Morning Cut Recommendation

Hello,

 

Yesterday's market action was interesting in the sense that we had a huge fall (synchronized across the world with US Futures and European Markets too falling in unison). Two things seem to stand out,

 

1. The big bar (Drop) came out of the blue. If this was Selling (which it should be since it was during market hours and one that would have taken out a lot of long stops. Theoretically such bars means that the trend has turned and the next bar continues form where the first bar left off.

 

Here that just did not happen. For the next 90 minutes of trade, we traded above the low of the day. While market seemed to be still weak, there had to be buying since there was no fall later on. This action seems consistent with this being a shakeout of weak bulls.

 

2. The low for the day also coincides with the 200 day Hourly average. This is generally a pretty good support level and market bounces from this level previously have taken the Index to a level higher than the previous pivot high.

 

For today, Longs in Nifty can be initiated with Stop Loss below 5395. As we are also on the verge of a wedge breakdown, a strict stop is very necessary.

 

Regards

 

Prashanth

Mythri Stocks & Shares Pvt Ltd.,