NEW LOWS AGAIN, Nifty closes at lowest in 26 months.

On 10 August 2006, the Nifty closed at 3260. Since then, the Index has never closed below 3269.30 – today’s close.
Now, new lows are not bullish. yet, we should remember this saying: “The Trend is your friend until it comes to an end”.
Calling the low or high of any move is dangerous. We will not try to do this. But, the daily chart for the Nifty does have some interesting possibilities.
The 14 RSI shows signs of possible divergence. I say ‘possible’ since the down move is not over yet, therefore the RSI may move down cancelling the possibility of a divergence. As of today, the Nifty has made lwoer lows, but the RSI has not yet made a lower low. It can easily do so, but it has not yet done this.

How do you trade a possible divergence ?
Well, this unconfirmed divergence is NOT a buy signal. It is an indication of a possible bottoming out process. The first signs of bottoming out will come if the Nifty closes above today’s high – above 3330 over the next few days. If and when that happens, buying is possible with a stop below the low of the down move.

A Trading Range
Hidden inside the volatility is a small trading range for the Nifty. With support at 3280 and resistance at 3500, the range is above today’s close. If the Nifty is going through a base building process, then we can expect the Index to move up inside this trading range, looking for a rally to 3500.

What happens if the market continues to move down ?
Well, it is business as usual. We should see the Nifty sliding down, making these new lows. So what else is new ?

How low is Low ?
Briefly, lower than you can imagine. So, avoid long term buying. Buy only blue chips. Do not run after momentum stocks of the previous bull market. the next bull run will find its own favorites.