Bottom Line: We are in last leg of the first
correction of our multi month Bull Run. We will not enter Bear trajectory until
Nifty breaches and close below 6580 for three consecutive days.
It has been a great day for the bulls yesterday, with no
bears hardly found on the trading floor. The question is, 'is this the start of the next leg up?' This can only be answered
by looking into the major time frame chart. Let us pull up the Nifty monthly
chart to understand where we stand.
Looking at the chart, it is clear that the up move of 130
points that we saw yesterday hardly had impacted the ongoing correction. The
chart shows more downside to come in coming weeks. From my experience my
observation on RSI and its correlation with correction: "for a healthy new
leg up, the correction has to end up when RSI settles down in between the range
of 50 & 45. I have marked this in the above chart, and we can clearly see
that there is still room for the downside. Also look at the MACD, there isn't
any signs of bullishness yet. Bollinger bands are contracting, and by the time
we end this correction phase, we will see a tighter band, making prices to
hardly move within a congestion zone. Narrowing it down, Correction isn't over
Now let us also check the daily chart of Nifty to understand
how yesterday's ‘move up’ has impacted.
A little impact could be found. There isn't any drastic
change that we could find. Look at the downward sloping trend line, Nifty
hasn't answered to the resistance created by the gap down that we witnessed
last month. RSI hovering around the oversold zone, yes this could be taken up
as positive or negative and MACD still negative. Even if we find some follow up
swings in todays trading session, unless we see some drastic reflection on the
chart, I think this correction is still in place.
The trends for the day.
Long term Trend: Correction to the ongoing Bull Run.
As long as we hold on to 6580 we will not turn negative on the long term view
of Bull that we hold.
Intermediate term Trend: Trending Down, now the trend is in
Short term Trend: Trending Down. The trend will not
change until we close above 8210, which means 8210 would act as SL for those
who are short in Nifty.