The million dollar question right now.

Within a week, Nifty has travelled down from high of 14700 to closing below 14000 today on January 27, 2021.

Fundamentally nothing strong has changed from last quarter to this quarter with regards to companies result.

Thus, for this move we can look into the move from trader's perspective. Here's is the hourly chart of Nifty spot:

Nifty hourly chart
Nifty Hourly chart - January 27, 2021

From the looks of it, it seems that Nifty has broken down and closed below important supports and now it will fall more.

Nifty closed below 200 EMA ( an important medium term trend indicator - the wavy blue line in the chart above). And thus it seems that it will go down more.

But, it is not as simple. Now look at the same chart in daily time frame:

Nifty in Daily Time frame
Nifty in Daily Time frame

Not so bad anymore. It's still above the 200 EMA and looks like it is about to touch that first horizontal line.

That horizontal line is support for Nifty.

What is a support in chart and prices?

A more detailed post about support, resistance and how to figure them out is coming up soon and will also be part of the free course on stock market. So, here is the short version of it (also what happens when these levels are broken).

A support is a price from where stock price keep going up and doesn't fall down below that price.

For example look at this daily time frame chart of HDFC Bank:

HDFC Bank Daily chart
HDFC Bank Chart

You see how the price of HDFC Bank is bouncing from that blue line ( ~ 1360). Thus, it can be easily said that 1360 is acting as support for stock prices of HDFC Bank.

Now that we know what is a support level, let's move over to our main topic:

What's the support level of Nifty currently?

Using the daily chart of Nifty, the current support level of Nifty is at 13780-13750.

As a trader, one of the most important thing to notice is that none of the support or resistance numbers mentioned are set in stone. So, they need to read along with closing of the bars.

In this case, how Nifty will close on Thursday January 27, 2021 will decide about the market moves in next couple of weeks.

This Thursday is monthly expiry of futures and options segment for the month of January as well as Budget is coming up right after that. Both are significant event and thus, it requires caution.

What to do when market is falling?

If you are investor, then unless the support levels are broken, please don't exit from your investments. Moreover, as investor, you should focus on stock specific research to invest into stocks and not bothered by index movements overall.

On top of that, such times actually help you in buying good quality shares as better prices.

As trader - well if you are already short since 14600, then it's time to book more of your profits and rest of it within couple of days. Indian VIX is quite high and thus volatile moves can be expected over next two days.

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Your friend,

Rohit - Trader's Pit

If you are premium newsletter subscriber then I will share few of the trade setups for the coming days in next newsletter (will be published on Jan 27-28, 2021).