Nifty Analysis: Outlook and Trend for 21st May 2020

Medium Term Trend: ↓Down (Changes to up above 9800)
Strength Returns: Nifty opened above 8900 and after trading around 8950 levels for most part of the day, it jumped and moved over  9000 levels to close with a gain of ~200 points.

In last post we had mentioned " one should be vigilant & careful if he is on short side as markets can reverse and trap shorts on the wrong side anytime".

Today we did see some sharp reversal back above 9000 levels. Inspite of Nifty breaking below 8950 we were hopeful of a comeback. There were couple of strong reasons for same, firstly the entire fall of last 10-12 days from 9800 levels is looking like a corrective move. secondly we pointed out important support levels (ref yesterdays post) for near term and even though Nifty had breached it marginally, it was not very convincing and lastly we highlighted the exact pattern markets had made in May 2018. That was a similar pattern and after it ended , markets started moving up.

So now that we have made a close above 9000 levels, can we expect Nifty to move back to 9500 levels? I think we can, there are indications beginning to appear on charts which are suggesting a strong bull run in coming days. A big resistance markets will come across is 9250-9350 "island reversal area" and Nifty must take it out. Once this gap is closed then we can expect markets to move back towards 9500-9800 or even higher levels. Personally I wont be surprised if Nifty manages to move above 9300 levels this time and then even 9800 levels in coming few weeks.

We entered long position today around 8950 levels and recommend holding on to long positions with a SL of 8830 levels. If the current consolidation is over then we should be moving strongly in Up direction ( with minor pull backs ofcourse). For bears to have upper hand again, markets must make a sharp U turn immediately, more it trades above 9K levels, more stronger Bulls will become.

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Nifty Analysis: Outlook and Trend for 20th May 2020

Medium Term Trend: ↓Down (Changes to up above 9800)

Below 8900: Nifty opened higher but couldn't sustain above 9000 and gave up more than 130 points from days high to settle at 9880 levels. Up  60 odd points.

Now we have a second consevutive close below 8950 levels so looking at chart there is very little going on for the bulls now and everything is pointing in the favor of bears only. Having said this, let me rewind and take you to May 2018 ( 2 years back).

Nifty

Left hand side is the chart for the period May 2018 (exactly 2 years before) and on the right hand side we have current chart. Now we couldn't help but notice stark similarities between both the charts. In 2018 Nifty had seen a sharp fall below 10500 and after that a pull back which was sort of 'rounding top' formation. During this period Nifty kept on sliding from higher level but continued to maintain a corrective trend and held on to the initial lows. Now currently we are seeing the same thing happening. Nifty continues to move in a zig-zag and in corrective pattern (similar to rounding top).

In 2018 when the correction got over, Nifty saw a steady move towards higher level (11k+). Now I am not saying that same thing is going on to happen now as well but it certainly is a possibility. 'History repeat itself' is one of the important parameters of technical analysis and should not be ignored. Even though there is nothing on charts yet,  things can change quickly, bears are getting complacent and whenever any side become complacent, things change very fast in markets.

Now lets have a look at another chart.

Nifty

Here, I have drawn a upward moving channel and Nifty is just trading on the lower side ( broke it slightly yesterday). I have also drawn 2 horizontal support lines (in blue) and 2 resistance lines (in red). Currently Nifty is just trading at or slightly below the first support line. Second support zone below this level comes at 8000-8200 levels hence its veryimportant for Nifty to move sharply up from here else we can go down deep in -ve territory.  On the upside first clear resistance is around 9350 zone and above that 9700 levels. If Nifty start moving up and takes out 9350 levels, then chances are that it will take out 9700 levels as well.

So even though we don't have much positive on charts yet, the nature of fall or the nature of Nifty movement for last few weeks is indicating that markets are probably consolidating before it starts a new rally or bull move.Everytime a consolidation ends Markets usually sees a clear and sharp move on the upside. Hence once should be vigilant & careful if he is on short side as markets can reverse and trap shorts on the wrong side anytime.

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Nifty Analysis: Outlook and Trend for 19th May 2020

Medium Term Trend: ↓Down (Changes to up above 9800)

Weakness: Nifty opened flattish and broke below the key support zones of 8950-9000 levels to close at 8825 levels, down ~300 points.

In last few posts we have been mentioning that 8950-9000 is a very good support zone and we do not expect it to be broken easily. Now today it has broken conclusively however since its such a critical support zone, we need to see one more close below this level ( and then weekly close) to conclude that its broken for good.

We all know what happened when Nifty had closed above 9850 on expiry day. 9800 was such a important resistance level and though Nifty managed to close above it, it failed to give 2 consecutive close above it and has declined more than 1000 points from there. Overall market continues to be in down trend but levels around 8900 is a strong support zone and probably the last hope for the bulls. If its broken successfully and conclusively then there will be very little left for the bulls to look forward too.

Sustaining below 8900 could push Nifty back towards 8500-8000 levels and if that happens then the chances of this correction extending for a long period (time wise) will become strong and that will not be a positive sign.

There is still a chance that the fall we are seeing since last few days is just a move by markets to remove weak/short term traders who entered on the back of economic package news. However to prove this scenario right, we must make a fast (very fast) recovery from these levels towards 9200-9300 levels. at the time of writing this post SGX is trading at 100+ points so it needs to be seen if it can build on further gains and propel itself higher back towards 9200-9300 range.

Though every thing is looking bleak at the moevemnt, its still too early to conclude anything. We recommend observing markets for few more sessions before concluding anything Nifty can still surprise by giving a strong move on the upside from here.

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Nifty Analysis: Outlook and Trend for 18th May 2020

Medium Term Trend: ↓Down (Changes to up above 9800)

Flat Day: Nifty dropped to 9050 levels but held on to it and managed to close flat at 9140 levels.

We had mentioned in yesterdays post that as long as Nifty defends 8950-9000 support we can still hope for a fresh bull run. Defending this support zone and then filling the gap down area at 9250-9350 could push Nifty once again towards 9500 and 9800 levels.Today Nifty did test 9050 levels and moved up a little so its possible that support is tested already or at the same time one more fall towards 8950-9000 level can not be ruled out.

On daily charts, Nifty formed a hammer pattern which is a bullish pattern. Holding on todays high and then closing the gap area at 9250-9300 will bring bulls back in the game. Its possible that markets have set their eyes at a higher target ( 10K+) and all this choppy and sideways movement is just a ploy to get weak traders out of market . The fall of last 2-3 days we are seeing (after the economic package was announced) is also pointing towards this scenario only.

Keep in mind the package announced is indeed positive for the markets but sometimes markets do not react to positive news immediately but they take their time and create a perception that its not important. They fall a little and short term traders start moving out and once the euphoria around the news dies, then only market start moving up. I am not saying this is how its happening presently but a strong possibility exists.

If you see the rise from 8950 levels (21Apr) to 9870 (30th Apr) had taken 7 trading sessions and since then (in May series) Nifty has taken 10 days already and its still trading above 8950 level. Inspite of consuming more time the fall is not able to retrace 100% of the rise. This is also suggesting that probably the entire fall from 9800 levels is just a corrective move.

Eventually we expect 9300-9500 levels to give way but the timing is something market only decide. It might decide to spend some more time at current levels or it might decide to fall little more from here but ultimately it should move up.

Overall the trend continues to be down for now and any larger upmove is expected only once Nifty crosses above 9800. At the same time  its likely that major portion of the correction already got over at 8000-8500 levels and we do not see more correction ( price wise) but time wise correction can take place (and is happening actually). Since last one month, markets are trading roughly at the same level.

Moving into next week we need to see if 8950-9000 level holds or give up and if holds then whether markets are able to fill the gap down area  of 9250-9350 zone. That will give us further insights.

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Nifty Analysis: Outlook and Trend for 15th May 2020

Medium Term Trend: ↓Down (Changes to up above 9800)

Nifty Plunges: Nifty opened with a gap down and broke below 9200 levels to close at 9150 levels with a massive loss of almost 250 points.

Nifty once again opened with a gap down and it assumes lot of significance since yesterday opening was with  gapup. With todays gapdown Nifty has posted yet another bearish "island reversal" pattern on the charts. The last Island pattern (9850-9500) which formed on 1st May still stands and today markets have formed yet another bearish Island pattern. It can have serious implications if its not filled in next few trading sessions. So it will be interesting to see how markets behaves from here. its possible that we see markets taking big enough swing from here.

In Last post we had mentioned that markets are proabbly looking good for another upmove. Markets did move from 9200 to 9550 levels but it hapenned in a gapup move (on the back of economic package announced). Even though markets gave up some of the gains it had closed in +ve territory yesterday and gapup stayed intact so a further push towards 9800 levels was a real possibility. However it seems too much of positive sentiments or expectations on the street gave smart money an incentive to offload some of the holding and do some profit booking/selling.

Formation of another bearish island reversal pattern today is a matter of great worry for the bulls and its important for them to defend 8950-9000 levels. Currently this level is standing there as a strong support and must not be breached. Breaching 9k will further give strength to the bearish structure that is being formed.

In Nutshell , we need bulls to defend 8950-9000 levels and then fill the gap which formed today at 9275-9350 levels. If that happens we can hope for a fresh run towards 9500-9800 levels ( like we have been mentioning in previous posts we expect 9300-9400 resistance to break ultimately). It is possible that fall today is just a move by markets to shake-off weak/small traders who entered markets yesterday just because of positive newsflow. But we will have to wait for few more trading sessions to confirm that. If the gap at 9250-9350 gets filled then we can expect the markets to fill the second gap (9550-9850) as well but before that its really important to protect 8950-9000 levels.

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