Nifty Analysis: Outlook and Trend for 19th Mar 2020

Medium Term Trend: ↓Down (Changes to up above 10500)
Weakness To The Fore: Nifty opened in positive territory above 9K levels but the familiar script played out once again and Nifty dropped below 9k levels in no time. It kept drifting through out the day and finally closed below 8500 levels with a loss of 500 odd points.

Nifty has drifted towards Friday low of 8500 and has breached it marginally too. Weakness we are seeing in the markets is truly exceptional and market is just not stopping its downward march.

We have been mentioning that 8500-9K is the zone where Nifty can bottom out and even though we have closed slightly below it, our view has not changed. Volatility index has moved to 63% so 100-200 points here and there shouldnt matter much. A retest of Friday low was always a possibility so its not really surprising that markets have visited those lows again.

In last few posts we have mentioning how around 8500-9000 levels markets are more or less achieved correction which is in line with previous major fall seen in 2008 ( and 2000 and 1993). In 2008 Nifty had fallen from 6300 to around 2300 ( fall of 4k points). Now in 2020 Nifty top was around 12400 and at todays low of 8407 we have achieved a correction of 4K points. So even in absolute terms we have achieved correction with those of 2008 levels.

Now there are some who will point out that in 2008 we had corrected around 57% so its possible that we repeat that as well. But that is not the right way to look at it, let me point out how. In 2008 markets had moved quite a lot, nifty had moved from lows of 990 to 6300 ( almost 7 times) so it took markets a crash a 57% to bring back markets to the average of last 4 - 5 years. In other words market needed a crash of 57% to wipe out the gains of last 4 years. Now, in 2020, mkts have achieved that with a 30% fall. Today we are sitting at same level where were sitting 4 years back. Its all a matter of wiping out the excesses of last few years ( and not about absolute %age fall).

Having said this we need to observe and see if market is taking a support at these levels. Important support levels shouldnt be tested again and again and markets shouldnt hang around these levels for long. We have tested these levels twice now so need to observe if markets tries to make a comback which is definitely due and likely. In Our opinion one should continue to buy good quality stock with a final stop at 8k levels.

Happy Trading!

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Nifty Analysis: Outlook and Trend for 18th Mar 2020

Medium Term Trend: ↓Down (Changes to up above 10900)

Weakness Continues: Nifty opened up around 9300 levels however couldn't sustain the momentum. "sell on rise" emerged yet again and pushed nifty below 9000 levels. It closed at 8965 with a loss of 250 odd points.

Nifty once again dipped below 9k and today even managed a successful close below which is a bearish sign however that doesn't change our view (not yet). We continue to observe this area ( levels around 9K) as a significant support area and as mentioned numerous times in previous posts, at this level Nifty has achieved parity or equality with that of 2008 fall ( & also with 1993 & 2000 falls). So common sense dictates that we should be some sort of supporting coming in at these levels.

Nifty overall trend remains down, makes no mistake about it, however markets have  turned way too oversold and a bounce from these levels is likely. We have already seen one bounce on Friday which took Nifty back above 10K levels however it didn't last and Nifty now has turned and moved below 9K once again. Now the question is was the bounce we saw on Friday was just a dead cant bounce and Nifty is now ready to resume its downtrend? It may be so but our view is that some part of the bounce could still be pending and as long as 8500 holds, Nifty can attempt another shot towards 10K levels.

Looking at the nature of fall from Fridays high of 10200 to 8965 today, its looking relatively slow & corrective in nature ( In comparison to the rise we had seen from 8500 to 10200 levels on Friday) which also suggest there is another leg pending on the upside which can take Nifty back to 10200 levels. One worrying sign is that VIX continue to rise and that is never a good sign for bulls for Nifty to make some upsides we should see some cooling off in VIX.

From investment perspective Nifty continue to offer good opportunities to accumlate good quality stocks at cheap prices. Today inspite of market falling 300 points some good stocks ended in +ve territory (which again suggests a change in market breadth & likely support at these levels).

Markets can be anything but predictable and whenever markets turn predicatable the trend usually changes ( even if its for short term). From trading perspective if Nifty manages to move above 9300-9400 levels tomorrow ( above todays high) then we can expect further upside but on the other hand if weakness continues tomorrow  below 9K and market start spending too much time around 8500 then it wont be a good sign and the chances of market breaking below this level will increase.

Happy Trading!

Nifty Analysis: Outlook and Trend for 17th Mar 2020

Medium Term Trend: ↓Down (Changes to up above 10900)

Tanks again: After showing some respite on Friday, Nifty tanked once again to close around 9200 down ~750 points.

Nifty today saw a sharp dip with a surge in volatility. VIX is now touching 60 which is extremeley extremely high. It needs to cool down to 25-30 levels then only some normalcy can be expected to return to markets.

Keeping the volatility aside and just looking at the big picture, the overall view still remain same. For a larger time frame levels around 9k offers good support. Since volatility is so high low of friday can also be referred hence 9000-8500 now becomes the level which shouldnt be broken in near term. Like we mentioned in previous post, around 9k Levels nifty has achieved equality with 2008 fall ( and with most other major falls we have seen in history of Indian markets like that of 2000 & 1993). Today Nifty has come down to test this level once again & its possible we go slightly lower again tomorrow ( the way US & global markets are tanking). But once again , if market drops below 9K , then it should be utilised to add good quality stock to your portfolio.

However in case market start trading below 8500 and we get a close (2 preferably) below this level then it will be unprecedented and markets will enter unchartered waters. somehting we have never witnessed in the entire history of our markets. Though anything is possible in markets, the levels of 8500-9000 should hold (unless world is about to collapse).

In Nutshell, since VIX is trading so high it makes sense to stay from trading for some time ( doesnt matter which side you trade SL will be very big) and instead utlise your capital to buy good quality stock at these levels ( with a stop at 8500). Markets could and should take support at 8500-9000 levels and this level/range is likely to hold but in case it breaks then one should totally step aside ( even form investing perspective).

Happy Trading!

Nifty Analysis: Outlook and Trend for 16th Mar 2020

Medium Term Trend: ↓Down (Changes to up above 10900)

Rollercoaster Ride: After taking a severe beating Nifty opened with another gap down and within minutes hit the lower (10%) circuit. When the trade resumed after 45 mins it moved up smartly to above 10k to close at 10020 levels, (adj close 9950) recovering more than 1400 points from day low.

Yesterday we had mentioned that "this is not the time to be scared or to be afraid. Agreed what we are seeing is exceptional but exceptional times offers exceptional opportunities. This is the time one should start investing in good quality stocks from long term perspective (5-7 years)"

Adding stocks around 9k levels in the morning session has already given a return of ~10%. Most stocks are up more than 15-20% fromn their opening lows.

We had also mentioned that "Now though Nifty has turned 9500, the weekly rsi is still at 23 so we can fall a bit more (9000-9500 broadly is the range). Nifty has turned way too oversold so one bounce back is definitely pending now which can take nifty back to above 10K levels"

Thats how Nifty played out todays session, it fell below 9k but immediately triggered circuit freeze and when it opened again, it opened around 9k and then  went on to move above 10K. It hardly spent anytime below 9k levels.  

At 9k levels Nifty had seen parity with the 3 major falls we have seen in the history of Indian stock markets past ( 1992/1993 Harshad Mehta, 1999/2000 Dotcom bubble & 2008-Lehman crisis). So the common sense says that worst is over. Of course volatility can and will continue for some more time and we can once again visit the lower levels, not denying that. All we are saying is that worst seems to be behind us now and like we said yesterday, this is the time to build a good portfolio with good quality stocks. More weakness below todays lows, will be unprecedented, never seen in history of Indian markets and could only mean that the end of the world is near (which we all know is not going to happen) so the chances are Nifty could and should recover from these levels ( slow or fast that we need to observe, both are a possibility)

As far as trading is concerned , its very difficult to give levels as the volatility is so high (VIX is sitting at 50). Bounce which we have seen was long pending and had to come more important question is what now. To build further strength Nifty needs to cross many hurdles, It first needs to trade above 10K and then make a move above 10500 levels. That will be the first sign that correction is getting over , a move above 10900 levels would then change the medium term level to up once again.

For less risky traders, it wont hurt to keep trading aside and focus on building a portfolio.

Happy Trading!

Nifty Analysis: Outlook and Trend for13th Mar 2020

Medium Term Trend: ↓Down (Changes to up above 10900)

Blood Bath Continues: After taking a breather yesterday Nifty once again tanked down. It closed with a massive loss of almost 900 points at 9500 levels.

Only positive point today was that markets somehow managed to save itself form a trading freeze. There is no point mentioning any support or resistance levels as markets are behaving irrationally for the short term (though its not making sense now, in some time it should start making total sense).

In last couple of post we had mentioned that this correction is definitely not a normal correction and if its a rare correction (seen once in 2-3 years) then it should complete around the current lows ( 10200-300) but if turns out into something which is extremely rare ( seen only once in 10-15 years) then we can fall all the way to 9500. Markets touched 9500 today and took just 2 days. Speed at which we are falling is mindboggling indeed.

Lets now try to make a sense of whats going in market and what could happen in the times to come. We recently (last posts) talked about how weekly RSI has fallen to 30 levels and in case this correction turns into something major then it can further drop to around 20 which translates to around 9500 nifty levels. Now though Nifty has turned 9500, the weekly rsi is still at 23 so we can fall a bit more (9000-9500 broadly is the range). Nifty has turned way too oversold so one bounce back is definitely pending now which can take nifty back to above 10K levels. After the bounce-back fizzle out probably we can fall again towards todays low and even more towards 9k levels. 

Now lets take a step back and analyse Nifty on a larger time frame ( monthly charts). On Monthly charts, the RSI level is sitting at 37.6 today and last time such levels was seen on monthly charts was way back in 2008. In 2008 RSI had dropped to around 36 which again points to the fact that what we are seeing is an extremely rare event which happens only once in 10-15 years.  Before 2008 we had seen such levels in 1999 ( dot com bubble/nasdaq crash) & 1992 ( harshad mehta scam). Evne though such falls are painful they always present good opportunity to long term investors.

Though we are positional traders and only talk about swing trading, this is one time where we must say that this is a time to stay away from trading but this is not the time to be scared or to be afraid. Agreed what we are seeing is exceptional but exceptional times offers exceptional opportunities. This is the time one should start investing in good quality stocks from long term perspective (5-7 years). If you look at charts carefully you can find many stocks which are available at very good prices at the same time there are some quality stocks which have hardly corrected those are the stocks to invest. Please dont pick up garbage stocks which are available cheaply as those may not recover when markets start recovering instead invest in good quality (index based preferably) stocks. 

We all know what happened after 1993 , 2000 and 2008. Everytime market has shown these levels a new bull run has started afterwards. There are many who are saying that markets can fall to 6K levels,since in 2008 we had seen a 57% correction from top and in this fall, till now, we have just seen a correction of 25% so we can fall another 25% easily. While anything can happen in markets, we must understand that in 2008 markets were extremely leveraged so measuring correction with %age fall is not always the right methodology. Also note that monthly RSi didnt drop to <40 when Nifty fell to 4K, it touched 40 only when Nifty had made a bottom around 2.5K. Agreed after that markets spent nearly 6-7 months in 2008 at the same level before it started moving up. So same can repeat even now as well. Its possible that we spend rest of 2020 in 9-10K range ( just to frustrate investors) at the same time chances of a fast recovery is also there. Markets can go back to 12K levels even before you realise. Chances of both the scenarios playing out is 50-50 but like we said earlier, one thing is for sure, the levels we are seeing presents an extremely good opportunity to build a long term portfolio and invest in good quality stocks.


If you are not a leveraged trader, then you should not be see this as a threat but an opportunity.

Happy Trading ( or should I say investment).

Nifty Analysis: Outlook and Trend for12th Mar 2020

Medium Term Trend: ↓Down (Changes to up above 11095)

Halt in Carnage: After falling for more than 800 points in last 2 days, Nifty took a breather and prevented further damage. Though at one stage it was threatening to go down once again but it managed to move back in green to close flat near 10450.

Though Nifty failed to put up a sizeable rally today but many must be taking comfort from the fact that it didnt fall any further. Global markets were cautiously positive and did manage to cut some of the losses of last couple of days (but not nifty).

Corrections can broadly be divided under 3 Categories:
1. Which is common and seen frequently ( 1-3 times  a year).
2- Not so frequent and cause massive damage (once in 3-5 years)
3-and  major ones which totally destroys market but seen only once in 10-15 years ( like 2008/1999)

Once nifty broke below 11K levels, it turned into something more than a normal correction. Weekly RSI is sitting at 30 which is extremely low and like we mentioned in previous post, this level is seen only twice in last 12 years (2012 & 2016). In case market decides to end this correction as type 2 then there is a possibility that the worst is over ( though some more weakness cannot be ruled out and its possible that weekly RSI can remain stable or even go up while market go down some more but that could be a sign of strength and not weakness).

Continuous weakness from here could be indicative of something major and exceptional, in such a scenario we can fall all the way down to 9k-9500 levels ( that would push RSI to 20 like we saw in 2008).

For now we need to observe if market is trying to finish the correction around these levels and to do that it must fill the last gap down ( 4th consecutive gap) which is sitting at 10700-10850 in next few trading session. Trading below this gapzone could give more power and further encouragement to bears and could cause more weakness.  Closing above this gap could be the first sign that bulls are returning. In most market conditions 4th consecutive gap usually gets filled up in subsequent trading sessions ( but what we are witnessing nowadays is not normal hence the word of caution).

In Nutshell, the overall trend continues to be down and need to see if Nifty tries to fill (and make a close above) the gap area at 10700-10850 levels, if it does then some strength can be expected back in the market , failure to fill this gap and continuous trade below this zone would be negative and could push markets down again back to 10200.

Happy Trading!

Nifty Analysis: Outlook and Trend for11th Mar 2020

Medium Term Trend: ↓Down (Changes to up above 11095)

Bloodbath continues: Nifty opened (yet again) with a huge gapdow and kept on moving downwards. It hit a low of 10295 before moving back above 10400 levels.There was absolute carnage all around & it closed with a massive loss of 540 points.

Nifty is getting weaker day by day and though there were indicators that we could see some stability around 11K levels (and we had also said that as long as levels around 11K are held, there are chances that the fall is arrested around current levels). However another gapdown today made it clear that markets are not following any technical indicator as of now and this fall is turning into something which is not common or is of rare nature..

In last post we had shown nifty chart with RSI to point out that how RSI has come down to a level ( which has been generally seen only twice a year in last 5-6 years). Now today weekly RSI has gone below 30, which was last seen in 2018 (when nifty hit 9950) and before that in 2016 ( when nifty hit a bottom of 7k) and before that it was in 2012 ( when nifty was at 5K levels). Only time Weekly RSI for Nifty has fallen significantly below 30 was way back in 2008 ( 12 years back) that time RSI had dropped to 20 and Nifty had seen a low of 2K.

Now if this was a normal correction it should have stopped around 11K levels ( which it didnt) but even if its a rare correction or a rare fall ( which happens once in 2-3 years) then it likely to hold around the levels of 11200-11300 and not fall much beyond these levels.

Now lets consider the other scenario where this fall turns into 'extremely rare' (which happens once in 10-15 years like that of 2008), then weekly RSI can drop to 20 ( which means Nifty can go down as low as 9500).

Its upto market to decide what category of correction/fall it wants to achieve, depending on that either we fall another 1000 points towards 9500 ( going by current speed it can be achieved in 1-2 trading sessions) or complete it around todays low. There is no point predicting the next target cause when markets are in such mood generally no level is respected and no technicals are followed.

Having said this, would like to make one correction. In last post we had also mentioned about the possibility of exhaustion gap and had called the gap on friday , 4th gapdown in a row. looking at charts again it was only a 3rd gap down ( the second gap down around 10750 on 26th was filled intraday so doesn't qualify). Technically, todays gap was the fourth consecutive gape and generally the 4th consective gap is filled in subsequent trading sessions ( next 2-3) but the point is these days markets are not following 'general' rule. But still we need to observe and see if markets tries to fill this gap and move above 11800 levels in coming sesssions.If that happens then may be ( just may be) we can hope that bottom is done for time being.


Happy Trading!