Nifty Analysis: Outlook and Trend for 24th Mar 2020

Medium Term Trend: ↓Down (Changes to up above 10100)

Panic On Dalal Street: Nifty once again opened with a huge gap down around 8000 and triggered a circuit breaker around 7800 levels weakness continued after markets resumed trading and Nifty dropped to 7600 levels. It closed at 7610 down by a whopping 13%.

Its difficult to believe your eyes when you see Nifty trading around 7500 levels. Who would have imagined that markets will see such a sharp fall in matter of days (corona or no corona). This fall has been vicious and spiteful and has knocked the air out of markets lungs. Period.

Last few updates we had mentioned that around 8500 market has attained equality with all the major falls it has seen and its likely that we make a bottom around these levels and try to move up. Weekly close was also above 8500, however todays fall has raised doubts that markets are not yet done with the fall and has more legs to go ( may be timewise if not pricewise). Markets are spending too much time below 8500-9000 and its not a good sign. If we continue to spend time below 9k then we are ruling out a smart recovery immediately. Its not one of those correction which happens just to square off traders position (bear trap) and moves up after doing so. This is wealth destruction and if we continue to trade below 9k the chances of this correction extending for next few months will increase dramatically ( its already increased aa lot after todays fall). 

When one analyse markets for a long term perspective ( in this case for almost 20-30 years) it has to be done on  monthly charts. Now when we look at current month chart, the position does not look good but March has still few more trading sessions to go. If it can make a smart comeback above 8500-9000 levels then some bit of hope of a fast recovery will be rekindled however if we end current month around same levels or around 8k then we are going for a long-long correction (time wise).

When we say long correction it means atleast most of 2020 and probably some bit (1st qtr)  of 2021 as well. Markets are likely to spend next 10-12  months in sideways to weak trend ( like it did between 2001-2003 where Sensex kept trading between 3000-4000). Its Possible that markets are damaged too much to make a smart recovery from here ( another few trading sessions should confirm that).

So even though we were expecting markets to make a bottom around 8500 zone and move up, but after seeing todays move its possible that markets are preparing itself for a long haul in bear territory. Leaders/sectors we had seen outperforming in last few years will start underperforming and new leaders and sectors will emerge. This will make large investors reshuffle or rejig their portfolio. This entire process is its a time consuming process and will happen slowly and take its own sweet time. To avoid such a scenario markets must make a quick recovery and make it fast.

Looking at market PE , currently its sitting at 18. Mean/average PE of market is around 20.Just in Jan we were trading around a PE of 30 and just in a matter of days we have come down to 18. Lowest PE Nifty has seen is ~12 in 2008 & 2003 (mind you PE can continue to come down even when markets moves up like it happened in 2003). For long term perspective a PE ration of anything between 12-20 is very good for investment so one should continue to invest in good stocks, just be mindful of the stocks which did exceedingly well in previous bull run (like banks) as those may underperform now.Alsoa PE ratio below 15-16 has never sustained in India for long so keep that in mind too.

So just to summarise, continuous weakness below 8500 has raised a possibility that markets are preparing themselves for a long haul in bear trajectory( 10-12 months). In case we dont see a smart recovery above 9k soon then the chances are we will spend a lot more time around these levels. For long term investors it is a good news as they will get a once in a lifetime opportunity to invest but not so good news for people who have a large portfolio as it would mean they have to endure a lot more pain for a lot more time and possibly reshuffle their portfolio as well. From trading perspective , better to stay away till VIX cool downs to respectable levels ( less than 30).

Happy Trading! 

Nifty Analysis: Outlook and Trend for 23rd Mar 2020

Medium Term Trend: ↓Down (Changes to up above 10100)

Smart Comeback: Nifty opened flattish but kept on moving upwards and went on to cross 8800 intraday. it closed at 8750 levels with strong gains.

We have continuously been mentioning that at 8500-9000 levels market has achieved correction which in magnitude is already measuring upto 2008 correction ( and that was the biggest correction we have seen in our markets). since volatility is high, a sharp movement can take place from any level, but logically we shouldnot trade consistently below 8500 levels for long. Yesterday markets broke it and close below it marginally but today it has again bounced back. So even if Nifty breaks below it , its likely to be temporary.

We had also mentioned how the long term RSI is already at a level which is only seen during major bottom areas. Now lets just have a look at another data point. This is monthly chart of sensex with 100DSMA.

Sensex Monthly

The last time this moving average was touched was way back in 2008 and 12 years later now in 2020. Which again proves that we are at a vey critical and important juncture from 'All Time Trend'  perspective.

So will keep in short, overall view remains same . We are nearing an important area which could form a bottom for next 10 years perspective hence its prudent to invest in good quality stock at these levels. Those who are predictiong doomdsday kind of scenario and predicting the end of the world are getting ahead of themselves. From trading perspective yesterday and today Nifty offered good levels to initiate buys & we did buy @ 7950 levels yesterday & 8240 levels today again.

We dont recommend holding shorts as long as Nifty is trading above 8300 levels and a cross above 8900-9k levels can push Nifty back above 9500-9700 levels. Final hurdle placed at 10100 above which the medium term trend will change to up.

One more thing, markets will find its bottom a lot before this Covid-19 things begins to dissipate. Market always act in advance hence if  you are thinking that markets will make the bottom on the day a proper solution is found then you are totally wrong. Always rememeber- bullish trend emerges when the story & situation on the ground is still pretty bad.

Happy Trading!

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Nifty Buy/Sell Algorithm

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!

To join our algorithm based buy/sell whatsapp service, pls click below link or whatsapp @ 9319321906 

Nifty Buy/Sell Algorithm

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).