Nifty View: Update for 30th Jan 2019

Near Term Trend: ↔ (sideways with a downward bias)

Market update: Nifty opened at par after two days of heavy selling but drifted below 10600 and touched 10583 before some late buying coupled with short covering lifted the index and it closed just 10 points down at 10652 levels.

We had mentioned in yesterdays post that Nifty is appearing slightly oversold on the short term charts so a pullback/consolidation at these level is expected. Also it was the 6th day of consecutive fall in Nifty today and as the case has been since last 3 months, Nifty has max fallen ( made lower lows) for 6 days in row. A similar script played out today as well and after falling 70-80 points Nifty saw some pull back. Market has been directionless since last 2-3 months and there is a counter moves of bulls and bears taking place which last for 4-6 days in each direction. Now it will be interesting to see if Nifty can sustain the upmove/pull back it witnessed today and bulls take over for next 4-5 days. In other words we need to observe if market is playing the same script or it changes it.

Even though Nifty made a new low today and was trading weak throughout the day, the last hour pullback does give some hope to bulls and there still remains a possibility of Nifty moving up from these levels however it has considerably weakened now. Yesterday Nifty broke 10694 which was the previous swing low and today it broke below 10630 which was an earlier swing low. So Nifty has been making lower lows. Now the next swing low is sitting at 10530 levels and below that we have 10340 levels ( low made on election day result) which should be the final support for bulls. We had mentioned yesterday that another weak day will probably confirm that near term trend has now changed in favor of bears however even though we saw some weakness, it wasn't conclusive enough so we need more evidence to confirm that the trend has actually changed to down now ( for now it remains a strong probability).

Coming few days could be critical for Nifty, considering that budget is just round the corner there could be some spike in volatility ( as usually happens during budget). So traders are advised to keep positions light till then. continuous weakness from here below 10540 levels would suggest that trend has probably changed for time being. On the upside, 10750-10800 levels is likely to give stiff resistance. PCR (0.83)is totally in favor of bears at the moment so pressure is likely to continue till expiry atleast. Bulls can take heart from the fact that  Bank Nifty (even though is looking pretty weak) is giving a positive divergence ( for now). Also the market breadth was positive today and advance decline ratio was a healthy   31:19.

Trading recommendations: Same as yesterday,  There is a possibility that markets have started a new down leg at the same time since market is already fallen for 6 days & the pull back we saw today can be extended for another 2-3 days. Also the volatility is likely to pick up in short term because of budget. So if one must trade, trade light and trade with strict SL.

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Nifty View: Update for 29th Jan 2019

Near Term Trend: ↔ (sideways with a downward bias)

Market update: It was another bad for Nifty. It managed to open in a slightly positive territory but soon selling emerged and it kept getting intensified as the trading progressed and the pressure was visible till the very end. There was just one final small push from the previous low of 10630 which supported Nifty during the closing hours. Still markets closed with  a substantial 120 point loss at 10661 levels.

Overall it was another day where Nifty fell with momentum, actually the momentum was even stronger today than it was there on Friday. Nifty had a crucial support at 10692 which was breached with ease in the morning session itself. Bulls needed to defend it to rekindle any hope of an immediate revival but they failed miserably.

We had been saying that there was still a chance of markets pushing for one more leg up, however with todays fall the chances of a pull back have really reduced. Today the charts are telling a different story. Nifty had taken 5 days to rise from 10692 to 10987 and now it has retraced entire move in almost same time which is a classic sign of a trend reversal. However there are plenty of support available to Nifty between 10500-10650, also on the short term chart the markets is slightly in oversold territory so there can be a short term consolidation/pull back from current levels or 100-150 points down from here so if you are short/planning to short then please keep that in mind. On the other hand if we have one more bad day for Nifty then it will seal the fate conclusively in favour of bears probably.

Sine Oct'18 Nifty has max fallen 6 days in a row (during election result where it opened gap down and recovered fully by the time trading progressed). Now today was the 5th day of fall (lower low) in Nifty. So another fall tomorrow will make the current fall as the biggest fall of last 3 months ( time wise) and this is something which should not be taken lightly. Another thing which goes in favour of bears is that last 2 days fall has been in a straight line and seems impulsive ( there are no overlapping waves to be seen).

Technically speaking, we have been mentioning that Nifty making 7 leg diametric which is in its last leg (G). and we were expecting G to touch 11k+ levels. However now that we have a breach of 10700 levels ( which was the starting point of G) there is a high probability that G is over (as a failure) and a new trend down has started downwards. Nifty might still recover from here ( If G leg is moving as per irregular correction or if the fall from 10987 is just an 'X' wave). Traders should keep this in mind while planning their trading strategies.

Trading recommendations: Even though we were moderately bullish on markets we had exited our longs on Friday itself @ 10835 levels as the up move was not progressing as per the expected lines. Now going forward the trading strategy has to be prepared keeping these factors in minds i.e. a) Slightly oversold markets on short term charts b) Possibility of G leg getting finished and opening of a new leg down & c) Fall from 10987 as a connecting 'X' wave (which means another corrective will open soon). Don't recommend buying for now selling on rise with proper SL could be adopted ( with budget just round the corner volatility will be very high so trade light).

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Thanks for reading and happy trading!
 

Nifty View: Update for 28th Jan 2019

Near Term Trend: ↔ (sideways)

Market update: Nifty opened  on a positive note today above 10900 however fell flat again and saw an increase in selling pressure towards the end. It gave up 160 point from day high and finally closed 70 point down at 10780 levels.

Today bears ruled and they totally controlled markets no doubt about that. There were many indicators which were pointing to one more leg up in next few days to 11K+ levels. We were moderately bullish on the markets in near term and have been saying this for last few days. However  markets have shown they are not in the mood to go up immediately. So we were wrong in short term this time no two way about it and humbly accept the same but does that mean near term trend has turned bearish? Answer is no not yet (not in our opinion). let me try and explain.

Today when markets fell it fell with momentum and impulse (Something which was missing since last few days) but its a classic case of  "too little too late". In the very short term yes it might have some impact but overall in medium term perspective it doesn't change anything. Today is already the fourth day of the fall from 10985 levels. It had taken Nifty 5 days to reach 10987 from 10700 and now it has already consumed 4 days but 10700 is still intact. Fall we are seeing since last few weeks is having too many overlapping waves so for immediate short term may be yes we have momentum on the downside and the risk have increased a bit but overall it remains a corrective and sideways move which can stretch for few more days but not many.

We were of the opinion that time for choppiness and consolidation is over and Nifty should start breaking free but it seems some more time is pending for that. Since we saw some impulse in todays fall, its possible that market fall some more from these levels (even retest levels of 10600-10650 or even lower) but that would still be part of ongoing consolidation only which means a move up is still pending only thing which has changed is that it may not start from 10800-10900 levels as we were thinking initially but there is a possibility that markets go down a little more from here and then start moving up (from 10600-10700 or lower levels). We need to observe markets carefully over next few days to see how its behaving and accordingly plan our next move.

Another important thing to note is that ever since market hit 10K levels in Oct'18 it has always fallen 4 days  max in a row ( made 4 consecutive lower lows). Only exception is the election day result  time when Nifty fell for 6 days and hit 10340 levels. Now since 4 days have already gone we can expect 1-2 days for fall more before Bulls attempt to make another comeback. How successful they will be  that remains to be seen.

Trading recommendations: Considering the choppiness we are witnessing its prudent to sit on cash wait for markets to give a clear breakout first.  I don't recommend going short but waiting for right moment to go long.

Have a nice weekend!

 

Technical learnings: Types of correction (Irregular and flat)

Correction Patterns:

So what are corrections or corrective moves? Basically in simple words the correction is a movement in stock price which joins two impulses or trending moves. As the name suggests a correction is just  a temporary phenomenon and when they are over a trending move begins.

A corrective move is found between two impulses i.e. when a trend ends corrective move begins and similarly when a corrective move ends a new trend begins. Every impulse has five legs i.e. 12345 & leg 2 & 4 in each impulse are corrective moves or correction patterns. They are usually smaller price wise but bigger time wise than trending moves (1,3&5). They often presents a directionless trade and spend too much time doing nothing. Which makes them harder to trade.

Once markets have taken a big trending move it needs time to digest those move, corrective pattern help market digest previous move.

Below are the main Corrective moves or Correction pattern which can be found. 


Corrective Patterns



1. A-B-C simple zigzag : Simple zigzag is most simple and common pattern found . They usually found in wave 2 of an impulse. in such corrections wave A & C tends to be equal though sometimes wave C can stretch to 161.8% of wave A

2. A-B-C Flat corrective: Its similar to zigzag only thing is all the legs in such patterns tends to be equal. So entire correction is like a channeled move.

3. A-B-C Irregular correction: Irregular corrections are most confusing of the lot and are very common too ( they are also called expanded flat). In such corrections wave B will always cross start point of wave A, giving an impression that correction is over however just when everyone goes long prices turn down and C leg turns lower than end point of wave A which gives the impression as if a new trending move has started on the downside. However as soon as the wave C ends, the prices turns in opposite direction and the reversal is usually very fast and sharp, catching everyone with surprise. Irregular corrections when identified can be an excellent trading opportunities however its almost impossible to identify them in advance. But they can be identified when they are nearing completion or already completed.

Nifty View: Update for 25th Jan 2019

Near Term Trend: ↔ (sideways with a positive bias)

Market update: Nifty opened flat and traded in a narrow range of 10840-10800 through out the day. It finally gave a sharp pull back towards the end and closed up 20 points at 10850 levels.

Nifty though did make a new low, it failed to give any follow up selling below yesterdays low. We mentioned in our previous post that yesterdays fall was looking like a corrective move only and especially the last hour fall looked like an "after thought" and that it seemed to lacking any intent or purpose.. We had also mentioned that there are significant divergences to be seen and there is not much room for Nifty to go down.

More or less that's what happened today, whole day Nifty threatened to break below 10800 but it failed to do so as it had already run out of ammunition on previous day. Infact the last hour pull back today looked like a breakout on the upside.

Today markets failed to give any follow up selling below yesterdays low so the down move sort of fizzled out.However if we can see follow up buying above 10870 levels tomorrow then may be we can conclude that correction is over for time being.

Technically speaking, the entire move of last 4-5 days ( from 10850 to 10985 and then fall to 10800 levels) is looking like a irregular correction. If its true then expect a sharp up move from here on.

So overall no change in our view, inspite of 100+ point fall yesterday and todays consolidation, we still feel Nifty can see higher levels from here in short term. If our assumptions are correct then there is a high probability that consolidation and range bound movement we have been witnessing since last few days is now over and a clear trend may emerge soon.

Trading Recommendations: Markets continue to remain deceptive and is punishing traders who are trading on both sides. I don't suggest going short at this stage however if you are already short then you may keep a strict SL of 10910 levels. Long positions can be continued with a SL of 10750 (same as yesterday). Don't overtrade/leverage and manage your risks all the time. Next 2-3 days ( as we approach expiry) could be decider.
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Nifty View: Update for 24th Jan 2019

Near Term Trend: ↔ (sideways with a positive bias)

Market update: Nifty opened at par inspite of a massive 300 point fall in Dow overnight however it kept struggling entire day at its familiar resistance of 10930 and crashed almost 110 points in last hour trading to 10810 levels before finally closing at 10831 (down 90 points).

Nifty broke below its recent support zone of 10840-50 which has been supporting market since last so many days. So can we conclude that Nifty is in a bearish trend and has started a fresh leg downwards? We don't think so. Fall of last 2 days which we have seen is not convincing enough. Not only its lacking momentum, any sort of direction or purpose is totally missing from it. The entire fall from 10987 ( Monday) till date is looking like a A-B-C corrective. If you look at hourly charts you can see "A" leg of this corrective lasted for ~130 points ( from 10987 to 10860 yesterday) and "C" today  leg also consumed "130" points as well ( high of 10940 in morning to 10810 low it touched around 3PM). Of course we can see some more weakness from here but I wont be surprised if Nifty takes a sharp U turn from these levels ( there is a strong possibility of same).

Apart from the corrective nature of the fall there are other indicators like RSI which are giving strong positive divergence and in the current scenario (in our opinion) we do not see much room for Nifty to go down from here. We had mentioned yesterday that  as long as 10840 level is held there is a chance of markets giving one more push on the upside. Please keep in mind that support levels are important but the way they are broken or taken out matters a lot. Nifty may have broken out 10840 today but fall was not at all convincing especially the last hour fall looked like an "after thought". We need to see more weakness from here below 10800 -10750 levels to convince ourselves that its actually the beginning of a fresh bear trend.

In nutshell, for now, todays fall is just part of the same consolidation or choppiness which is going on since last so many days and it will be premature to conclude that market have broken free and a new trend has started down. Need more weakness/fall from here ( that too with momentum and force) to conclude the same.

Trading Recommendations: Markets are being deceptive and will continue to remain so for some more time. This is a difficult period for trading and traders who try to trade on both sides( bull one day and bear next day) are likely to lose a lot. If someone is holding Shorts he should book profits at these levels and longs can still be held keeping 10750 as SL.

Thanks & Happy Trading!!

Nifty View: Update for 23rd Jan 2019

Near Term Trend: ↔ (sideways with a positive bias)

Market update: Nifty traded again in the familiar range of 10930 -10850 for entire day. It dropped to 10860 levels after opening at 10930 levels but support came at lower levels and it finally closed at 10920 levels down 40 points.

For traders this range bound movement is becoming very frustrating and those who buy calls/puts are losing big time (doesn't matter whether you are buying call or puts) because of time decay premiums are falling rapidly. 25 days are gone by and Nifty is still trading around 10900.

Yesterday it looked like as if nifty has broken rage and finally moved on but market had other ideas and has clearly shown that it will take some more time before it decides to break free. However markets cannot continue like this in a tight range and sooner or later they will break free.

Overall market remains choppy and range bound. There is no change in our overall views and we still feel markets remains in a downtrend but as long as 10840 support is not breached we can see higher levels from here in short term. If 10840 is taken out then there is a possibility of markets testing 10700 level again. Even though the breakout yesterday didn't sustain that doesn't mean downtrend has started. We need to see more weakness to conclude that.

Weak Asian markets/global cues and falling INR/USD is weighing strongly on the markets also the market breadth was again negative today (2:3 in favor of declines) but PCR remains strong at 1.3 suggesting some support in near term.

Market remain treacherous and deceptive and like I said yesterday if you try to do too many trades in the current scenario then the chances you are going to lose. What we are witnessing is a classic corrective complex corrective which precedes any big trend in the market. This is markets way to shake traders confidence. One is bound to lose if hes continuously trading in/out anticipating a breakout on both sides. When the time comes and actual trend begins most traders would have already suffered enough losses in this range bound  market and would be scared of taking a position.

 If your capital is small then you must sit out and wait for clear trend to begin and trade only once this consolidation is over. Still if you wish to trade then best way to trade such markets is to trade in the direction of near term trend without worrying about intraday swings (don't change your stand basis intraday choppiness). Keep a tight stop loss/ target and keep holding position till either SL hits or target is achieved.

Trading Recommendations: Like I mentioned above if your capital is small then sit out till the time this consolidation is over and a clear trend emerges having said that, as per our view markets can still see higher levels from here so that is a real possibility even now. If you wish to subscribe to our live whatsapp Nifty trading updates/trading recommendation during market hours then you may subscribe using below link:

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 Good Day and Good Trading to You!