Nifty In Technical Charts: Short-Term Trends Unclear

My last letter was entitled A Time to Buy and it was dated March 21. It was preceded by a warning to get ready to buy in earlier letters. Now, this turned out to be a pretty good call as the Nifty and the whole market, in fact, moved smartly and sharply over the next two weeks, adding about 1,800 points from the early March bottom which we had called! In and through that rally, all the things we wanted happened, viz., short covering from the FIIs in futures, return of the FIIs into a net buy situation, DIIs continued to buy, retail started pitching in with buys, the VIX declined, the options switched to a clear indication of short puts, the long build up of retail in cash and index futures hardened and the breadth improved across the board! So, that was something very good and hopefully, readers may have been able to take some advantage.As we moved higher in a strong advance and reached former swing levels and the targets zones given at 23,800 areas, the external environment started to intrude, mainly in the form of Trump tariff talks. This got strident and led to a halt in the buying and profit taking also developed. And there hangeth the tale! Chart 1 tells the story..Over the past couple of weeks, the left side of the move is the rise, and that one we captured. I had stated that, "But for those with limited capital, they don’t want to miss a chance at a dropped level of price. Hence, they should not wait. For those with larger capital, they can parcel it out with some entry now and wait for confirmation for buying more.”Now, the question is, does the decline created by the response to the Trump tariff announcement present us with another buy opportunity? After all, the evidence that had collected did show us that the there was a good chance of the market continuing higher. But over the weekend, everyone has got (freshly) spooked by the Chinese retaliation that has clobbered the global markets on Friday and we learn that the Nifty has traded down as well, along with falling global markets post our closing on Friday. Chart 2 is an indicative chart of the same..Trump Tariffs: Trade Turbulence Ahead, But India May Sail Smooth, Says Neelkanth Mishra.It is difficult to say where the market shall open on Monday, but the main point is that the rise has been curtailed at the recent swing high at 23,893.In chart 1, I have given the retracement levels (that one would have normally expected) at 22,785 and 22,485 and the prices, apparently, have deep dived beyond those levels too. Will they be seen on Monday when we begin trading? I don’t know, so I would continue to keep the above two retracement levels as being valid measurement levels to judge Monday markets.Now we come to a cross road. What if the levels are seen and markets trade lower? The tendency would likely be to question whether we should follow those, whether it is right for markets to fall this way after having already fallen much in the preceding five months? The answer is no, they should not. Realistically, we don’t have to react the same way that the other markets got hammered down on Friday. But if the prices don’t recover and stay down, we need to respect that as well and then check for fresh signals that we can react to — for we could not react to the gapped move. That may come in multiple ways, too numerous to list here. But it will certainly set up for a strong retest of the earlier lows near 22,100.But what if it doesn’t? Now, that puts up a couple of limited scenarios that we can discuss. First is, does the NF go below 22,660? If it does, then decline can continue to go lower. If it can hold higher, then it may attempt a pullback to fill the gap that shall get created — back till 23,000-23,100. So, as we go into next week, I would keep this level in mind as well (22,660) along with the two levels mentioned earlier.Either way, I think everything here might slow down. There is high confusion in the markets across the globe right now and generally when that happens, markets tend to get into a range. We just saw a sharp rally- which is typical of a bearish phase, and topping out at expected levels, the market should now get into a consolidation mode.It had seemed like a three-wave correction had formed and the recent upmove. Chart 3 has the moves annotated with Gann angles. While the rally top was caught squarely by the declining angle line from the top, the support angles drawn from a recent low are tentative..Everyone has their views on what Trump has done and what the fallout of that is going to be. I am not so sure because many of these big macro thingies are above my skill set and understanding. When that happens there are only a couple of this to be done: a) do nothing fresh. Or b) mark a good stop and jump in.I prefer to be camp (a) for now. There is absolute lack of clarity but everyone around you seems like an expert! That is a dangerous time, I think. I would let the week go and wait for more clarity to emerge before doing anything..M&A And IPOs Worth Billions Stalled In 24 Hours By Trade War.CK Narayan is an expert in technical analysis, the founder of Growth Avenues, Chartadvise, and NeoTrader, and the chief investment officer of Plus Delta Portfolios.The views expressed here are those of the author and do not necessarily represent the views of NDTV Profit or its editorial team.

Nifty In Technical Charts: Short-Term Trends Unclear

Do nothing fresh, or mark a good stop and jump in, says CK Narayan.

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