Nifty has completed short covering which i mentioned in my last post and targets of 9980 were achieved on Friday. But now what next?
Technically speaking we should now trade after getting closer to 10050-10060…But can GST Simplified announcement fuel the rally ??…Lets look at the chart
May be you might be confused looking at the charts, but let me explain you in simple words. When we last crossed 9000 in March, we gave a breakout to Inverse H&S pattern which gave a target of 10600-10800 for a long term bet which is yet active which suggest that we are surely in a long term bull run and we should get there once before crossing down 9000 anytime in future. Now when we consider Wave Theory to predict further trend we are getting two probabilities …First is that a dip to 9700 was a Corrective WAVE A of larger trend , which means recent short covering is WAVE B which can resist in the range of 9980-10060 and resume slide down to 9400. Second is that a dip to 9700 was the end of Corrective Wave 4 of a motive wave which means we are into Wave 5 of the larger trend which could get upto 10700 which is coinciding near to Inverted H&S. But remember BOTH POSSIBILITIES HAVE EQUAL CHANCES!
Now looking at the Derivative open interest , currently we are having a resistance at 10000 which is making us little bit biased on the short selling in next week but for the bulls we got a GST Simplified Announcement post market hours on Friday which could break that resistance on Monday opening. Now Talking about Moving averages , we have closed above 20 DSMA 9965 which was acting as a strong resistance on daily chart and on weekly chart we have taken strong support on 20 weeks Average which is acting as support since start of the year.
So to recommend a strategy to my readers, i would suggest going stock specific longs on monday in sectors such as PSU Banks and Pharma which are looking to outperform on charts in coming weeks. Also Earning season kick starts next week so that could be in focus. On the otherside for index trading, i would recommend not to trade this 100 points (9980-10080) as it could be quite volatile. To get a confirmed trade, we need to close above 10060 for longs and close below 9910 before crossing 10000 next week for shorts. So its better to avoid index trading and rather stick to stock specific trading.
Happy Weekend Guys and will keep you posted as soon as we get some clear trade on Index!