This chart shows that the rally into mid-July lacked momentum strength and is more likely to slip if there are no good news inputs. With the earnings season now more or less ended, the likelihood of triggers is limited and so, we should be looking for continued down drifts rather than rallies. If portfolio values of players keep decreasing or if they don’t make any money on their investments, then the sentiment takes a hit and that leads to declines at the first sign of resistance.
Further we looked at time counts, falling around 5th of August as we were nearing the support zone near 24,500 too. I wrote, “So, it seems like we are having some time counts coming up in the next week and bunching up near the support zone in price @24500. That is nice and it gives us something to look forward to in the week ahead to spot some kind of reversal”. But no reversal came of it as the index slid further (though not by much) and hit some further lows lower.
We tried to see some supportive evidence from the other indices and here I wrote, “The other indices too are in similar situation, so the job of reversing from support is going to be tough. Hence, it would be more prudent to expect some consolidation to occur rather than reversals from the upcoming price and time nexus.”
We carried on thus – rallying a bit, where it seemed like we were holding on to the support- it still does- but with follow up attacks on the base. This inability to carry higher is indicating weakness of bulls and some renewed determination of bears. Given this situation, I had written in the last week, “This would mean that we may have to continue with a sell the rally approach in the index even as one tries to find some diamonds in the rough of quarterly numbers for investing. It will require a move past 24900/56150 (on spot) for the down drift to get arrested any.”
And there it rests now. If you go back to Chart 1, you may see a small attempt to form a Range shift pattern on the RSI. Hence the higher low marked at 24500 area now gains some importance. This fledgling pattern of the bulls will fail if the Nifty future recedes below that level in the week ahead. So, for short term players who may be harbouring some bullish intent, that should be kept as a stop level. Equally, for bearishly inclined traders, the same 24500 level will act as a trip level for more declines ahead.
On the options front, we continue to see frequent flips, that are lasting maybe a day or two at the maximum. As of Friday, Chart 3 shows the situation of calls ad puts. With PCR at 0.93, it is kind of split in the middle but call shorts dominate a bit. Call additions appear to have occurred on Friday. Note that there is no significant Put short position below the current levels as well, to act as a cushion. Hence, it seems like traders are going to play it as it comes in the next week rather than take up any pre-determined positions.
