Wednesday, November 17, 2010

Nifty Chart Checkup

Thanks to a holiday, we can take some time to look in detail at the end of day Nifty chart. Here is chart with my notes coming in after.

This is a candlesticks chart for Nifty, end of day. Three moving averages are applied to prices, 20 day, 50 day and 200 day. The moving average lines are marked, so readers should be able to identify them. Have a look at the current position of each of these averages before you read on.

Prices have cut through the 20 MA, and yesterday also through the 50 MA. The long term trend, as represented by the 200 day average is UP - the average is rising, as also, prices remain well above the average.

The bearish crossover of prices below 50 MA is disturbing since it usually signals the start of an intermediate down trend. There are 2 reasons why we are not calling for a downtrend - First, sometimes the 50 MA acts as support and prices bounce back. Note a similar support in late August. Second, the crossover has come about in a strong support area. Therefore, the breakdown of support will be a clearer signal than this crossover.

How do we know that support is holding? You need a bullish candle! This will be the first sign that some kind of support has emerged in the 5900-5950 area.

What happens if support breaks? A close below 5900 approx will be a sign. Traders should not have any long positions, if they sense a breakdown since the next support comes much lower at 5300 - 5500. Note the gap between 5500 and 5900 - nothing in between!

Reader comments are welcome.


alphabet1 said...

Hi Sudarshan Sukhani Ji,

On ichi charts eod, the cloud has support upto 5780-5711 which is another level to watch in between 5500 and 5900.

On EW (and also on ichi cloud) if this fall holds 5935 we might be retracing back in wave 5 upwards again to a new high(well each one has his own count though).

VIJAY DUTT V said...

Hi Sir,
I have been a huge fan for you from last 3 years and i am regular follower of your blog.

Yesterday nifty hit a low of 5970.30 which was exactly the 0.23% fibonacci retracement of the big move from 4786 to 6305.

The last time nifty hit this 0.23% fib retracement from 4786 to 6384 was exactly 5934 with pinpoint precise.

This has happened even yesterday with exact precision. Do you believe these technical levels are significant in trading.
Please give your view on it...

Happy Trading Sir

ilan kaalai said...

you are a capital for Indian traders, thank you sir, you see , i am very frequent follower and eager to learn from you sir, salutes...

tushki said...

hello sir
so by this observation do u think the new high now is not possible this year on nifty considering the fact that even global markets have started cracking

Secondly if there is a corrective rise after such a large fall, till where can nifty head?

Thirdly ur view on the intermediate target for reliance capital?

Nifty direct said...

You have posted very useful and valuable chart i really appreciate it and i want to thank to you for sharing.
stock futures tips

Pankaj Pandekar said...

Dear Sir,
Where can i get live NSE and commodity feed?

rocky said...

Thanks for this wonderful explanation sir, seeing this chart i remember your comments on cnbc tv long back when nifty hadnt took off was trying to cross 5300 level,you had said if nifty crosses 5400 there nothing in between to stop it all the way up to 5600 or higher(so it did till 6000).
Thanks again!

Pi said...

@ Tushki & other wanting to know where the market will be headed..

This is just a correction & a buy opportunity. For investors this move below 50dma is like a 'first dip after breakout' is for traders. You buy expecting higher prices ahead.

This market should take out previous highs & march on higher to possibly 7200 (fib extension target) by Jan-Feb.

Watch out for more such comments like mine over the next 3 months over this blog & other such forums. When you hear a lot of voices all agreeing & talking bullish like i am rather than asking tentative questions go out & dump all your stocks then. We should be almost thru wid a 2 year move off the lows & ready to see a deep correction then.