Nifty: Daily Price Analysis

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SwingKing

Well-Known Member
#1
Markets behaved on expected lines today and confirmed the potential bearishness present in the system. Today, markets formed a harami pattern (and a tweezers top spinning top) formation. This comes at a very stiff resistance level of 5360 5400. Two dojis formed three sessions earlier were followed with bearish engulfing pattern on the 8th of April. Following these, today the market has formed a harami pattern. All these patterns are very strong reversal patterns. Furthermore, Nifty is very close to a rising trend line and any violation of the trendline (red line) supported by the above mentioned patterns is going to provide good opportunity on the short side.

Going by the three day away rule, we can comfortably state that Nifty has now formed a minor top at 5399. The trend will turn positive if this level is taken out on closing basis. Thus for now, the key level is 5400. Strong support lies at 5300 - 5310.


 

SwingKing

Well-Known Member
#2
The market's continued its sluggish slide today. A close under yesterday's harami (tweezer top) does indicate further bearishness in the market. Also, confirmation of harami pattern today gives us a short term resistance of 5380. If this level now get's violated, then the short term trend will again turn positive. As of now though, the short term trend remains negative.

From the past few months, the Index is following a pattern where beginning of a correction is not savage. The index gradually drifts down, giving signals of consolidation (thereby trapping more bulls in the way) and then suddenly moves down with increase in volatility. This happened in June, October, December and in January. It is yet to be seen if the index is currently following the same pattern. From the look of things though, it seems this may be the case. The weekly divergence of momentum indicators has now spread to the daily charts too. MACD and RSI have both starting diverging from the price movement. With the kind of clues that the market is giving, it is most likely that we would move down from here. Tomorrow is a trading holiday, so on thursday, when the market's open, they will largely react to the global cues.

Let's see how things span out.
 

SwingKing

Well-Known Member
#3
Today's day was filled with action and was probably the most important day if indeed reversals are on the cards. The market's started very positively, but failed to cross the crucial level of 5380 as highlighted in the previous post. Moreover, we had two days of reasonable global sessions and yet we fell today. By the end of market's closing, bonds yields had eased. This generally has a very short term impact on market's (on the positive side). However, this was not the case today. Market's fell at a faster pace during the closing time and moreover closed in the low 10% of its range. Inflation numbers were released and were yet again high (good to see though they were not in double digits). Politically, the government is under tremendous pressure to bring down inflation. Opposition is gunning down the government behind this issue. This has significance as the next RBI meet is around the corner. The way financial sector is selling, it seems that something might be on the cards as far as interest rates are concerned. Today's close also broke the zone of 5280 - 5310 which on previous occasion was a minor top and has served as good resistance and support during the previous bull run.

Furthermore, if one looks at the volatility figures, there are good chances that things might indeed start getting ugly. There was significant writing at 5300 and 5400 levels and many major stocks saw unwinding of long positions. I wonder if these are signalling something. After today's kind of move, usually market's don't fall immediately. It usually builds a base indicating that there is more upside to come. This sucks in a lot of market participants who were waiting to enter on a minor dip. Once this happens, the market's move down further.

Things are getting interesting now. Let's see how things shape up.
 

SwingKing

Well-Known Member
#4
Another important day for the market came to a fitting end. As I had mentioned yesterday, the market tried and built a base to signal that it is not going to fall further. Though many would suggest that today was a hammer sort of a formation, I would still not read too much into it. The reason is simple, A hammer is only valid when it occurs near a strong base or a previous support level. There was no such significant level which I could find around today's low. Also, most of the significant action today happened below yesterday's low. So technically, we were still trading weak today especially after witnessing an outside bar engulfing yesterday. This week's action led to Nifty breaking its important trendline which extended right from March 2009 (See the figure below).

When we try and combine the global picture with what is happening in India, we find that there is a lot of uncertainty that is lurking around. Hanseng Index has recently turned around from the complex head and shoulder neckline it had formed (See the figure). China Index has been forming a symmetrical triangle since september 2009. China is going to have an Important meeting regarding it's currency valuation and interest rates scenario. Isn't it ironical that symmetrical triangle being formed is precisely reflecting this (the uncertainty)? I could not find anything bearish in the US index accept from the fact that S&P is hovering around a major trendline support and if it violates that things could look different for the short term. (Update: S&P has formed a classic Evening start pattern on friday. From here on the high of 1214 remains a formidable resistance. World over we are witnessing reversal signals. Such insync signals always lead to deeper corrections)

What we can conclude at this juncture is that globally there are uncertainties present but still we must still see how things will shape up. One thing is for sure, that in which ever direction the breakout occurs (or the price moves), the move could be significant and one should be alert and ruthless enough to switch position. Volatility cycle at least suggests so. Let's have a nice weekend and let the market play its course.

HangSeng



China



India

 
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SwingKing

Well-Known Member
#5
Nifty's price action again reflected the kind of bearishness prevailing in the system. Volumes were huge today. Furthermore, the way Hang Seng and China tanked in their sessions, it was a bit worrying. Hang Seng declined further from the neckline of the complex head and shoulders formation and China must have come very close to violating the symmetrical triangle being formed. S&P in the US market's have formed the classic evening star pattern which is one of the strongest reversal pattern. The MSCI Emerging market index has formed a classical double top. It has retraced from the top level and unless it forms a new high, Double top formation would remain confirmed.

We are probably pulling off from Wave 5 (smaller degree) of Wave 1 (higher degree) in Nifty. If this is true, then Nifty can easily go down another 10-15% from here. Whether this is the case or not, that only time will tell. As far as shorter time frame is concerned, Nifty can test the levels of 5020 if bearishness (uncertainty) prevails. Having said this, market's tomorrow may be volatile. For day trader's, being in such market is not advisable.

 
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AW10

Well-Known Member
#6
Having said this, market's tomorrow may be volatile. For day trader's, being in such market is not advisable.
Raunak, in my view, probably volatile mkt and wide range are the best days for a daytrader.. ofcourse provided they know how to trade them.
They can't make money in dull, 60 point narrow range mkt.

And ofcourse, if they don't have any strategy then I would advise them to stay away from daytrading and come back with proper plan, unless they want to exprience the roller-coaster ride of emotions and donate the money to professional trader for giving them this ride.

by the way, thanks for nice analysis and comparision with various market. I think, china dropped by 4.8% today and trading volumn in US mkt was almost double of recent average. I guess, smart money has finally found the reason to take some action after enough of waiting on sideline. Market was going up and making new highs on low volume. Lets see what comes next, till then enjoy the ride.

Happy Trading
 

SwingKing

Well-Known Member
#7
Raunak, in my view, probably volatile mkt and wide range are the best days for a daytrader.. ofcourse provided they know how to trade them.
They can't make money in dull, 60 point narrow range mkt.

And ofcourse, if they don't have any strategy then I would advise them to stay away from daytrading and come back with proper plan, unless they want to exprience the roller-coaster ride of emotions and donate the money to professional trader for giving them this ride.

Happy Trading
Well absolutely AW10. Volatility and price fluctuations are good for day traders. But tomorrow volatility is combined with uncertainty. Which way the market's will move cannot be anticipated. Usually on big news days, the drop(rise) is almost vertical and that to a sharp one. Such days are very difficult to trade.

For Example, In January, market's were expecting news from RBI policy meet. During that day Nifty almost fell vertically 30-40 points and rose back to the prior levels within no time. Such days thus become very difficult to trade. I'll try and post the chart for the same.

Look at the chart below. Markets fell from 4820 to 4777 in one minute (actually less than that). Surely the guy holding at 4820 would have panicked and exited his position soon after such vicious moves.



Tc
 
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SwingKing

Well-Known Member
#9
20th April 2010 - Nifty Update

Market's finally got what it wanted (a credit policy which is directed both towards growth and towards curbing inflation). Whether inflation would come down or not, that only time will tell. Going forward the next major event which market will look forward to is a 'normal monsoon'. I doubt that monsoon's are going to be normal. Like previous year, monsoon will be late as the weather cycle seems to have shifted. (Well, let's not get into that as our Met department still maintains that all is well). But monsoon not arriving on time could have serious repercussion on the market's (Inflation would push higher).

Coming back to today's session, the market's further depicted the underlying weakness. Though it closed in the green, one has to see that the market's were trading at highs of 5257 and then closed near 5230 (formed long upper shadows). This is after the credit policy was in favor of markets. Now there are two ways to look at this, first, the market's reacted positively but there after took a breather, Second, if a good credit policy and good results cannot propel the markets, then what can ? Going forward, market's may well look for global cues as that seems to be the flavor currently. As of now though, the market's remain weak and should be traded with caution.
 
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nimish_rulz

Well-Known Member
#10
Hey Raunak the volume today is very high and isnt it similar to what happened when the budget was announced? I see a lot of absorption volumes and high level of manipulation. If you see on budget day we almost touched 5000 but closed well below the high around 4918 even that time volume spike was massive. I believe we might have a short term up move as we did go down to 5209 from 5256 but then to close at 5230 shows that this was a mere test of supply to absorb as much as possible. Again my view and I might be wrong. In last 2 trading sessions, we have moved from a low of 5160 to a high of almost 5260 to close at 5230 which to me sounds further upmove. Contrary to this when market touched 5388 and decided and went down below 5300 on the same day it was a good short call but I believe for now the correction maybe over and soon we ll have a move up.

The other reason I believe market fell today was with the increased Interest rate the Rupee goes up which is very logical hence the IT stocks suffered which brought the index down look at Infy TCS they were all positive in the morning but these stocks exerted substantial pressure and closed towards the low thus forcing nifty to shed its gains whereas if u see banks and other Interest sensitive stocks they were buoyed by the positive expectations and closed towards their days high which is a strong signal that they might further continue their up move.

As far as monsoon goes I think buying Bajaj Hindustan might be a good bet to protect your portfolio as if the monsoon don't go as predicted the sugar crop will suffer and prices for sugar will rise again making these companies a good investment also the stock has fallen a lot and taking good support at 130 levels. I think stop loss of 128 this stock can be a good buy especially now with a price to book value almost being close to 1.

For me I thinking we ll be weak if we fall below 5150. Until then I m going to be sector specific and ride the upmove.
 
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