So Finally after 3 months of patience all my downside targets upto 8150-8250 has been achieved. In my previous post i mentioned about a crucial pattern “Multiple H&S” which had a neckline at 8560 and we did respect it on closing basis with targets on downside touched in just one day due to unexpected event. Demonetizing 500 and 1000 currency notes have turned charts of Nifty more cruel. Technically there is always a alternative count and for my previous count of bottom at 8150 , alternate target count was 7300-7600 which is now seems to be coming. …..is true and am not scaring you guys!!! Though for a confirmation we need to wait for Nifty to close below 8150 which is 200 day average and also previous bottom count. Market may not see Free Fall from here but gradually we may get there!! On the upside we may now have a ceiling at 8580, which is strong neckline resistance as market with red horizontal line while crucial 50 day average is 8690 is to be breached for bulls to be back in drive!
Now looking at some long term charts, Monthly on Nifty, we could see how crucial is 7400 support line which is intact since the low of 2008. Support line level of 7400 is also coinciding with at Retrenchment level of recent rally of 6825-8960..So stay alert if we close below 8120!!
Fundamentally what could justify my view??? ….Answer : Consumption story! The recent step of government is surely a game changing for a long term story and growth of India but a short term to medium term, its gonna hit balance sheet of companies. Q3, and to some extent even Q4, would see a great fall in demand of goods and services. Purchasing power of most individuals would take a hit as cash is completely sucked out and so is black money. A common man would cut down on extra purchases for a time being which could hit sector such as Auto, Capital Goods, Real estate, Cement and Textile industry.. But on defensive side sectors which are daily needs such as FMCG, Pharma and to some extent Education can do well. So its best time to accumulate stocks of Defensive sector while wait for few months to buy other sectors.
Risk Takers sell on rise if we breach 8120 for December/Jan expiry with upside Stop loss at 8700 and targets on downside 7800/7670/7450
Safe traders avoid any trading for next few weeks and sit on liquidity to purchase for long term below 7700!
Will update next if we breach 8700 or 8120!! Until then Trade safe!!