In our last weekly report, we have mentioned of Falling Parallelogram structure, which gives us the view of Nifty testing 5150 levels. The buying was also suggested near this level with a positional stop loss of 5080. But on the timing cycle day of 21st Jan, a sharp downward momentum of Nifty not only triggered 5150 levels but also tested and closed around 5085 levels, indicating short-term trend reversal. Nifty lost 333 points in just 4 trading sessions. On weekly chart, a long bearish candle is formed as Nifty has lost 298 points from previous weekly close to current weekly close. Nifty closed near the bottom trendline connecting earlier bottoms of 3918 and 4538.
1) Now on daily chart, if the current two tops are connected at 5181 and 5310 and parallel line is drawn from 4538, the support arises near 4700 levels.
2) 50% retracement of the uptrend from 3918 to 5310 is placed at 4610.
3) 200 – DMA is also placed at 4633.
4) The volumes in the current fall are on higher side in last 4 trading sessions suggesting the strength in the current fall and give the higher possibility of further correction.
5) As per wave theory, the wave counts are explained on the chart and ‘C’ wave is in the continuation. The characteristic of this ‘C’ wave is a fall without bounce back and turns the sentiments extremely panic due to its force.
The entire ‘B’ wave is situated in a ‘Rising Wedge’ Pattern and its downward breakdown was placed at 5080. Now as 5080 level is breached downwards, a sharp downward swing is expected test the level of 4700.
1) No fresh buying should be made as short term trend is reversed to downside and bottom fishing is to be avoided.
2) The ongoing short positions in Nifty can be continued and fresh short positions can be initiated below 5000 with a stop loss of 5100 for fresh as well as ongoing short positions.
3) Partial profit booking is recommended if 4850 level is achieved and the stop loss to be revised at 5000.
4) If the downtrend in Nifty continues below 4850, one can book full profits around the target of 4750 levels.
5) At the current situation, the upward trend reversal is placed at 5180 on closing basis.