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NIFTY: 'Classic' Market Tops

NSE:NIFTY   Nifty 50 Index
Hi
In this article I will discuss how classic market tops develop and in this background I will try to analyze whether our market meets the conditions necessary for it to be declared at its top.

Acceleration
As we can see that market was behaving nicely in the primary channel (white). Suddenly it changed its behavior and started to accelerate in a new channel (pink). It reflects greed where everybody wants to buy, irrespective of the market valuations.

Overbought
This is a typical condition where markets jump out of the supply line of the trend channel. The tendency after such an event is to get back into the channel. A we can see at A, B and C in the chart when it jumped out of primary channel.

Wide range bars
Another common observation at market tops. The volatility increases and the range of the bars, compared to previous so many bars, suddenly widens. We can clearly observe the recent formation of such wide range bars in our market.

Distribution at the top
A very powerful and rare observation at the higher time frame charts (monthly), but very common on lower time frames. We generally observe sharp reactions from the top. Markets then rally as if everything was normal. It then peek-a-boo above the previous highs and
tumbles down. It may rally again to retest the highs but with no buying interest at the top level. It means that the market makers are in distribution mode. They support the market at certain psychological levels and begin to distribute to the heard again near the top. When the distribution is complete, they stop supporting the market and lock everybody at the top.

Shortening of the thrust and Upthrust
The market makes new highs but without any further progress. And this progress keep on diminishing at every attempt to make new highs. Clearly visible at A, B and C. Also at C there is an upthrust (can't discuss here) with next bar down which confirms the rejection.

Unfortunately I dun have the Volume on the index charts so can't do VSA , otherwise the scenarios would have been logically more clear. With all this in the background, I have reached to the conclusion that our market is forming a top. A top which will be remembered for a couple of years.

One can wait for a lower low formation to confirm but that condition is sufficient for lower time frames. Also It is possible that market bounces sharply from 10600 zone or 10000 zone but those rallies should be played for quick gains. Selling the weakness on such rallies will make us big money. The levels like 9500-9000 may be seen in the coming months. But have patience, this is gonna take some time.

I hope it makes sense for everyone and help in your future decisions.

Trade Safe, Stay Healthy.
JJ


Comment: Please bear with me as it is not possible to discuss all the details here in this article. I just tried to briefly cover as many symptoms as possible.
Comment: Your likes and comments would be appreciated.
Comment:
Sentiments don't change overnight. Morning rally was just a trap to lock in more buyers for some quick money stop hunting. Let's see if the price slows down a bit or keeps up the pace.
Be an opportunistic. Intraday patterns have been working like a charm these days.
Good luck.
Comment: Perhaps the market is in a hurry to test support levels.
Beware of shorting at the lows coz such days usually trap traders on the wrong side of mini trends and hit stops.
Comment: All targets done.

JJ Singh
Full TIme Trader/Investor
🔰Moderator, TradingView

✅My free educational channel https://t.me/jjsingh_2020
✅I am on twitter @JaySingh_2020
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