Nifty In Technical Charts: Shaken Sentiment

Ideally, median lines of pitchfork act as a good resistance. Even earlier, the prices hit it and soon bounced off it lower. Now, with sentiment somewhat mixed and perhaps a bit shaken, can the median line prove to be a wall that the Nifty may find difficult to cross? I would certainly look for it.

One of the reasons I would want to be a bit wary is because of the time count. My cycle studies indicate that October will not be a bullish month. I had already warned that beyond the first week to ten days in September, the trends may start to falter. Volatility has set in. I expect this to continue into October as well. The only sustained time signatures I get for the days ahead is in the last week of September, when the market trends may wear a better bullish look. But this is a short window, replaced soon by uncertain days.

Typically, at such times, we will find that the markets will take on a rangebound action and present dullness on many days. Also, it may take on a very stock-specific nature to the moves. Stock and sector rotations may become rapid and moves may not really sustain for long enough for us to entertain swing or positional trades. Thus, a time for quick trading is upon us where one will have to be quick and adroit in entering as well as exiting from trades. Not really for everyone. It is at times like these that access to software such as Neotrader can prove to be invaluable as they can guide people through fast shifting market trends. People don’t find so much difficulties when the trend shifts slowly but find markets greatly disconcerting when the shifts occur rapidly and without much notice. Such a time, I feel, is upon us for the next 45 days.

This is, of course, not to mean that the market will be devoid of opportunities. There will always be something in play and news flow is bound to be there in some fashion or the other. For example, the September-ending results season should start from mid-October and will provide some news inputs. But, if the overall trend is not favouring sustained trends, understand that even good news may produce only short-lived moves. It will therefore require more than ordinary good news to create sustainable trends.

I am stating this also in the context that there are a lot of ‘stories’ that are doing the rounds now. Some of the earlier ones (like Suzlon and Reliance Power and a few others) have come good during the recent boom time, so the tendency would be to believe that it will repeat yet again ahead. An example of this would be a stock like Idea, where repeated stories of fund infusion have been hitting the markets. Will it work? I don’t know. But given the stage of the market, I would now tend to believe such stories less and see whether price action really bears out the rumour. Only then will we be inclined to lend some money to such stocks. The days of playing pure momentum may be at a rest for now.

In the earlier letters, I had indicated a target zone around 20,250 for the Nifty futures and that is now reached. Current cycle has a high around 20,350 that may be difficult to top. Option trading volumes have shot up even further, with open interest at near the money options being at all-time highs. PCR (put call ratio), however, remains largely neutral, implying a huge trading nature to the position build rather than much directional play. These are subject to quick liquidations and hence, players in options also need to be slightly wary.

For the coming set of weeks, I would suggest a less active play in the markets with momentum investing also given a bit of rest.