It has been strong bounce for two days with the headline NIFTY index advanced over 700 points from its reaction low. Taking the nifty as benchmark index, we shall try to gauge the market direction for the short term.

If you observe the chart A, the NIFTY index has seen two large impulse waves from COVID-19 lows and latest top of 26275 is exactly 100% extension of first impulse leg.Then, we have seen a correction from nowhere when everyone was bullish and nifty made a bottom of around 23800 which is 23.6% Fibonacci retracement of the second impulse leg.Now the market has seen a bottom at the Fibonacci zone and currently quoting at 24500 area. The larger question is the correction over or not?

To understand that one should know a correction phase can have minimum two legs. Whatever correction we have seen from 26275 to 23800 has formed only one leg with three minor legs within. And within correction the market tends to see some strong pullback which may extend 61.8% of 26275-23800 decline phase. Hence,we are possibly in a pullback leg of corrective phase which has been indicated by break of trendline and a close above few hourly EMA,s provided at Chart C.

The Chart B Shows, the index may face some pressure at the EMA zones in the daily chart showcasing the recovery phase may not be smooth. Today’s high of 24536 is exactly the 20 days EMA level which has been used by market participants and next level is 50 days EMA pegged around 24730 levels.

The Chart C shows the index has managed to close above its 20,50 and 100-hour EMA, almost after 35days, signalling a tendency to recover from the selling zone. A broadening pattern formation was also seen in the hourly charts and if prices manages to sustain above 24500-550 zone, prices may significant recovery can be possible towards 25050 as price target.

However, we should not ignore the flip side and if the NIFT Index fails to sustain above 24500 and breaks the 24150-200 zone then, pullback phase shall be negated.

The case of bank NIFTY is however is more interesting and index managed to ranging movement when the headline index was sliding. The bank NIFTY chart below shows that the index needs a daily close above the horizontal zone, placed at 52600 mark to advance towards 53300 level or towards the all-time high.

Triggers for the Indian market

Stable global market and improving local market breadth

Possible slowdown of FII selling, with FII longs on index futures yesterday

Fed may go for rate cuts 25 bp or more pushing RBI to turn dovish

Stable Crude oil Prices

Below then expected corporate Result resulting in earning downgrades

Event to Look at: CHINA POLICY MEET on Stimulus tomorrow