Havent heard about a Dead Bull Bounce?….Nor did i ….We always heard about a “Dead Cat Bounce”…But Last two days recovery on Nifty has made me curious for a bounce which is greater than a Dead cat bounce but its not a rally until we breakout on resistance.
Attached graph is weekly graph of Nifty as on the Closing on 27th March. A day is still left to close the graph but we can take a early call as there are many signs of a bounce back. If we look at the candlestick pattern, we have two possibilities tomorrow, either bullish Engulfing (If we close above 10228) or Bullish piercing pattern (if we close above 10106). After last two days of recovery in the market, i feel atleast we are getting a close above 10106 tomorrow which makes a possibility of a reversal strong.
There are many other factors to support the reversal pattern on Candlesticks which are more crucial than such patterns starting from 200 Weeks average support at 10061 on closing basis. We did close below the same last week but as Technical guide says, we need two confirmation minimum to be assure of any breakouts , so in our case tomorrow we are almost closing back above 10061 making last weeks close a false one.
Second factor, is the oversold territory where indicators are revolving as of now. We can expect a sharp short covering and tomorrow might be the day as its March expiry and also the last trading session of current fiscal year. Looking at the option data for we can expect 10000 to be the support for near term.
So how would we know how far can a bounce be ??….
…my Third Factor, Wave theory. Looking at the recent fall in the markets, we have either completed a Minor Wave 4 at 9955 or we have completed Wave A of a Wave 4 correction of a rally from 7825-11200. In either possibility, minimum bounce or rally could be upto the range of 10560-10710.
So to sum up, we can expect a Dead Bull Bounce rally with the targets of 10560-10710 while Stop loss on downside can be 10061 which is 200 weeks average. Expect some furious short coverings in PSU Banks n Pharma so watch out for stock specific trades too. BUT markets are always unpredictable so hedge your positions with 10000 PUTS of April series.
See you guys soon! Happy Trading!