Bears damage the charts

What is the lesson after today’s sell off?: If you have to panic - panic early.

Nifty has been on one way ride and that is down. In last five days, it has lost 400 points in a straight line. Technically, it has broken major support levels be it moving average or horizontal support line. So, the big question: Where do we go from here?

A. Oversold Bounce OR B. Relentless Selling……….I wish if we knew

Nifty intra-day Chart

Today was a day when morning HOPE of market holding 100 dma turned into nightmare for most investors.

1. Nifty started the day around Friday’s low of 4687. It formed a double bottom near 4670-4675 and rallied to 4730.
2. But that was it as far as rally was concerned. Nifty then tumbled below 4700 and after some brief attempt to hold 4675-4680: the bulls gave up
3. This was the time when bears took complete control of the market and Nifty made a one way slide from 4675 all the way down to 4540
4. The way it sliced 100 dma without any fight - makes that moving average irrelevant.

Nifty finally closed the day with 3% losses. Nifty spot recorded high of 4730 and low of 4538.

Nifty 5-day Chart

The 5 day chart clearly illustrates - how Nifty has just sliced through all levels without any fight. Technically, Nifty is oversold but that does not guarantee any bounce. Nifty is below all major support levels and hence every rally will get sold.

Nifty Daily Chart

On daily chart, today was the 11th consecutive day when Nifty closed in red.

I don’t remember when was the last time, Nifty saw this back-2-back days of selling. The 100 dma now stands at 4628; and 50 dma is at 4848.

Where do we go from here?

It depends. Today, it smacked off like climax selling. Most of the high beta stocks have got too extended on the downside.

There is a saying: HOPE is a four letter dirty word in the market. Since, market has closed in deep red, it would be advisable to wait on the sidelines till clarity emerges. My gut feel tells me: that by tomorrow evening - Nifty will be ready for big bang bounce to 4850 to clean up the shorts that have got piled in the system.

Please note, there is nothing to suggest any strength as of now. I have a feeling based on watching the market - Nifty will first rally to 4850 before tanking again to 200 dma. It seems unlikely that Nifty will just one way go down to 200 dma since all those who had to panic have already panicked.