- The Nifty 50 has pulled back a bit during the trading session on Wednesday to go down to the ₹18,000 level.
- This is an area that has been important more than once, as it was previous resistance, and now we are trying to figure out whether it is going to have enough “market memory” in order to send the market lower.
- If we get the market stabilizing in this area, then it’s possible that we could see a bounce and a continuation of the overall bullish pressure that we had seen for so long.
- I think at this point, we have a situation where India will probably continue to perform quite well.
If we break down below the ₹18,000 level, it’s possible that the market could break down rather significantly, perhaps reaching down to the 200-Day EMA. That currently is at the ₹17,500 level and rising. That would be a very negative turn of events, but I think given enough time, we probably see enough value hunters come back into the market in order to support India. After all, India is going to be one of the big winners when it comes to the problems that China has, as they are set to step in and take advantage of that weakness.
Caution in Volatile Environment
On the other hand, if we turn around break above the highs of the last couple of days, it’s very possible that we could see a big move to the outside, perhaps reaching toward the ₹18,800 level. That may take several weeks to get to, but it would be my target as things stand.
I think we’ve got a situation where traders will have to look at this through the prism of India outperforming most other indices, so a lot of people are doing “pears trades” where they are short some of the more “standard indices”, such as the NASDAQ 100, and long the Nifty 50. However, I think that in this volatile environment you need to be very cautious, because you can get smacked down if you are not careful. You have to assume that all moves are going to be volatile in the financial markets, regardless of the market that you are involved in. With that, the Nifty 50 probably won’t be any different than many of the others out there.
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