It’s clear by now, that the smooth uptrend that we witnessed from 17,000-odd levels is gone. The Nifty 50 index has started to correct after hitting an all-time high of 19,991.85 and bears are now enjoying the party.
The last two sessions were quite volatile as the index gapped up at the open on Thursday and fell flat on the face by the end of the session, moving a total of 215 points (from high to low) for the day. The follow-up session opened with a gap-down and closed at the lowest level in the last 50 days.
Image Description: Daily chart of Nifty 50 (spot)
Image Source: Investing.com
On Thursday’s gap-up opening, it looked like the index had finally breached its falling trendline resistance and was ready to reverse its course but the intense selling pressure turned it into a fake signal. Even though I was becoming bullish above 19,472, nothing can be done when the global cues are not good. Much of the selling pressure is the ripple effect of market-wide selling going on in the US markets.
Now, on the charts, the closing on Friday was quite a bad one and has again signaled the resumption of the downtrend. If on Monday, the index does not cross Thursday’s high of 19,584, then this level will become the new resistance, coming down from the earlier hurdle of 19,645.
Also, as the trendline breakout failed in the last week, a new revised trendline can be drawn joining the peak of Thursday’s high, which will be less steep. Either of the buy signals - this new trendline breakout or new resistance breakout can be looked upon as a fresh cue for a trend change.
As the downtrend has resumed, the market has again switched to a sell-on-rise one. Technically, there are no support levels present till 18,900, meaning a fall of 365 points cannot be ruled out.
Disclosure: I have multiple positions in Nifty 50.
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