Nifty had a very important day with heavy volumes – A crucial juncture!

Bottom Line: A huge volume day with strong selling pressure seen in Midcap and Smallcap sectors. Follow-up action will be very crucial.

Yesterday was a very crucial day with lot of vital technical information. The major index Nifty showed a correction of nearly 100 points compared to previous day’s close at one point of time and touched an intraday low near 8430 levels. The fall of more than 100 points was previously seen on 16^th October 2014 (in wave b) which started with a fall of 138 points on 23^rd September 2014. From closing perspective, in this entire up move from 7724 to high of 8535 yesterday registered the most negative day with -67 points. Yes, the entire up move did not have a single bar closing negative by more than 67 points. The next most negative bar was only at 43 points. To add to this, the volumes had been the highest seen only in the Election month – May 2014.

Nifty 60 mins chart:

Overall breadth and momentum!

The overall breadth was extremely poor with merely 274 stocks advancing on NSE compared to 1232 declining. More than 80% of the stocks closed negative and even Midcap index registered heavy volumes. All the sub-indices except Healthcare and Oil & Gas closed negative. Oil & Gas managed to close positive due to late recovery in heavy weight like Reliance and ONGC. BSE Smallcap closed negative to the extent of 2.32%. The reason for emphasizing so much on breadth is because this indicator has continued to deteriorate all the while Nifty was touching new highs.Also such severe selloff in broader market is a precursor of a bigger degree correction or occurs after a sustained down move to create panic lows. However, follow-up price action is very important and it will be crucial to see if prices can manage to break the previous day’s low near 8430 levels.

In short, these are going to be interesting times and if Nifty indeed moves below ……. followed by …….. in faster time it might be take majority of the crowd by surprise amidst all the euphoria and optimism.It is time to sit tight and keep a watch on the mentioned levels for getting confirmation of the trend. Just one day of fall is too soon to conclude completion of a trend!

Subscribe now to “The Financial Waves short term update”daily research report. It is extremely crucial to keep tab on the important support levels of Nifty for confirmation of trend which is due to start! Simply visit http://www.wavesstrategy.com/index.php/store.html and get instant access to research reports delivered everyday morning on your email address