The Short term trend is down. Today was a narrow range day. This suggests uncertainty in the minds of market participants. Soon, this uncertainty will end as either the bulls or the bears will gain the upper hand.
At 4400, the Nifty is no longer in an 'overbought' position. Thus, after a four day decline, the narrow range day could be the signal for a reversal of the short term trend. On the other side, we have the Nifty standing on support at 4400. Support should hold. But, if it does not hold, then we have two technical factors - breakdown of support and breakdown from a narrow range day. Together, these factors could easily see the Nifty fall to 4330, or even to 4200.
Remember all analysis is useless if it cannot be put into actionable ideas. Now, based on these two scenarios, we can develop a short term action plan. We do not have a directional bias now. Two days ago, we felt that the Markets could slide, and that did come about. Today, the market is evenly poised, for reasons explained earlier in this note.
Since we are ready to buy as well as to sell, we will let he market decide the course of action for us. if tomorrow morning price action suggests strength, we will be buyers. If there is weakness in early morning, then we will go with that momentum and become sellers. A buy should see the Nifty to 4500, at the least. A sell should see 4330 or even 4200. This is just one part of the plan. Keeping a protective stop is another part.
I should write more tonight, so keep visiting.