Nifty 50 Closes Opening Gap; What is the Future Roadmap?

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After a massive plunge at the opening tick, there has been a massive buying witnessed from the lower levels. Investors’ high-risk appetite led to a sharp recovery from the day’s low across the board. The primary support came from the banking space, with the Nifty Bank index clocking a 1.28% gain to 41,390, which is near the all-time high.

Coming back to the Nifty 50 index, a steep cut in the opening session left a huge gap on the daily chart. As the market generally tends to fill the gap sooner or later, a retracement on the upside was somewhat expected. But surprisingly, the huge gap was filled with the intraday rally on the same day. This showed that the bulls are still not ready to give up.

During the rally, the India VIX did not cool off. This volatility measure generally moves in inverse correlation with the market’s move. Therefore, today’s rally should have eased off the VIX but this didn’t happen. This simply means investors are still expecting high volatility in the market, which generally directs to an impending downtrend. Currently, the India VIX is trading 4.87% up at 18.31 by 1:36 PM IST. 

Image Description: Daily chart of Nifty 50 (spot) with the RSI at the bottom

Image Source: Investing.com 

Now as the gap has been filled what’s next? There’s still a stiff resistance at the top for the Nifty 50, although the Bank Nifty is looking relatively stronger with the only resistance being left is the all-time high. After filling the gap, security generally reverses the trend towards the previous direction. Therefore, the trend in the Nifty 50 could still reverse from the current levels despite a massive demand from the lower levels. 

For the bears, the absolute best level to try to fade the rally after a gap-down move is around the low of the previous day. That is where the gap closes. This level is extremely important because this is the level from where the left-out traders are expected to initiate new positions and traders who held the wrong position try to cut their losses short.

Another reason is the bearish divergence at the top which I have talked about several times. This divergence has started to work and the first day of correction was today. As long as the index does not cross the previous day’s high of INR 18,088.3, the divergence stays intact. Although traders need to be cautious of an upside move that could come on the back of a recovery in the US markets as yesterday, the Dow Jones fell over 1,200 points which indicates a probable immediate bounce.

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  • Rahul Phull @Rahul Phull
    especially, when it cross 17990. Yesterday's unexpected movement of Nifty50 twice - 1st 18045 & 2nd 18091
    Like 0
  • Mohanraj Mohanraj @Mohanraj Mohanraj
    18300
    Like 0
  • NIRAV JARIWALA @NIRAV JARIWALA
    call buy karo share buy karo election aa raha hai so company me investment badhaye election after 30% down ho jaye gi apke investment ki value
    Like 0
  • Shivayogi Kempawad @Shivayogi Kempawad
    Bank Nifty all time high is at 41829.60. So today's high is we can say 52W high.
    Like 0
  • Trishul Rawool @Trishul Rawool
    Nifty is showing that it will go to 18850 based on ABCD pattern.
    Like 3
  • Mahamad Kathat @Mahamad Kathat
    bank nifty ka range send
    Like 1
  • Mahamad Kathat @Mahamad Kathat
    bank nifty ka range send
    Like 0

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