Nifty Update

Nifty did manage to take some support at the 5500 levels as mentioned in the previous post and bounced 100+ points to 5610 before cooling off again post INFY results.

Take a look at the NIFTY chart above.
The 'Green lines' show the falling wedge being formed in Nifty with support near the 5450 area.
Now 5450 level is very important technically because
i)  it is the long term trendline support from the rally of 4500
ii) it is the lower area for the Bullish falling wedge and
iii) it is the zone of the Breakaway "Reform" Gap in place since the start of this upmove in Nifty.

So it is quite evident that 5450 remains a CRUCIAL LEVEL to be watched below which one may see a swift fall in the index.

At the moment Nifty is forming a Bullish Falling Wedge and a breakout on the upside can have 2 targets for the Nifty.
TGT 1 - 5650/ 5670 which is the 200DMA for Nifty and will offer strong resistance
TGT 2 - 5820/ 5840 which is the RED TRENDLINE RESISTANCE shown in the chart which will come into play post the falling wedge breakout in Nifty and closing above the 200DMA

Please Note that the zone of 5820 is also the 50% retracement zone for the entire fall from 6100 to 5500 in Nifty and being a Fibonacci retracement will offer strong resistance.

Therefore, 2 crucial and trend deciding levels to be watched are 5450 and 5820.

Trend for the Nifty still remains down. However considering the highly oversold territory Nifty is in one can expect a relief rally post the falling wedge breakout and wait to create fresh shorts at higher levels.

One may safely buy in 5450 - 5500 zone & then create short positions in Nifty near 5650 and 5820 zones with small stops.