Deja vu for momentum traders
“Our markets opened higher after yesterday’s minor correction or rather we should term it as a breather. Subsequently, we witnessed a nosedive in the initial hour mainly on the back of some news flow on the differences between the RBI and the Central government. Fortunately, the damage got restricted at the kissing distance from 10100 and to everyone’s surprise, there was complete turnaround in traders’ sentiments as we witnessed a vertical rally of nearly 300 points to conclude the session with whopping gains of 1.85%.
In our previous articles, we had mentioned about index gearing up for some relief move. Yesterday’s initial hour correction precisely got arrested around the 61.8% retracement of the upmove from 10004.55 to 10285.10. Due to strong broad based buying, the Nifty went on to breach the 10300 mark; thereby confirming a ‘Bullish Cup and Handle’ pattern on hourly chart. This technical development triggered a sharp short covering move to hasten towards our mentioned intraday level of 10400. Now, going ahead, with such kind of set up on charts, we expect extension of the move first towards 10450 and then to test the ‘200 SMA’ on hourly chart placed around 10560.
Traders are advised to trade with a positive bias to ride this relief rally and use any decline towards 10350 – 10310 to create fresh long positions in the market.”
By: Mr. Sameet Chavan (Chief Analyst-Technical and Derivatives, Angel Broking)