The 2.3% bump UP for the Nifty on Friday was quite smooth and brought a lot of cheer on the streets but the CRITICAL 5690 level still remains unconquered. Given the smart rise of the previous week, it may not seem formidable after all. Nevertheless, we will have to wait and see what the market does. So, let us do a what if scenario.
a) What if 5690 is taken out – the bullish case. The market structure that we thought was unravelling in this post would not be the case and markets would continue to head higher. The problem here is, the market has spent more days between 5600 and 5200 than it took to decline from 6182 to 5177. So it is looking more like a short-term bullish picture. And the question – How much higher? It could be around the region of 5900 but may not be much higher.
b) What if 5690 is not taken out – the bearish case. Obviously the old targets would still be alive while we may still have to see if we need to slightly review the market structure. But the markets need a quick decline – the longer Nifty holds above 5600, the odds of the bears losing advantage would increase.
A couple of things that needs to pointed out here. Firstly the volume of the short-term breakout did expand slightly, it was nothing exceptional as the media is projecting it to be (see the horizontal blue line on charts).
Secondly, while the small caps and mid-caps tend to follow the large caps, they are yet to clock higher highs – risk taking is not yet back, at-least so far.