Nifty Resistance Holds & Risk is Off Again.

Stocks and Silver are getting slammed as the world moves away from risk. The Nifty saw a dramatic decline all the way to 4900. All trends see some kind of corrections. The rally from 4700 to 5200 was a correction of this bear market – a relief rally.The Intermediate bear trend seems to have finally asserted itself, with the relief rally probably complete. The Nifty seems on way to challenge its earlier low of 4700, and, eventually break below it.

A large head and shoulder pattern earlier discussed on this blog has an approximate target of 4000. This pattern remains valid.

For investors, the wise trade is to do nothing – just hold on to your cash. For traders, it is wise to follow short term charts and go with the intermediate trend which will change to down, if and when the Nifty closes below 4900.

Nifty Resistance Holds

On Wednesday(Yesterday), the Nifty retreated back from the 5165 resistance line. The close was mildly lower but it is reasonable to expect lower levels today, with deep declines in the U.S. markets overnight. The Nifty now offers a number of possibilities:

1. A bullish head and shoulder pattern in development remains possible so far the Index stays above 4900. With every passing day, the neckline will become stronger resistance, but the pattern is not yet cancelled.
2. The current up move is over, with the Nifty rally coming to an end. Short positions may be taken for the intermediate term, using the 5200 round figure as a mental stop. The downtrend gets confirmed below 4900.
3. Nifty remains between 5165 and 4900 making a long trading range. A move out of this range will give a tradeable opportunity.

No matter what the Index does, traders should do such visualisation.  This exercise gives a view on the Nifty which is essential for short term traders.