Nifty showed sharp reversal on 18th September and closed up by more than 100 points.
This would have been sufficient to turn many of the traders and analysts directly from the sell side to buy side. However, we have been closely observing movement of Indian markets for many years now. This gives us the luxury to compare and relate similar price action in the past. In short, it helps us to look at past patterns and predict the future price action.
Nifty daily chart:
As shown on above daily chart of Nifty we can clearly see that the sharp down move followed by sharp up swing is usually not sustainable and prices do come down sharply again. The similar action has happened even this time and following is what we have been quoting in our daily research reports over past few days:
Following is a part of research published on 19th September morning –
….Sharp down move followed by sharp rise can result into increase in volatility and becomesdifficult to comment on sustainability. So a pull back towards 8050 and then a bounce back above the recent high will provide a good trade setup.
Published on 22nd September i.e. today morning:
…Over short term, the up leg from the low of 7940 can be first leg of wave c but since the reaction was steep without any meaningful base formation so we can see a pull back towards 8050 – 8060 levels before the uptrend can continue. This pull back can be sharp as shown by past history and also seen during the bounce back of August & November 2013.
Happened: Nifty had a Gap down opening near 8085 and made a low near 8064 levels. This sharp reversal might be a surprise to many of the traders positioned on long side but we have been warning our readers about sustainability of this up move looking at the similar pattern and structure in the past.
Nifty has been moving exactly as the path we have shown in beginning of the month in the daily research report and so far followed each and every swing in similar fashion. To know what is next from here and what is the short term to medium term trend of Indian equity markets subscribe to “The Financial Waves short term update”. For subscription options visit https://www.wavesstrategy.com/Payment.aspx