Waterfall Effect breaks the market when the price moves against the big momentum traders. which forces the momentum traders to liquidate their positions aggressively by creating an avalanche trigger. The waterfall effect can be explained through order flow analysis by analyzing the buyers and sellers commitment and their trade location.
We captured the Buyers and Sellers commitment during the last couple of days in Nifty Futures and brought the meaningful zones pictorially over the candles to understand where the current commitments are.
Sellers twice defended the commitment zone around 17300-17450 levels and back to back buyer commitment levels which formed on 15th Feb 2022 stood at 17316 – 17111 and 16870 – 16977 levels respectively. Price breaking 17111 decisively could trigger a waterfall effect as back to back momentum traders are positioned on the longs which could force the players to exit their positions.
So what could possibly go wrong?