Volume Analysis on Nifty- Short Term Divergence and Long term Confirmations.

 

Nifty Futures ---

There were huge volumes in the downtrend.

The current rise has not seen any rise in volumes.

 

There can be two ways to look at it:

The bullish Way

 

- > There is no speculative buying.

-> Huge shorts were created in the fall and will now lead to scampering of shorts.

 

The Bearish Way

-> The rise is not supported with volumes. Not enough conviction.

-> The fall can be sharp any time when this move stops.

 

 

Nifty Spot

 

There has been a significant rise in volumes in the current rally.

Today is the highest volumes ( but we had some big change of hands so cannot be considered )

But overall the rise has been supported by Cash volumes.

 

Interpretations

-> The rise is supported with volumes which give conviction in the rise.

-> Although previous rise did come with volumes but this is after a sharp drop in volumes.

-> This is a classical trend change indicator.

 

 

So on the volume analysis it clearly tells us the trend has changed but on RSI and other indicators it also tells us this is stretching a bit too much

 

 

The recent top at 5217 and todays high which is at 5244 shows a lower RSI value. So any further highs to

5300-5400 will definitely be RSI divergence.

In such a case the upside could get capped in near term but it is not necessary that we may correct sharply.

Also we are reaching a highly overbought stage but its also a breakout beyond 70 which never happened at previous channel tops !

So near term rise to 5300-5400 is a risky one to buy into :).

 

Bottomline :

 

-> The clear change in trend spotted at 4600 for 4900/5100 was very well picked by us and benefitted all the readers i suppose.

-> We did get stopped out on the Nifty short but it was a small hit of 50 points but the heavy stock longs compensated it.

-> The most important point is TREND REMAINS positive but its showing divergence signals.

-> STOCK Specific moves get big in this last leg and we may continue to see sharp rises in broader markets.

-> But on the Nifty it seems we might be in the last 100 points and its better to be very Cautious here!!!

-> Keep very strict stop losses in trading positions

-> Avoid Leverage ( We were pretty much leveraged till yesterday )

-> On the sentiment side when we initiated a strong buy at 4600 nobody was interested and now suddenly there are a lot of BUY CALLS/TIPS/NEWS and analysts have slowly started talking of 5700 etc. Waiting to read more reports like BULLS are BACK , BEARS are Killed etc etc headings. So when the street consensus develops to be positive the markets tend to take a breather.

-> Am i sure of 5400 first or 5000 first --- the answer is NO !! So what do we do is just sit back be stock specific and be very light. Investment buying paused 🙂 ( we were very much invested at 4700-4500 as disclosed many times till now, still holding quite a lot but will reduce tomorrow )

-> But yes we firmly believe we have seen a major long term bottom at 4530 and 15100 as mentioned before. The strategy earlier since August was --- Buy the Panics, Short the Rise has now clearly shifted to Buy the Dips and Hold on!! ( example NESCO bought at 550-500 need not be sold for a couple of years )

 

 

Yes Yet Again

 

Every Bull Market starts with a BEAR RALLY !

 

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Happy Investing,

 

Nooresh Merani

 

CEO – Analyse India Market Solutions Private Limited.