Tuesday, June 3, 2008

Changing Trends Technicals and Fundamental

Dear friends,

I am posting here my analysis of Nifty. This is a very humble effort and I hope you will be kind enough to apologize me for any mistake.

The first thing I request to all of you is - kindly do not think I am 'predicting' or even 'guessing' any move by Nifty in any direction. I put it here very clearly that I'm only trying to analyze chart and data and presenting my view only. Kindly trade after consulting some expert advice.

Please see the attached chart. If we draw a downtrend line from Jan high to recent high, its meeting at three points. In other words, after Jan high, if we consider 2nd May high as last resistance and draw a trend line, extend it, then recent high was exactly at that line on 16th May. This, according to me, is a validation of the down trend continuing, as the line became resistance and Nifty started falling from there.

Now, let us talk about latest uptrend. In my opinion, the latest uptrend started on 18th Mar, when Nifty made a low of 4468 thereabout. The uptrend of Nifty continued touching 4628 on 7th April and continued its upmove. I drew an uptrend line joining these two, and Nifty respected the support of this line until 22nd May. But on 23rd May, Nifty broke that trend line and in my opinion the uptrend was disturbed.

For any resumption of last uptrend, Nifty has to go above that trend line, which is above 5200 and rising.

Now, considering the downtrend is in place, I have this assumption that Nifty can still move upto 5000 - 50 levels as it might try to test the downtrend line.

One more thing to watch out is Nifty made a Bearish Engulfing on 29th May and an Inside Day on next day, so it will be difficult for it to move up in a hurry.

Also, if we remember May Expiry day trading and the way Nifty closed at almost near the low, it tells something strange is there. The way 5000 Puts were written and the way most of the global markets were doing (most of them doing good), it is very difficult to digest Expiry day close. As we see, the downtrend is continuing and there is weakness in the markets with all up moves getting sold out.

Looking forward to your comments/suggestions

Harish Dobhal

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