Market finally gives a reality check to complacent bulls: Angel Broking

Daily Market Wrap Up by Mr. Sameet Chavan (Chief Analyst-Technical and Derivatives, Angel Broking):

"Today morning, the global set up was just ideal for our markets to have a head-start for the new trading week. At the opening, we started with a decent bump up to mark a new six-month high. Subsequently, for an hour or so, markets remained in this bullish zone and post this, it just turned out to be one of the terrible days in the recent past. The sell off mainly triggered after the news of India-China clash once again taking place at the border. This resulted into a massive liquidation in our markets by continuing sell off throughout the remaining part of the day to eventually conclude with a massive cut of 260 points from the Friday's close (and more than 400 points from morning high).

The way the market plunged today post the cheerful opening, it finally gave some justice to our recent cautious stance. Since last week or so, we were sounding a bit contradictory and have been advocating booking profits continuously in the rally. It might have sounded a bit repetitive but this is how the market surprises us and hence, it's better to be proactive at times; because when the market takes a U-turn, it happens all of a sudden and does not give much time to react to the development. Yes, nobody can predict what will trigger the selloff; but the velocity at which it falls, it can be very intimidating for momentum traders at least. So. It's all advisable for traders to take some money off the table when the market turns euphoric. Now with today's development, 11750-11800 has now become a sturdy wall and we do not see it breaking upwards immediately. Before this, in case if Nifty gives a rebound towards 11500-11600, one should use it as an exit strategy for existing longs. On the downside, Nifty has now reached a key support zone of 11300-11250. The moment we breach this (which looks on cards), get ready for an extended correction towards 11100-11000 in days to come.

Today, barring IT, no other sector was spared; in fact, the recent driver, Banking has taken a solid toll after precisely testing it's '200-SMA' early in the morning. The major casualties were seen in the broader market, who were enjoying a strong Bull Run since the last few weeks. We reiterate that we were cautious because the market had become complacent and when things become hunky dory, the market tends to give some reality checks soon and this is exactly what we witnessed. By saying all this, we are not all expecting a similar kind of sell off (no way closer) that we witnessed in March. In fact, if the correction extends, it should be considered a healthy one with a longer run and would provide better opportunities for those who are sitting on the sidelines."

Source : Equity Bulls

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