Nifty 50 sees big gains on ATH, is it time to go short?Provided by

It was a pretty good start to the day, with the benchmark index not only trading in the green zone but also hitting an all-time high of 22,783.35 points. However, the record high is about 7 points away from the previous high of 22,775.7 points.

While new highs are always a bullish sign, the small difference, coupled with heavy profit-taking, dragged the index down about 210 points from its highs, creating some headwinds for the bulls.

As of 3:23 pm (IST), the index was down 70 points at 22,571 points, a reversal from all-time highs is definitely not a good sign. What should traders do now?

First, with today's all-time high, the overall trend is bullish but lacks strong momentum. However, long positions should not be entered here and waiting for a drop to the nearest support near 22,300 may be a good option. If this low is broken, a very strong support area of ​​21,700 – 21,800 could emerge over the next few days. Both of these support areas can be used as buying opportunities.

As far as the bears are concerned, if you look closely, the index is also forming a double top pattern on the daily time frame as both peaks of this M-shaped pattern are around the same level. This is a bearish reversal pattern with the same support as above (strong support).

Ideally, traders should wait for the pattern to complete, which is done after support has been broken, but those looking to short prematurely can try initiating some hedging bearish strategies. These positions can be covered at the same support level where bulls can attempt to establish a long position.

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X (formerly Twitter) – Ayush Khanna

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