Nifty – 8 Feb 2017

To be sure, the outlook around the globe is quite uncertain and absolutely unhealthy; low volume rallies without broader sector strength in combination with various forms of divergence make the primary trends – and thus long-term investing – very tricky indeed.

For the Nifty there are two forces: the intraday uptrend and the longer term toppish formation (B-wave). The intraday trend has carried the market towards the key level at 8762. A weakening of the intraday trend in combination with some sort of correction back towards ~8100<>8000 is very likely with a breach below the intraday support at 8700 functioning as a trigger/confirmation. Such a correction is welcome, healthy and not serious for the near term outlook. However, for the long term outlook this could very well function as conformation of a completion of the B-Wave recovery and thus start of a much longer, deeper and more serious correction (easily towards ~7500). Such a decline is far from certain at this point, but risks are mounting while upside potential and trend strength is waning. These factors alone warrant caution and an exit-long stance from a strategic viewpoint.

What to watch for over the next 1-3 weeks. A correction towards 8100-ish. A bounce back to any level up to 8700. This should lead to our long-term bearish view. Failing to hold below 8700 (zone) after a correction opens the door towards the old highs around 8960. This latter scenario is considered substantially less likely and we certainly do not trade any such move. We’ll be happy to miss such an opportunity; risk/reward is too skewed. We prefer to avoid any exposure and see how the market develops over the next few weeks.

  • Primary trend: neutral
  • Outlook: long-term uncertain, trend reversal probable
  • Strategy: exit-long long, prepare for correction
  • Support: 8452 / 8133 / 7940-
  • Resistance: 8762 / 8910 / 8960+

Intraday 3-hrs chart NSE Nifty

Daily chart NSE Nifty