The day began on a surprise note. The three day pattern before that had indicated tremendous weakness and it looked like NIFTY is going to fall and no one had second thoughts about it with US markets also tanking the previous night. But contrary to everyone's expectation, the markets bounced and infact rallied strong moving past all the resistance levels till it reached the last resistance level of around 3056 indicated yesterday. As soon as it reached that level, there was a very strong pull back and NIFTY futures lost around 50 points and almost touched 3000 levels at one time within the last half-an-hour. Now let us analyse that move.
1. Is this move an indication of what is in store in the coming days? Are we going to see similar pull backs that are very strong.
2. Is this to frighten the late entrant enthusiastic bulls who were willing to enter at 3050 levels for the fear of missing this rally and just shrug them off.
3. Is this move just to reassure the bears that they are in the right position, or is it a false reassurance ?
The overall move suggests that bulls are still very much under control and might give up only on a strong move below 2915. Bulls have the upperhand, but bears might take control in the short term.
The good thing about today's pull back is that, it has become very easy to set the stop loss level for shorts. Any move at this stage above 3056 and 3080, will see bears looking for cover similar to last expiry and can push NIFTY further above to test 3150 and subsequently 3250 in the short term.
The resoning is that a move above 3056 would nullify the "shocker" effect for the bulls, even for the late entrant ones and would prove points 1) and 2) above to be wrong and would prove 3) to be true, i.e bears were given a 'false reassurance' and so had to run for cover.
So given this scenario, tomorrow's trade will be very significant. This is the last chance for bears to take some control and if they give up, bulls will rise ferociously to an extent which we wouldn't have seen.
Let us have a very close eye on how it spans out.
Chart courtesy : nseindia.com