The image says it all.
As expected in the update on 9th May, Nifty has lost almost 9% from the April close to the lowest level on Friday, all in just 3 weeks. This has made all indicators on the daily time frame extremely oversold, and a pullback rally is in the offing now.
In my opinion, the bear, after a tremendous onslaught over the past few days, looks tired now and needs a rest. This is true all across the world markets.
This is also generally a period, when the baby bulls come out and rejoice, and start shouting that the last 2 weeks was just a correction, and that Nifty is now headed for 5500 levels and then 6500 and then....
I seriously doubt this!
Just one word of caution for the bulls - please keep an eye in the rear view mirror - and look for the charging bear once he completes his rest.
For those who believe the next rally will just be a relief rally, levels given on the chart will help.
The first confirmation of this will be seen if Nifty spot rises above 4947 on Monday, which confirms the bullish hammer pattern that Nifty made on Friday. Once this is done, the previous low of 4842 should not be breached - this is the stop loss for any longs now.
A rally to 4990 - 95 before Thursday is possible, but it may not cross and close above that level in this May expiry.
Subsequent to that, there might a fall to 4900 - 4910 level, and then a rise to 5055, which will be a key resistance. A cross and close above 5055, can take Nifty to 5185.
I seriously doubt if 5055 or 5185 will be crossed in June.
THE BEARISH VIEW WILL BE NEGATED ONLY ON A CLOSE ABOVE 5200.
I have a suspicion, a lot of bears will be trapped in the next couple of days, and then as always, a lot of bulls will be trapped again later.
I might be completely wrong, if Nifty cannot go above 4947 and keeps falling - but the risk: reward is in favour of being bullish for now.
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