Medium Term Trend: 👇Down (Changes to up above 15200)
Nifty @ 14760 Up 230 points : Strong Pull Back
After crashing a whopping 600 points on Friday, Nifty staged a strong pull back and recovered almost 250 points. Lot has been happening in Market and VIX has also shot up to north of 25 (which is pretty high). lets take a step back and see where are.
In previous post (Thursday) we had mentioned that "Now since this sharp upmove has come on (& just before) expiry day, one should observe and see if Nifty is holding on to these levels. If the upmove is just an expiry driven move then we should see a sharp fall back towards 14700 levels in next 1-2 sessions (this upmove should fizzle out in equally fast downmove)"
That is exactly how markets played out and we saw a strong reversal on Friday itself which took markets below 14600 levels. such a brutal fall confirmed that the pullback witnessed on Wednesday/Thursday was driven by expiry related adjustments ( smart money must have written lower level puts which were protected). As soon as expiry was over mkt opened with gap down continued its main trend. This gap down meant that we now have a Bearish island reversal on the daily charts ( which as the name suggests is an bearish pattern)
Such a pattern often indicative of traders being trapped at higher levels ( in this case around 15100 levels).
Now its possible that markets have already achieved their immediate target on the downside ( around 14500 on Friday) or at the same time its possible that Fridays lows are retested again and markets even break it and fall towards 14200.
Only silver lining is that even though 14600 was broken convincingly on Friday, todays closing has come above it and thus market has prevented consecutive close below 14600 (which was a crucial support). If markets can hold 14600 for few more trading session and manage to move above 14900 levels then there is chance that this correction is probably ending. Till such time, however, weakness is likely to continue and Nifty can can continue to drift lower. As a trader, we wont be in a hurry to Buy Nifty yet but would like this weakness to playout first.
Happy Trading
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