CNX-NIFTY- A REVIEW- THAT IT MAY STILL BE HEADING FOR SEVERE CORRECTION OR A CRASH LIKE SITUATION -5-8-2016

CNX-NIFTY

Pursuant to my last post of 8-7-2016 it has gone up by more than 400 points intraday which is a huge rise but vulnerability for correction is also increasing with straight rise. Technically it is looking o.k. on the long term chart but short term signals are weak as of now and indicate that it could correct from here and may hit 8336—8300 range in coming days. Furthermore please note that in last few days it hit a high of 8711.30 but otherwise it has been moving in the range of 8520---8675 and 8577—8661 range is very critical for it and if this uptrend has to continue then it has to sustain above 8661 consistently on the closing basis. It went beyond 8661 intraday for five days in last few days but could close above it for just one day only and then moved down. Therefore the upper band of the said range is looking highly vulnerable for correction, so the long trade should only be attempted if it sustains above 8661 on the closing basis for 3-4 days or after a reasonable decline at appropriate levels. Going down the support levels are at 8489.80/8476.70/8407/8353-8336-8300/8287.55/8243/.  

It has been moving up unabated for last five months giving a phenomenal rise of 1885.50 points, which is 82.21% retracement from the top & bottom of 9119.20 & 6825.80. Please note that any retracement beyond 80% if it does not hold on the closing basis then correction is imminent or the on-going up move may be over and it may start fresh down journey and the 80% mark is at 8660.52. So it is the benchmark point for now. Please note that if it corrects from here then the first critical support range for it is between 8350—8300 and then 8243-8153.  The uptrend will be potentially threatened only if it breaks the range of 8040-7930 and sustain and the uptrend may end if it breaks 7800 level and sustain. I once again reiterate that 8577--8661  is highly risky zone therefore long call should only be attempted if it sustains above 8661 for few days or after reasonable decline may be in the range of 8340—8300--8243. At present short call can be tried on the rise with a stop loss of above 8730.

 Above all it is important to mention here that all the ingredients are present now for a deep correction or for a crash like situation as it had witnessed before the crash of 1992/2000 & 2008, furthermore it is moving in 8 year time cycle, so the crash like situation in 2016 may not be ruled out completely and it may happen anytime now but latest expected by September-2016(see my post of 8-7-2016), so be alert and watchful. The atmosphere is ideal for strong correction or a crash like situation because the optimism is at the highest level defying fundamentals, valuation are stretched beyond imagination in all the segments specially in small and midcap stocks, stock tips are making round as it seems that it is everybody’s game, stocks with no fundamentals and financial weakness or with huge financial losses have witnessed unprecedented rise in last few months and lastly  flurry of I.P.O hitting the market in last few months, therefore present situation is identical as it was before the earlier market crash as mentioned above. Kindly note that it cannot keep on going like this and eventually fundamental and financial strength will come into play and prices will come back to realistic levels.  In fact in last few days small and midcap stocks are making spike tops and then moving down which is an ample indication that small and midcap stocks are possibly topping out and they may head for a bigger decline in coming days. Large caps stocks have also started giving weak signals and fall could be imminent. Therefore do not to get carried away or tempted by the market moves and tips circulating around instead do your own research and pick up stocks with sound fundamental and which are available at reasonable valuation else wait for them to come to realistic level and then invest. It is suggested not to chase the stock because it seems that a trap has been laid and if one is not careful and get tempted then one may be sucked into it. Furthermore please avoid left out feeling in the market for sure because it is certainly going to trap you. Last but not the least be vigilant and act judiciously. 

Remark: - It is in the uptrend. It is highly vulnerable zone for correction so avoid long call now and only attempt it if it consistently sustain above 8661 or on decline in the range of 8340—8300—8243. Short call can be tried now on the rise but not above 8661 with a stop loss of above 8730. Crash like situation cannot be ruled out in coming days/weeks or months. Therefore extreme caution is advised.

Disclaimer:-The view expressed here are solely of the author and he is not at all responsible in any way for the outcome of the trade you enter based on the above view.

Note: Price stated here is of spot market.

Contact me for strategic guidance to enter and exit the trade.