Nifty had been in super trend since the month of Demonetization which gave us a rally from 7900 to almost 11200 in 14 months. Generally market is said to be significantly corrected if we have a breakdown of almost 10% from the recent highs and which we never got in this 14 months rally. But now, last week sell-off has got some fear amongst traders and that nervousness can also be seen on weekly charts of Nifty
Attached chart is of Nifty and the periodicity selected was Weekly for my study. During my quick go-through it came into my notice that Nifty is near to 13 Weeks Average support which hasnt breached on Weekly closing basis since last 14 months. Currently that support is at 10550 mark and we almost kicked it off today with the low at 10586 at spot level.
So what Next?
Surely we are trading near to support crucial level but it isnt sure that we breaking down from this levels. On positive side, Nifty has given a minor 4 th Wave correction which might have ended at todays low and we may see some bounce back to 10900-11000 levels before confirming any medium term reversal. Strongly resisting this rally is the bearish engulfing pattern on weekly charts at recent highs making it more difficult for bulls to take fresh longs. I am sure many mid-cap stocks are looking at attractive valuations which tempt you to buy stocks for short term but crucial remember 10550 on this weeks closing. To support on the short term trades, we even have strong PUTS writing at 10500 until today which would be help for derivative traders.
Short term trade can be of a pull back on Nifty since we had got a steep fall in recent past. So short term traders can go long on Nifty with tgts of 10790/10840/10960 and stop loss 10520
Medium term traders could wait for a confirmation of either breaking below 10550 or above 10900 for trend confirmation.
Have a happy trading week guys!