Disclaimer: These are my personal thoughts and not trading advise. To view the full chart, right click on the thumbnail and open in new window.Yesterday, in my last paragraph, I had mentioned that there was a cycle in time that occurred yesterday. Which led us to the possibility that yesterday could be a short term top.
Indeed, the market reacted with weakness. But the force and the momentum of the weakness has not been strong. We also see that the Nifty still has not violated its previous swing low.
The Nifty also reacted rather smartly from its lows. The manner in which it moved up suggests that we may find tomorrow resuming the up trend. We could then count today as a breather pause.
If the reader “zooms” in to the last two or three days, we see that a minor trendline in blue has still not been violated. The Nifty also has remained above an earlier swing top, which was earlier exerting resistance. Now it does seem to be providing support.
If on the other hand, we see the weakness extended tomorrow, then we may assume the intermediate trend has turned down. Of course, the weakness has to be confirmed by violation of earlier swing lows. In case the earlier swing lows are not violated, we will assume the trend to remain up and approach the market with long point of view.
Using other analysis techniques, we see a relatively large build up of short positions on the Nifty futures and options. Since the exchange does not release data for long or short open interests, we cannot pin point whether long positions have booked profit and exit, or fresh shorts have been created.
Either way, we find that, suddenly, the majority in the market have become pessimistic. And as we all know, most of the times, the majority are proved wrong.
Therefore, we may expect that the uptrend could be resumed to our earlier projections.
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