The weekly chart of Nifty shows that this week had a
marginally higher top, a lower bottom, and a lower closing for the week ended on 08.11.24 . After opening on
Monday, Nifty endured a lot of volatility throughout the week and closed at the
same level on Friday – 24,110, forming a Doji. Last week, Nifty also formed a
Doji.
Therefore, while the day-to-day scenario looks challenging for Nifty, in the bigger picture, there's some comfort for the bulls. Technical indicators last month suggested that the market would go further down, targeting 23,100. I discussed this in detail in the post on October 20 and earlier on September 20, where I mentioned the potential for a significant drop. Both posts are available in my Face Book timeline (https://www.facebook.com/dhiman.das.94).
After the first week of trading in November, while the main
theme still seems bearish, there’s also a possibility that a temporary bottom
may be forming.
Last week, Nifty’s movement was much like a thriller movie.
After dropping 250 points on Monday, it showed a remarkable recovery on
Tuesday, reaching a low of 23,842. Bulls continued to dominate on Wednesday,
momentarily crossing the important 24,500 level, but it was a false breakout.
Noticing the intraday volume, one could have shorted instead of getting caught
in that bull trap.
Even if one did short, it was reasonable to cover the
position that very day. By Wednesday’s close, the strategy was clear – if Nifty
crosses 24,500 again, a long position should be taken.
On Thursday, the market opened with intense selling pressure. It felt like a scene from a tragic movie, with the famous song by Jatileshwar Mukhopadhyay playing in the background, "What kind of morning is this, darker than the night."
The reason behind Wednesday’s rally was the outcome of the
US elections. Now, experts are saying – our market didn’t fall due to the US
elections, so it won’t rise just because Donald Trump became the US President.
It’s a logical point, but I admit I didn’t think this way initially, which is
why Thursday’s heavy selling pressure caught me off guard.
The only consolation was that, although I couldn’t
capitalize on the fall, I didn’t buy and incur losses either.
Now, let’s discuss the technical evidence for why there
might be a temporary bottom. In the hourly chart, we can see a bullish head and
shoulders pattern forming. The breakout level is 24,500. In the coming days, it
will be good for the bulls if 24,000 holds.
On the daily chart, momentum indicators, especially RSI,
show positive divergence. I mentioned earlier that Doji formations have
appeared for two consecutive weeks.
A Doji indicates indecision in Nifty – suggesting some hope
for the bulls. Previously, Nifty was on a downward trend, and now it has paused
temporarily.
The ammunition is still damp – although the bulls
occasionally spark, there’s no real action. This reminds me of a story from
around 80 or 100 years ago, about a soldier in charge of bombarding the enemy
from a mountain. One night, the enemy advanced due to a lack of bombardment.
The soldier faced a court-martial, and when the committee
asked why he hadn’t fired, he replied he had a hundred reasons, with the first
being that the ammunition was wet due to rain. The committee head responded,
"There's no need to hear the other reasons; the wet ammunition is
enough."
There are many reasons Nifty hasn’t risen; the main one is whether Nifty will decisively cross 24,500. That’s not possible until the ammunition dries. Similarly, in Bank Nifty, the bulls will be ready to fire if it solidly crosses 52,600.
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