These levels were witnessed only during the absolute mad peak run last year and rest of them are either from the NDA win time during 2014 or pre budget move in nifty in 2018.
One thing’s for sure - Seeing nifty’s RSI above 80 consistently is an absolute rarity. How long will it sustain these levels needs to seen.
Is it time to short? In my view, For risk takers - Maybe yes (by taking small SLs and looking for one big reversal trade) , For those who are bullish, It’s maybe time to take some profits off the table. But, definitely these zones are not the places to have FOMO and go all in.
FIIs, EPFO, retail participation is increasing may be, I don’t know the numbers. And there could be new reasons for such participation too, or there is a strong case even if the reasons are the same.
3 days is a very short term when we consider long term to be months. So market may fall a day, goes up or stays put for a few days, then fall again.
I wonder when I see selling in particular sectors on a day, and after a few days those very sectors witnessing buying. Nothing may have changed in those sectors in between, but still they are sold and bought quickly.
So while the daily RSI has gone to above 80, the weekly RSI is still at 60. Of course, I do look at single days when I trade, because one falling day is enough for buying, and one rising day is enough for selling.
Personally I short at 17970 today and covered at 17750. This short was just to hedge my portfolio. And position size was to cover 80 percent of my equity portfolio.
So it was more like a covered call.
Usually I don’t do this for my entire portfolio but I was little uncomfortable at these levels. Just a gut feeling that I would get a small correction at least.
Uncomfortable is subjective even for an investor, and more so for a trader.
If I am investor who want to invest for long term, I want the valuations to come down, the froth to disappear, and I will wait until that happens.
If I am a trader, I will look for opportunities, irrespective of the market level as my concern is only for the short term, even if the valuations wont stay at elevated levels, I don’t mind and in fact I like it as I chase momentum.
And then there is shorting, another opportunity when the market reaches a top and fails to stay there.