Will we have a Bullish Reversal in Nifty, Bank Nifty and Paytm?

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Today I will once again be looking at the headline indexes and Paytm (NS: PAYT ). I have chosen to look at the indexes again as I had written an article about them on 2nd May in which I had said that they are in a precarious position. Since then, the indexes have traded as per the scenario given and they have had a decline until the levels provided in the article. For example, Bank Nifty fell to the highlighted support zone at Rs 33,500, whilst the Nifty fell to the support zone at Rs 16,850. Once the indexes reached my support levels, I then gave more downside targets via Twitter (NYSE: TWTR ) and my pre-market videos on YouTube. Next, I will look at Paytm again as I have written about the equity twice in the past. The first article was when it was trading at roughly Rs 1,100 and I gave a target of 790, which was met rather quickly. I then wrote about it again and gave a downside target of Rs 600 and Rs 490. Paytm, as expected, fell to Rs 600 after which it dropped to Rs 510 this week, which is a haircut away from Rs 490.

Coming to the Nifty. On Thursday, I shared in my pre-market video that I will be selling certain puts. This strategy worked out well as all puts from Rs. 15,800 and below expired worthless on the 12th May expiry. This, in turn, gave me and others who traded it a good return. I say this as the spike on Thursday morning let option sellers enter with higher quantities and devour more premium than usual. The reason I had said I was selling puts was due to us reaching an important support zone, which I had shared in my video.

Now for this week. Whilst, penning this article, the SGX Nifty is positive and indicates a gap up of roughly 100 points. However, all of us who trade daily know that this is not a reliable indicator, as a lot can change by 9 am on Monday. Thus, in the Nifty future, there are two trading scenarios as of now. The first scenario involves the index holding the Rs 15,720 support or the support zone between Rs 15,542 and Rs 15,638. If these support zones hold, then we can expect a dead cat bounce towards the resistance level at Rs 16,080 and Rs 16,340. Once we reach these zones, I will update you about the next step via my videos and Twitter. The reason I am calling this a dead cat bounce is as the longer-term trend in the index is severely bearish. Thus, if a bounce does occur, it is important not to get all bright-eyed and think the Nifty is out of the woods. On the other hand, the second scenario in the Nifty involves the index breaking the support zone at Rs 15,720 or the support between Rs 15,542 and Rs 15,638. If it does this, then we can expect a decline until the support at Rs 15,270 and Rs 14,940.

Now when we look at the Bank Nifty, the storyline is similar to the Nifty. Therefore, due to this, we have two scenarios that can play out here too. In scenario one, if the Bank Nifty holds the support zone at Rs 32,700, then we can expect a bounce until the resistance zone at Rs 34,400. A break of this zone would cause an up move until Rs 35,300. The resistance zone at Rs 35,300 is very important as it is extremely sturdy and could bring the dead cat bounce under serious risk. In scenario two, if the index breaks the support at Rs 32,700, then it will have a fall until the support range between Rs 31,900 and Rs 32,250. A break of that would bring Rs 31,300. 

The only stock I will look at in this article is Paytm. Paytm is one stock that I wish was listed in the FnO segment. This is as I have been writing and tweeting about it since IPO and it has fallen as per expectations. Thus, it would have been a short of a lifetime from Rs 1,900 to roughly Rs 500. Coming to how I expect it to trade in the coming sessions. I expect Paytm to form an elegant bullish trap in the forthcoming days. I say this as the stock is attempting to form a double bottom on the daily chart. Thus, am sure every technical trader will tweet about this, which will lead to a lot of retail traders getting suckered into buying this equity. The reason I am positive that the double bottom attempt will fail is due to the bullish volumes being low when pitted against the bearish side. Plus, the 50-day and 20-day moving averages are trading above the current price. Thus, I expect any up move to be stopped by the moving averages, after which we will have a decline back to the support at Rs 490. Once it reaches the support at Rs 490, I expect the stock to form a new low by heading to the two next key support zones at Rs 440 and Rs 350.

Overall, the headline indexes in the bigger picture are in a rut as the longer-term trend is bearish. Thus, if we have a dead cat bounce at the levels shared above, then expect it to be a quick-up move that will end swiftly. This is a bear market up moves are sharp but short-lived, after which we return to the primary trend. Coming to Paytm, investors ought to avoid it as it is forming a bullish trap after which it will begin a new decline. This is as the technicals are bearish, whilst the fundamentals are of poor quality. Thus, it’s better to put your money in many other quality stocks that are listed in the Indian market. Lastly, I have attached a YouTube video in which I have looked at Tata Consultancy (NS: TCS ) Services, Sterling and Wilson Solar Ltd (NS: STEN ) and ICICI Bank Ltd (NS: ICBK ). Watch it if you are interested in knowing whether they are worth an entry.



Good luck trading.

Disclaimer: The investments discussed by Sandeep Singh Ahluwalia may not be suitable for all investors. Thus, you must trust your analysis and judgment before making investment decisions. The report provided is for informational purposes only and should not be interpreted as a proposition to buy or sell any securities.

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  • Bal selvan @Bal selvan
    thank you sir
    Like 1

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