Using the standard chart, we can easily see 3 gaps formed as each day the BN moved up. Typically, these gaps need to be filled, and if there is a drop, it can turn into a big one, given the spacing b/w those gaps.
However, we also have a 45700 level to meet. So we'll find out by this coming expiry (which is Thursday btw).
Typically what happens is you have many people (both traders, but mostly retail investors) book profits, expecting the market to drop. And then after a continuous move up every day/week - they start to doubt themselves, and then they jump on at higher valuations.
This is when the tables turn, and you have a big dump take place, and then when they've lost 20-50% of their investment, they throw the towel and sell.
So much for buy low, sell high, this is just the opposite.
Seems like it's a bit volatile today, with a dump, followed by a pump. That's basically a 1% move in the Banknifty!
And so we have reached the target! I never expected it would be today, but here we are: 45718 crossed.
Now with almost 6% increase in just 6 days, you maybe wondering what is going to happen. We have the saying...
Up the elevator, and down the lift
Which means it's a stair step pattern upwards, and then it drops vertically like a hot pancake on the way down.
During this period, I noticed that the PEs are not decaying as much as you want, and the India Vix is now at almost 12%, up by 3.5%. For me, that's an indication that volatility is about to spike, typically seen when the markets crash.
So, where did we get the level 45700 from? Well, quite simply this was the last bottom to peak in the BN, as you can see below:
Of course, this is pure coincidence, if not there is some rhyme and rythm to the market moves.
I still believe we will reach the 40,000 level to fill the gap, before resuming any bull run. When is the question!?
I'm going to include the volume profile for today as well, as that gives a good indication of where the levels were traded the most. You can mark these levels:
- 45400 (where we are at now)
And once we break those levels, you can look at where the gap fills are to be made.