NIFTY may take a U-turn. Fresh buying here would not be wise.

If you carefully look at the two daily charts of NIFTY below you will spot something interesting. As anyone would agree VOLUME is a key determinant of market movements and decisive for its direction, the recent spectacular upmove in NIFTY is not supported by the positive money flow as proxied by volume.

Chart 1: NIFTY spot Vs. Accumulation/Distribution indicator

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The thin red lines indicate the pace at which NIFTY fell from its last high near 9100 to 7900 and then climbed sharply to 8800 now. The uprise in NIFTY is much sharper than the accumulation rate which is a warning. The thick red lines are helping to visualize this discrepancy which are pointed to different directions.

Chart 2: NIFTY spot Vs. On Balance Volume indicator

This volume indicator clearly shows the uprise took place with much higher volume than the downfall whereas the spot NIFTY could not yet surpass the previous high of 9100. This excessive volume could be because of slow distribution which is creating pressure on NIFTY particularly during the last 10 trading sessions.

At this situation the best bet could be shorting the market with a target near 8470-80, which is the 50% retracement level of the upmove. Risk can be contained by getting out if the trade if NIFTY crosses or touches the previous major high near 9100. This gives a very good reward:risk ratio.