Nifty is on the cusp of it all as it has broken the 20 week average which has held for the last 18 months, except for one false break during the April 20. Is it yet another false beak or has the mid term trend reversed for Good. The possibilities are marked as per the chart.
Market is heavily oversold, as the marketwide PCR ratio has reached lowest point in last 7-8 years. Low PCR shows more call writing over put writing. In such extreme bearish market sentiment history has mostly seen market bottoms and not the market tops, hence my bias remains bullish.
Coming to Elliot waves now, long term trend remains up as the rallied in 9 waves since march 20 low, which means it is an extended impulse of the form 5+4 waves. Impulse waves show the direction of the larger trend and that still holds. and it'll hold till the time market doesn't break the march 20 low. Primary case is marked on chart. another bullish case could be that this is fall was wave II of (5) as the (5) shows sings of extension. Either ways it'll a total of 13 waves 5+4+4.
If Todays low at 16780 breaks
Having a bullish bias doesn't mean ignore the risks. What to do I in such a case?
Segregating the investments and trade is the first thing to do. Investments are not required to be bought sold every time a routine correction happens. Trades need to be actively. For managing the trades the confirmation steps to gradually reduce/increase the total size of trades is one of the ways to manage risk or to buying some puts options to hedge your portfolio against a crash is another.
If you can't bear the maximum loss that can possibly occur, then the risk is too high. Reducing the value at risk (VaR) is crucial in times of higher uncertainty.
Market is heavily oversold, as the marketwide PCR ratio has reached lowest point in last 7-8 years. Low PCR shows more call writing over put writing. In such extreme bearish market sentiment history has mostly seen market bottoms and not the market tops, hence my bias remains bullish.
Coming to Elliot waves now, long term trend remains up as the rallied in 9 waves since march 20 low, which means it is an extended impulse of the form 5+4 waves. Impulse waves show the direction of the larger trend and that still holds. and it'll hold till the time market doesn't break the march 20 low. Primary case is marked on chart. another bullish case could be that this is fall was wave II of (5) as the (5) shows sings of extension. Either ways it'll a total of 13 waves 5+4+4.
If Todays low at 16780 breaks
Having a bullish bias doesn't mean ignore the risks. What to do I in such a case?
Segregating the investments and trade is the first thing to do. Investments are not required to be bought sold every time a routine correction happens. Trades need to be actively. For managing the trades the confirmation steps to gradually reduce/increase the total size of trades is one of the ways to manage risk or to buying some puts options to hedge your portfolio against a crash is another.
If you can't bear the maximum loss that can possibly occur, then the risk is too high. Reducing the value at risk (VaR) is crucial in times of higher uncertainty.
