Nifty continues to move in non-trending fashion!

Bottom Line: Nifty continued to protect the lows near 5980 levels on closing basis. Follow-up action will be important to observe.

Nifty Daily chart:

Nifty 10 mins chart:

Nifty 60 mins chart:

Wave Analysis:

We have mentioned in previous update, “Indian markets continue to move in a few days of rally and more than twice the time of consolidation structure. Although the overall effect is positive but it makes a very challenging trading environment for Swing and Option traders. Such environment results into reduction in volatility and time value, both of which are important for trading long options”.

As shown on daily chart, Nifty formed an outside bar indicating indecisiveness. Prices continued to move within the range of 5980 and 6020 levels with no clear directional breakout.

We are using Bollinger Bands® to get important support and resistance levels as the current move is sideways. As seen on 60 mins chart prices closed exactly on the support of the band. It will be important to see if Nifty can bounce back from here and protect the lows of 5980 on closing basis which it has been testing over past few days.

We are also showing Nifty 10 mins chart which gives a clear picture on latest pattern. Prices are forming an expanding correction. We have shown this type of correction even before and mentioned that such corrections which were rare before has become common now. Market always manages to choose least expected path.

It is also important to note than last 100 points of rally has managed to convert many analyst and traders extremely bullish with targets of 7000 and more. We still do not think that current rally will sustain above 6400 if Nifty manages to cross 6100 on upside. As the rally progresses more and more analysts and media will join the bandwagon. But looking at the time taken for up move from 4750 levels we do not think this is the start of next bull market!

Over short term, Midcap and Small cap continued to be positive. Advances are more than Declines. Metal and Banking stocks continued their outperformance.

As per wave perspective, the current thrust is intermediate wave 5. Prices have completed minor wave ii near 5850 levels and it has started the next leg on upside in the form of minor wave iii. Earlier 5940 acted as a strong resistance and now it should become good support level.

Currently, prices are moving near the immediate support of 5980 levels. Move below 5970 will continue the previous day down move and prices could move lower till the next support of 5950 levels on intraday basis. However, move above 6010 will take prices higher till the next resistance of 6100 levels.

In short, as long as prices hold the support of 5940 our bias is positive. Move above 6010 will resume the uptrend. Any move below the support level would cause doubt about the bullish view.

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