Nifty had touched a lifetime high of 9218 on Fri. Mar 17, but has been in a corrective mode this week. Today, the index opened with a downward 'gap' and closed below 9050, partly filling the 85 points upward 'gap' formed on Tue. Mar 14.
There were a few technical and fundamental signs of worry for bulls that were mentioned in last week's technical update on the daily bar chart pattern of Nifty.
Though a bull market is supposed to climb a 'wall of worries', the index rarely moves in one direction. Corrections do occur, and are necessary to improve the technical 'health' of charts.
The good news for bulls is that the index is trading above its three EMAs in a bull market, and the long-term bullish structure of Nifty's chart is intact.
Daily technical indicators are in bullish zones and showing downward momentum after correcting overbought conditions. Some more correction may be on the cards.
There is a good possibility that the index will completely fill the 85 points upward 'gap' formed on Tue. Mar 14, and test support from the 8950 level.
In case 8950 gets breached on the downside, expect stronger support from the zone between 8700-8800.
Note that the 38.2% Fibonacci retracement level of the entire rally from the Dec '16 low (of 7894) to the Mar '17 top (of 9218) is 8712.
Remember that after correcting down to fill an upward 'gap', an index typically resumes its up move. If you were waiting for a correction to enter, this is the one to do so.
Can Nifty fall below 8700? There is no rule which says it can't. So, it may be a good idea to wait for the index to find some support and bounce up before entering.
Nifty's TTM P/E remains high at 23.45. The breadth indicator NSE TRIN (not shown) is rising in neutral zone - hinting at some more correction.