Thursday, May 10, 2012

Nifty at a Fibonacci Support level

The Nifty is at a significant Fibonacci support level - 4950. This number represents the 61.8% retracement of the up move from 4500 to 5630.

Now, I am not a big fan of Fibonacci retracements. Markets move on momentum. Why should a market stop falling when it comes to 61.8% of the previous up move? Prices fall when buyers do not buy. So, buyers will not step in to buy  just because the price has fallen 61.8%.

But, Fibonacci retracements are followed by many traders. Elliot Wave users swear by it. So, we keep a watch when a significant level comes about. At 4950, then, the Nifty is at a stop or fall situation. If the Fibonacci support holds, then this is the low. If it does not, then we are probably looking at a free fall.

We will have to wait for market action to tell us if the support holds or is breaking down. So, it comes back to momentum, doesn't it?

3 comments:

ajith2020 said...

Sir,
If this downward momentum continues for long can we expect below 4500 level in nifty in short term

ajith

MVG said...

In your "Sunday, January 15, 2012" post you said:

First, an ascending triangle in the Nifty has been confirmed when prices broke out above the horizontal resistance at 4800. A pattern target is set at 5070. If this actually does work out then later when stock market history is written, this pattern will be identified as the start of the new bull market. If the pattern fails, then it will be consigned to the dustbin of failed patterns, forgotten.

Is that view still valid or new market movement now has changed it in anyways?

Rushabh Shastri said...

I can say at 4900 market is oversold zone and I have observed well before also 4900 as important level than 5000....BANK should come to help...and RELIANCE too at 52 week low....Must need help for nifty TO BOUNCE form oversold zone