Will Bulls be Slaughtered in Indian Market?

Take a look at BSE Sensex chart which will give you an idea about the likely situation in the market.

 BSE SENSEX has broken through the floor of a rising trend channel in the medium long term. This indicates a slower rising rate at first, or the start of a more horizontal development. The index has support at points 36300 and resistance at points 40000. 

RSI diverges negatively against the price, which indicates a danger for a reaction down. The RSI curve shows a falling trend, which could be an early signal for the start of a falling trend for the price as well. The index is overall assessed as technically slightly positive for the medium long term.

The market has been on a song from the bottom of 7511 in the Nifty on March 24 to make a peak closing of 11,794 on August 31. A rise of 4283 points or a 57 % age rise in the Nifty. This dream run in the Nifty was primarily facilitated by a dollop of liquidity sloshing world markets. 

But, the defensive stand taken by the US FED in its last meeting, saw the bulls run for cover in US markets (Dow & Nasdaq). 

 As our markets are an extended arm of the US markets, it too developed cold feet as FII's ran towards the exit gate. To compound matters, the market was upset by the implementation of SEBI's new margin trading w.e.f. September 1st. (since postponed to 15th September). This liquidity contraction by the market regulator saw massive selling on 31st August recording a large bearish candle on the charts. Also remember that Trump will like that USA markets remain in uptrend till the time the US elections get over.

That this was not a one-time knee jerk reaction of the market was later on confirmed by a downward drift in the momentum indicators signalling a reversal of the on-going rally. The correction is yet to gain pace as some stocks (mainly, select pharmaceutical, IT and auto) are still registering new highs. 

One should also not loose sight of the fact that the market's P/E ratio has been trading at peak levels at ~ 29 putting the market in an highly over-valued zone. Some lead stocks in the index like RIL has moved below a rising trend line and is trading with a downward bias above the support level at ~ Rs.2,000. Other's like HUL, HDFC, ICICI, SBI (rally truncated) are reversing from their recent highs. 

All these are clear signals of change in the short term trend of the market and investors are well advised to start booking profits in individual stocks at higher levels. 

On the downside, the Nifty is likely to test supports at 11,150 (S1), 10,900 (S2) & 10,415 (S3). 

However, for continuation of the up-trend, the Nifty has to close above 11,600. While the market is likely to give a lot of trading opportunities in the near term, investors will be advised to sell the rallies and stay put in cash.

You can get BSE intraday trading tips here and make money like true professionals at Bombay Stock Exchange. As of now the Bank Nifty Option tips are yielding maximum profit due to enhanced volatility and you can buy a lot in less than Rs 10,000.