Nifty 50: First Red Candle in 7 Sessions!

  • Stock Market Analysis

The ongoing brutal rally in the broader market Nifty 50 index is clearly evident. The index has scaled almost 2,000 points from the 26 October 2023 low of 18,837. This is the sharpest rally in the large-cap index of this year and there’s no stopping it.

There’s no doubt that bears have burnt their fingers trying to fade this rally and still no signs of weakness are visible. So, what should be done from here? Despite a very strong uptrend, I don’t think it will be a viable idea to go long at these levels because the downside risk is too large to be managed.

The nearest support I could find is 20,250 which is 700-odd points far from the CMP. I don’t know how many can go long on Nifty 50 with a stop loss of 700 points. However, those who are sitting tight on their long positions can still hold their positions but with a tightened stop loss to lock in the majority of the profit.

For the first time in the last 7 sessions, bulls seem to be tired with the red candle forming on the daily chart. Also, this closing near to the opening has formed a Doji-like candlestick which denotes indecision among market participants. This candle at market extremes is a good indication of a probable reversal.

To denote the market extreme here, the RSI (daily, 14) can be used which is showing a reading of 84.03, the highest since mid-September 2021. Yes, the momentum is that strong! Hence, traders can expect a mean reversion from this overbought zone.

So, is it mean to go short? Here’s an interesting price action to notice. In the last 7 sessions, the index has never fallen below its previous day’s low (PDL). So, I would count a short signal as soon as the PDL is taken out, be it tomorrow or next week. This would be a counter-trend trade, hence, the chances of going it wrong is high.

Disclosure: I have multiple options for positions in Nifty 50.

-----------------------------------------------------------------

X (formerly, Twitter) - aayushxkhanna

CYBER MONDAY SALE: You can avail InvestingPro+ at a massive 60% discount and by using the coupon code PROC324 get an extra 10% discount over and above the ongoing promotional price for the Bi-yearly plan only. Click on the image below to access the link

Drop an image here or Supported formats: *.jpg, *.png, *.gif up to 5mb

Error: File type not supported

Drop an image here or

100
  • Raju Kumar @Raju Kumar
    Raju Kumar
    Like 1
  • Sekar Marimuthu @Sekar Marimuthu
    👍
    Like 0
  • Dr Shrinivas Karajagikar @Dr Shrinivas Karajagikar
    thank you
    Like 3
    • Aayush Khanna @Aayush Khanna
      You're welcome, Shrinivas.
      Like 0
    • Drop an image here or Supported formats: *.jpg, *.png, *.gif up to 5mb

      Error: File type not supported

      Drop an image here or

      100
  • Bhasker K Singh @Bhasker K Singh
    thank you
    Like 1
  • Ganapathy Raman @Ganapathy Raman
    though the candle is red its jus odd 10 to 15 points , doji for sure . bottom wick suggests buying pressure. Rally is on . Gift nif futures at 21100 now
    Like 1
  • jass royal @jass royal
    advnce feb. retrcment .
    Like 1
  • Akshay Jagtap @Akshay Jagtap
    Next week expiry 20500
    Like 1
  • Gnanavel Somasundaram @Gnanavel Somasundaram
    Yes may be after touching 21000
    Like 0
  • Aswath ram @Aswath ram
    20850 break then 20770
    Like 0
  • ashok sharma @ashok sharma
    yes it is likely 21200
    Like 1
  • ashok sharma @ashok sharma
    my assumption are21200 nearby
    Like 0
  • Ashish Dhingra @Ashish Dhingra
    not yet, chances are very shortly
    Like 0
  • Bhavin gadhvi @Bhavin gadhvi
    you wrote 21250....it should be 20250
    Like 2
    • Aayush Khanna @Aayush Khanna
      @Bhavin gadhvi Yep. Thanks :)
      Like 2
    • Drop an image here or Supported formats: *.jpg, *.png, *.gif up to 5mb

      Error: File type not supported

      Drop an image here or

      100

Related Articles