Positive market breadth on October 24, declining India VIX are indicators that risk-reward ratio is no longer that favourable for fresh short positions.
Since the last couple of months, we have been observing a formation of lower top and lower bottom on the Nifty. If we look at the Elliot Wave analysis, then this clearly seems to be a five wave structural decline. We ended the third wave near 10,138, said Ruchit Jain, Technical Analyst, Angel Broking.
The pullback move seen towards 10,710 could be considered as the fourth wave. We are considering the current decline as the fifth wave, he added.
In the second week of October, the RSI was at 26. Now, it is at 32. This is a positive divergence which in spite of index breaching the previous low, the RSI has been forming a higher low. This indicates that downside in near term could be limited, Jain said.
Positive market breadth on October 24, declining India VIX are indicators that risk-reward ratio is no longer that favourable for fresh short positions. Traders should not create short positions at current levels, said Jain.Nifty IT has been an underperformer this month and we expect the trend to continue. Nifty Midcap and Nifty Bank have been going through a phase of consolidation for last one-and-a-half weeks. We expect more stock specific movement, Jain said.