25 Aug ’23 Post Mortem on Nifty & BankNifty | We have a reversal of the breakout trend
Nifty Analysis
For the last two days both my predictions have gone wrong. On 23rd Aug I recommended a long but we closed in negative territory. On 24th I recommended a neutral stance, but we went deep red today. On both the occasions, I had mentioned the rationale on why I have taken that decision and how I may react if the market makes a different move.
Today we opened gap down right at the support/resistance zone of 19310 and went down quite strongly in the first candle. From there Nifty made 2 attempts to breach this SR and go up — but failed. We woke up to bad news from the US that FED & its commitment to bring inflation to the 2% band.
What this did to our markets is bring about a reversal in trend. Just the previous day we had a breakout from a falling wedge pattern and Nifty was breaking free to take out the 19700 levels — but this cut short.
This is what I said in yesterday’s report “For tomorrow I wish to change my stance from bullish to bearish. If we trade above the trend line for more than an hour — I wish to go long. And if we fall below 19310 — I wish to go short. Till then prefer to stay neutral.” I took the short position right at the open as my short criteria met. But the position is still not so profitable as the market did not fall further. I was hoping for more than a 1%+ fall today.
I have made a modification to the 1hr TF. The newest addition is the bottom trend line which is almost parallel to the top bearish line. The reason to bring this up is to find out what will happen since the support was breached. Since Nifty was respecting the bottom trend line on 4 previous occasions, I expect it to comply going forward also.
For Monday 28th Aug I wish to change stance from neutral to bearish with a stop loss just above 19310 if it stays there more than an hour. My next strong support comes at 18880 which means the fall could be quite deep.
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BankNifty Analysis
Banknifty made a strange pattern today, opening mega gap down and then breaking the support of 44068 by 10.30. And then climbing back to the open levels. From there it stayed in that tight range for the rest of the day.
From an intraday fall of 1.07% it is quite commendable that banknifty was able to recover and close only 0.59% lower. I was not quite sure why banks werent falling like other non financial stocks. Finally we have closed above the support zone of 44068 which is quite good for the bulls.The options flow was also indicating no major swings today, the premiums of the OTMs were like an ordinary friday. I was hoping to make a good fortune today — but the premiums did not help.
On the 1hr TF we have 2 island formations, the gap-up caused yesterday’s island and the gap-down caused today’s. Structurally BankNifty has not broken the bullish pattern from the breakout of falling wedge.
Now all eyes are on the support level of 44068, if it holds then banknifty will resume its upward journey with much more vigour. If the support falls — then banknifty will follow nifty’s downtrend and overtake it in the coming week itself.
I wish to go 60% neutral and 40% bearish for 28th Aug. If the support falls in the first hour of trade on Monday, I prefer to go all-in for shorts. Only if we take out the 44500 via gap-up then we need to think about a long position.