Nifty - 16 Apr 2014 - Sniffing at a Breakdown

Nifty plunges 100 points in 10 minutes, then consolidates forming Bearish engulf.

As discussed yesterday, it was consolidation time on Nifty, but not before a 100 point nosedive. The Nifty opened with a positive gap up of 16 points at 6793, made a quick high of 6813 (right into our identified resistance zone) and then nosedived to 6712, all within the first 10 minutes of trade. That 6712 became the intraday low, was emphasized with the fact that the Nifty then consolidating within a range of 30 points for the entire trading session afterwards. Finally, the Nifty closed at 6733, with a loss of 43 points over the previous close. Although our trading plan did trigger, the Nifty's swift move did not allow our order to get triggered and we were left watching the market from the sidelines. The Bearish engulf that has formed now, is in the supply zone and needs to be respected. This will get negated or invalidated only on a close above 6793 which was yesterday's opening mark.

1) The Elder Ray readings : Bull Power rises from +89 to +109 Bear Power also rises from +43 to +7 indicating that the Bulls are still strong and that the Bears are also very close to their safe zone. For today, the Bulls need to overcome the levels of 6820 to maintain their upwards momentum whereas the Bears need to breach the levels of 6710 to regain their lost grounds.

2) The fast stochastics are now out of the overbought zone and are pointing downwards while the slow stochastics are still in the overbought zone.

3) The Nifty has closed below its 8EMA but has closed above its 13EMA(6705) and 21EMA(6643) and has also closed above all its key DMAs.

 

4) In the above chart, the volumes have decreased with the fall in the Nifty indicating that the fall may get arrested. The MACD is still afloat at the top, but the histogram has gone below the zero line after 40 trading sessions almost. The ADX is also showing a fall in the Bullish momentum and a rise in the Bearish momentum. The Parabolic SAR continues with its Buy signal with the SL now brought up to 6667.

5) Considering the above, our trading plan for the day is as under.

a) Around 6770 we will open fresh short positions with a SL of 6795 and a target of 6700. We will add to these short positions only below 6670.

b) Around 6690 we will open fresh long positions with a SL of 6670 and a target of 6760. We will add to these long positions only above 6795.

Happy Trading !!! 

Buy calls on HDIL GICHSGFIN CLNINDIA & SCI hit their targets on 15 Apr 2014

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