Incisive Nifty Trend Analysis

josh1

Well-Known Member
@Josh, reality bites! What a stupendous rally! Fortunate enough to have seen two such rallies in our lifetime. Will wait for the dust to settle down before analyzing the market.
It seems we will see stupendous fall also today.
 

prada

Well-Known Member
Thanks to all the board members for contributing to this thread. I am unable to find time to contribute to this thread and I wouldn't be doing justice by keeping this thread alive. I've requested the moderators to close this thread.

Wishing one and all a successful journey in trading and investing. All the very best.

PraDa
 

prada

Well-Known Member
Good morning Dear forum members! Its nice to be back after a long hiatus. Market has come a long way since my last post and we have been in a very strong uptrend. As we approach the election cycle, I felt it was most prudent to analyze the market to figure out how it is shaping up ahead of the general elections. I did a comparative study along with various global indices/ currencies/yields etc. to understand in which direction we are heading.

Nifty chart from Feb 2016 is attached below:

Your new TVC.png


As we can see above, we have been in a well defined channel since 2016 and I expect the upper end of the channel to be re-tested or maybe even over shot before this bull run comes to an end. All this is expected to play out in 2018 itself. Indian indices have remained remarkably resilient as compared to its EM peers. With the MSCI EM index having bottomed out, US markets positioned well, Dollar index having topped out(/ close to the top), all I can say is we are at the verge of a huge global rally moving into the second half of the year. However I would advice caution in stock picking. Although, every junk and crap is expected to rally along with the market especially during the climax phase, it is most prudent to stick to blue chips. Because, once the party gets over, the junk will be kicked straight into the trash bin!

As we move into the most interesting phase of our market, I will try to post at least once a month ( time is a concern ). Wishing one and all a very happy and prosperous trading journey ahead!

PraDa
 

prada

Well-Known Member
Greetings of the day! In my previous post I had pointed out that we were at the verge of a rally moving into the second half of the year. The month of July has started quite well with an extremely bullish undertone and with the grand old index Sensex hitting fresh all time highs. Sensex has been the lead index in this ferocious bull run seen in our market and will continue to be so going forward. There is a wide debate on the narrowness of the market and the midcaps/smallcaps not participating in the ongoing rally. To me, this is absolutely no surprise. Market rally generally starts with narrowness and matures with broad participation and finally climaxes with narrowness again. Only exception here is that during the blow out phase just before the termination of the bull run, market participation tends to go over the roof. We will witness this in a few months when TV commentators/ media will once again start being gung-ho about midcaps/smallcaps. That will be the first sign of the death knell ahead!

Now coming back to the analysis of our market. In my earlier post I had missed mentioning levels. 11030-11070 was a crucial resistance band for Nifty and this is precisely where it started showing some signs of fatigue. A weekly close above 11070 should pave way for it to move towards 11400. Broad range of the market has now shifted to 10800-11400 with the crucial pivot around 10930. The coming week should see some minor consolidation before the rally resumes. I expect corrections to be extremely shallow at least until our market tests 11400 and hence every dip should be used to build long positions. Nifty bank is very interestingly positioned and is at the verge of a huge break out. I expect it to whipsaw around current levels before it finally manages a break out taking it to 28000 levels in a linear move. Broad range of Nifty bank has now shifted to 26500-28500. After analyzing the indices thoroughly, I expect the indices to remain in a firm uptrend at least until September/October by when I will personally start liquidating my cash portfolio and start accumulating short positions in the indices. In the meanwhile, lets enjoy the current rally. That's it from me for the time being. Have a wonderful trading week ahead!

PraDa
 

prada

Well-Known Member
Good Morning Members! In my earlier post, I had pointed out the broad range of Nifty and Nifty bank, and here we are at the upper range of both the indices( I trust, my fellow members were able to take advantage of my post). We have seen a stellar rally in our market with the broader market participating and the overall breadth improving. As clearly mentioned in my earlier post, corrections so far have been extremely shallow. We have now reached a critical juncture( deciding point ) in our market.

tvc_a2e62df37d05ebd3d1445d99660ea125.png


With the chart attached above, we can see a termination pattern developing. If my reading on the market is right, we should see this rally snapping within the next few sessions. We should now witness a much more meaningful correction. Negative divergences across various indicators further adds credence to this view. Risk : Reward at this point is completely in favor of the bears. I expect volatility to pick up and our market to under perform its EM peers going forward for a few weeks. Another cause of concern is the recent break out seen in Dollar index. DXY is expected to gain traction and target significantly high levels in the months ahead thereby exerting pressure on EMs. Broad range of Nifty is now 11100-11650 and Nifty bank is 27300-28500. Supports for Nifty- 11470-11350-11240-11170-11130-11070. It has to be noted that 11070-11130 is the first major support band if Nifty were to reverse from here. I advise extreme caution if one were to go long in this market from here!

Have a great trading week ahead!

PraDa
 

prada

Well-Known Member
Good Morning! In my earlier post I had raised a red flag with respect to an impending correction and had clearly indicated that the first major support band for Nifty was 11070-11130 if it were to reverse from the top! Although it did manage to hold the same on a weekly basis after the flash crash, it eventually gave way. The major cause of concern has been Nifty bank which has failed to hold/respect critical support levels and has cracked really hard. This has now made me re-look at the ongoing market structure and I have now derived three very interesting possibilities.

tvc_87662af97d8ff31e03ae2a0af459b096.png


One close look at the chart and we can see a termination pattern developing on a large time frame. If so, after a brief pull back from these extremely oversold levels we should head back lower to test the channel support ( 10470-10550 ). On the way up, I will look at the following levels as resistances 11030-11070-11130-11250-11290-11350-11400. Looking at the way Nifty bank and Midcaps/smallcaps have corrected, this seems to be the most preferred scenario. If market starts panning out as per this possibility , we should see a bottom in place by the third week of October. Now, coming to the second case. If the channel support is breached decisively on a weekly closing basis, we can safely assume that the rally which started in 2016 has snapped and sub 10k levels will then become a distinct possibility. The last and least preferred case is that the market has already made a bottom at 10820 and starts targeting the upper channel after some consolidation.

This market is very interestingly positioned with 3 possible scenarios unfolding. Let's see going forward what market has in store! All the best to your trading!

PraDa
 

prada

Well-Known Member
Good Morning! In my earlier post I had raised a red flag with respect to an impending correction and had clearly indicated that the first major support band for Nifty was 11070-11130 if it were to reverse from the top! Although it did manage to hold the same on a weekly basis after the flash crash, it eventually gave way. The major cause of concern has been Nifty bank which has failed to hold/respect critical support levels and has cracked really hard. This has now made me re-look at the ongoing market structure and I have now derived three very interesting possibilities.

View attachment 29023

One close look at the chart and we can see a termination pattern developing on a large time frame. If so, after a brief pull back from these extremely oversold levels we should head back lower to test the channel support ( 10470-10550 ). On the way up, I will look at the following levels as resistances 11030-11070-11130-11250-11290-11350-11400. Looking at the way Nifty bank and Midcaps/smallcaps have corrected, this seems to be the most preferred scenario. If market starts panning out as per this possibility , we should see a bottom in place by the third week of October. Now, coming to the second case. If the channel support is breached decisively on a weekly closing basis, we can safely assume that the rally which started in 2016 has snapped and sub 10k levels will then become a distinct possibility. The last and least preferred case is that the market has already made a bottom at 10820 and starts targeting the upper channel after some consolidation.

This market is very interestingly positioned with 3 possible scenarios unfolding. Let's see going forward what market has in store! All the best to your trading!

PraDa

Update: Further to the above post, we are almost there at the bottom end of the range. At this juncture although there is alot of panic, the market is completely in favor of the bulls. Bears need to exercise caution in shorting the market at current levels. I expect a swift recovery in a few sessions. The chart of USD/INR adds credence to this view. Its showing negative divergence on daily chart and on weekly chart it is hitting the roof. Personally I've started adding longs on Nifty and Nifty bank. All the best !

PraDa
 

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