Nifty - Where are we heading?

With the global markets witnessing a ruthless sell-off in the past month, where SPX lost 600 points in merely 13 sessions and the likes of Netflix, Facebook, Paypal recording massive losses, where are we headed in the coming months?

Let's see a short scenario for Nifty, purely from a technical view. There are obviously fundamental factors that were/are driving forces for these movements. But I would like to restrict my study to technical factors, more specifically- price behaviour.

1. After the Corona crash of 2020, there have been 3 prominent accumulations over time. After each accumulation phase, there was a subsequent phase of good unidirectional movement (mark-up).

2. Nifty is possibly going into re-accumulation. What does this mean for us? We are probably going to see a highly volatile market in the coming months. If you see, the price has never tested the All-Time High (ATH). It reached in the vicinity of ATH and faced heavy selling pressure from 18350. The ATH stands at 18604.

3. If you see, the price is moving in a range (Don't look for exact points for range, but see the behaviour of the price). Every time the price reaches the range high, we see a horde of responsive sellers pushing back the price into the range. Similarly, as soon as the price reaches the range low, we see the responsive buyers come into action and push the price back into the range.

4. The equilibrium level lies somewhere near 17500. Hence, if the price stays above the equilibrium level (17500), we can consider it as a bullish environment. Similarly, if the price falls below 17500, we can see it as a bearish environment. This is purely from the perspective of the range.

5. Some people may see it as a triangle pattern, which is also correct. The price may go into compression for the next few months, which goes in tandem with our theory of re-accumulation, but the triangle must break towards the upside.

6. If we see the fixed volume profile from January 2021-present, we see that the price is hovering around Value Area High (VAH). The VAH overlaps with a High-Value Node (HVN). Every time the price deviates from this zone, it reclaims it within a few days. The next HVN is very far and lies at 15700-15900. If we are to stay bullish, we need to stay and consolidate somewhere near the VAH.

Can it be a distribution?
Absolutely! It may very well be a distribution. As soon as the range matures and we record more price action, the matter of re-accumulation vs distribution will become much more clear. But for the time being, we are only concerned with the ranging or compression so that we can play out the range.

Conclusion:
I am expecting the market to stay volatile and then slowly go into compression. We may witness ruthless swings during this period of volatility. I'll be taking this range as a reference for my trades and will be playing accordingly.

If you found this post knowledgeable and useful, be sure to drop a like and comment. It will help me to know that people are actually reading these posts. Also, if you need a PDF of this post with all the charts, check out the links under this post.

Disclaimer: This is NOT investment advice. This post is meant for learning purposes only. Invest your capital at your own risk.

Happy learning. Cheers!
Rajat Kumar Singh (@johntradingwick)
NSE Certified Technical & Fundamental Analyst

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