Volatile Markets Expected

Today the Nifty broke through our trendline (shown in the chart below) in the first 30 minutes itself and since then it was a steady decline for the Nifty, though it became a lot steeper in the last two hours. Once a trendline is broken, doesn’t matter which side it breaks out on, a pullback is always expected. This seems to be a pullback to the baseline, though the sharp decline in the last 2 hours says otherwise. Well, we have to follow the market. If we go against it, we will end up in a loss. So, we will wait to see what the Nifty decides to do. For now, since the trendline has not been broken on the downside, we will assume this fall to be a pullback only and we shall assume that we remain in a short term uptrend. We shall be proved wrong if the Nifty were to go below 5250. The positive thing in the chart is that there was a positive divergence between the price and the RSI (price coming down but RSI going up) visible (marked by the brown lines and blue arrows) and it suggests that the trend should reverse if a trendline is broken. That trendline was broken today so we would expect the trend to reverse now. But, as mentioned, the markets are supreme. We have no choice but to follow them.

Depending on how the US markets behave tonight and how the Asian markets open tomorrow; our markets will take a cue from them. Weak US and Asian markets will make our markets open weak but in an hour or so, we could be back focusing on our own markets rather than getting worried about other world markets.

Tomorrow is the last Thursday of the month, which means it is the F&O expiry date tomorrow. This means there will be extra volatility in the markets and it is better to stay away from them. Markets may remain choppy tomorrow. On Friday, we have the budget, another high volatility day. A clear trend will be visible in the markets only in the first week of March. Till then stay away.

Day traders may like to take advantage of the extra volatility. But keep close stop losses because if one gets caught on the wrong side of the market, it could be extremely dangerous because of the high volatility in the markets.

No stocks will be discussed today and tomorrow. Look forward to Monday’s newsletter.

Happy investing!!!

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