Starting today’s post with some Gyan 🙂
One aspect of the market that Investors & Traders will do well to assimilate in their strategy is that “Market Rollover” from Top to Bottom or Bottom to Top happens starting from the smaller time-frame to the longer time frame. First, the hourly will turn over, then the Daily, then the weekly. If you are Bullish/Bearish on weekly, wait for the hourly charts to break all Resistance/Support. Then the same will happen in Daily and finally, the Weekly will roll over. And in 9/10 times it is worth the wait.
Keep this in mind especially if you are trading options 🙂
Nifty ended the week with a 0.4% cut. It was a range bound week with complete confusion in the minds of the Investors/Traders about the market direction but gave a decisive closing. ADAG stocks were in news for all the wrong reason. Reliance Infrastructure(RInfra), Reliance Capital (RCap), Reliance Home Finance (RHFL), Reliance Power (RPower), Reliance Naval and Engineering, and Reliance Communications lost between 20 to 40 percent in the past week.
Nifty Long Term
Nifty closed the week with a down-tick 0.40%. The weekly action this time is more decisive compared to last two weeks of Spinning Top. Nifty closed at the low point of the week courtesy to the last hour selloff on Friday due the government decision to impose higher tariffs on 29 US goods from next week.
It looks like the market is starting to get weaker as we have expected in our May end monthly analysis (Read here and here). The negative crossover on the RSI has finally materialized which will accentuate the negativeness of the “Bearish Divergence”.
Nifty Intermediate Term
The 11800 to 12000 range is still holding and for any momentum to develop this needs to be taken out in either direction as I have repeatedly written in my daily Nifty update during the last week. Finally, it looks like the balance is tilting on the bearish side. The RSI(7) is moving below the 50 level. PPO has given a signal which is normally bearish in nature. On the downside, 11550 to 11650 should provide the short term support. The negativity over the India government decision to impose tariffs on US goods will also play out next week.
Nifty Short Term
I will take the price action as a break of the support zone around 11840. If you look attentively from the day of the election results, the whole period till today looks like a distribution exercise.
- The higher high – higher low pattern changed into a lower high – lower low pattern.
- The intensity (% gain) of rallies were more in the first half which reversed during the second half with price falling faster and more during corrections.
I have drawn your attention many times last week that normally Nifty start correcting as the AD line takes out the previous low. That has played out well this week and as you can see from the chart below the correction in Nifty started at the same moment as the new low is formed. Perhaps the reason for this is it becomes too much for those handful of stocks to hold the market when all around gloom takes out the previous low.