Nifty(5139): Tuesday’s sell off was completely neutralised and once again the focus has shifted back to the critical 5175-5200 zone. It is always important to keep an eye on where we are in the larger trend. So, here goes:
We already know that in the medium term the bearish trend does not have a problem as long as Nifty stays below 5330. The structure marked on the chart is what is called a “flat” which has a tendency to exceed slightly above the high of “a”. The 50% fibonacci retracement point of the move from the Aug high is at 5230 and we might want to keep this as important level for reversals.
The alternative view is that, what if the point we have marked as “b” is actually a truncated 5th? One of the long-term possibility is that the bulls are back for the long-term (Nifty should exceed 5177) – this seems pretty incongruous based on several measures I follow. While you need to be aware that such a scenario exists, you might also want to be aware that this rally could extend to the 200DMA (about or the blue trend line shown on the chart (5400+ zone) and still be in a bear market. We will be using a different count in that case. We will discuss on a separate post when the need arises with charts and the works.
So it is important to understand that we should NOT make any large commitments on either direction of the market. Keep your positions to a manageable level.
The Euro seems to have put in an important secondary high 2days back and with a tight correlation with global stocks over the last few months this is going to be an important thing to watch out for. A decline to 1.3550-1.3575 seems likely and anything below that would mean that fuel for the bulls have gone empty.
Nifty short-term: Watch out for 5110-5085. Below this zone a quick 50 point decline could come through. If any intra-day traders out there, you might want to pay attention to this.
On CNBC, today at 8:20 IST.