ROAD AHEAD- NIFTY
Technical Analysis:
NIFTY
Here the Fibonacci retracement from NIFTY’s high of 12400 level till recent low of 7500 level was taken. Ideally any signal of change in trend will be above 50% retracement level which stand at 9979.87 and NIFTY seems well below that level. So technically speaking ideal buying level is only when NIFTY crosses 9979.87 convincingly.
Now few people will argue that, there was a recovery post seeing 7500 levels and we are seeing NIFTY trading almost 20% from that level. Point taken but remember one thing whenever there is such a big fall, the market is bound to give a V-Shaped rally. For this let us understand the index data of 2008 (The famous Sub-prime Crisis)
In 2008,
NIFTY peak was 6357. The first fall took NIFTY to 4448 levels (-30%). Post that there was a 25% bounce. 2nd fall took NIFTY to 3790 levels (-40%) and another bounce took NIFTY to 4649 levels (+23%).
As they say, history repeats themselves and specially it does, so let us all be cautious and wait for the right time to invest.
Now Let us Check Nifty on two more different Time Frame viz Weekly and Monthly
We can clearly say that Nifty given us a multi-year channel breakdown and there is still trading below the channel giving us an indication that it may not be the correct time to stay long in NIFTY at this moment, so it would be better to wait for some-time.
The MACD indicators are also not giving any sign of reversal.
Market is dealing with two factors:
1. Risk
2. Uncertainty
Markets can mitigate risk but mitigating uncertainty is pretty difficult. Currently we amidst an uncertain time as there is no clarity about the situation of the virus, the period of lockdown and on the quantum of losses for the industry and their peers.
It is better to sit with cash in hand and wait for this period of uncertainty to pass. Once this corona pandemic dust settles India will definitely bounce back as businesses will resume to normalcy.
CONCLUSION:
1. Any trades to be taken on NIFTY should be purely taken for intraday or max 2-3 days view.
2. NIFTY will give its first sign of strength only above 9978 levels and more conviction for someone who is conservative only above 10200 levels.
3. Any rally right now should not be taken on face-value as history suggests there is always been a V-shaped recovery whenever there has been a big fall.
4. Any aggressive investor, still wanting to invest should look at investing in chunks.
Sources: Investing.com (Charts)