Nifty short covering expected

NSE:NIFTY   Nifty 50 Index
Last week on Friday I had published my idea about going short since there was breakout below the short term support trendline. My first support target was 8161. Which is the 78.6% retracement level. This idea has worked out. Today, nifty made a low at 8062.75. The moment 8062.75 level was reached, there was a sudden bounce back. Although this bounce was short lived, it definitely showed that 8062 is acting as a support. The intraday recovery that happened lacked follow through and the closer nifty got to 8100, immediate retracement was seen. This was because there was either fresh shorting or a bit of long unwinding by intraday traders(those who went long around 8062). The general mindset of traders is bearish . The good thing I observed today was that during the last 30 minutes of trade (stronger hands trade during this time, eg. ETFs) there was no massive shorting. The global cues remain positive as of now, US Markets are at an all time high. FII data suggest that some fresh long positions have been added in the index derivative segment today. The RSI indicator on the 2 hour chart is below 30 now. If nifty crosses T4 with momentum then it will definitely go higher. On the downside 8000 is a strong psychological support as well as the support indicated by option data. 8000 december put has the highest open interest as of now. If nifty breaks 8000 then definitely T2 will act as a support. All these factors, point to a possibility of short covering. The first target will be 8176 and then the T4 (around 8230). I think there will be some short covering just for the time being till the above mentioned levels. Then fresh short positions will be added again since the long term trend remains bearish .

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