declining stocks are outnumbering the advancing stocks ( even though Nifty was rising) which again raises the concern if the distribution is going on in the markets (and to me its nothing but distribution only).

Still no change in my Bearish view, doesn't matter how much pull back Nifty gives and for how long it consolidates till the time I see the actual strength in the prices I wont change my stance. It took Nifty 3 days to reach 10870 levels ( from lows of 10630) now to start a new leg downward, Nifty must break 10630 in next 2 days ( sound difficult? lets see).

Again I reiterate, even though the volatility was totally missing today ( sharp contrast to yesterday) it can increase anytime now so please be very careful while trading and keep the qty in check always. if you feel you have made a wrong trade then don't hesitate to cut your loss and exit. If market catches you on the wrong foot, it will wipe your 100% capital in no time.

Trading recommendation: No change in views still. We are carrying our shorts initiated at 10840 levels ( exited our previous shorts around 10700 levels). Many traders are adding long/shorts and getting chopped and suffering losses on both sides (which happens during sideways trading). For now one must avoid compulsive trading and trade only if you are reasonably sure. Don't recommend going long at this stage so if you are holding longs then either exit or keep a tight stop loss.

Good Day and Happy Trading to you!