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NIFTY Gaps down: Should you buy?

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Bihar Poll results help beat down already weak NIFTY. NIFTY has opened gap down. There is a common myth in Technical Analysis which goes “All gaps should be closed before sustainable trend”, which is a myth because it is not necessarily true, which means if it may or may not happen. In fact if the gap doesn’t close today, it is very likely we see a sustained fall for next few days. We give you here a reasonable target for NIFTY shorts or for people who wish to buy into the correction. From the chart below, you see before the gap creation nifty has already¬†fallen by close to 400 points. And if the gap doesn’t close today, we should expect another 400 points fall in NIFTY from high price of today. This second leg of the fall is likely to take NIFTY to our Modi ERA support range of 7563-7130. This range was created on the day Loksabha election results came down. Interestingly the markets already once hovered around the high price of 7563 for the range before staging around 10% rally recently. This recent rally to highs of 8300 is likely to be completely undone if the gap created at the opening today is not closed.

NIFTY Bihar Outcome Effect

Disclosure: We hold NIFTY puts in anticipation of further decline.

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