Thursday, June 26, 2008
We had a two day good upmove in Nifty and it managed to give some life to downtrodden bulls. Today, I will analyze Daily as well as Hourly chart of Nifty (It looks very attractive). Following is my analysis of Nifty Daily first:
As we can see in the chart (Nifty 26 June.png), the Bear Market that started in Jan is still going on (Line 1) and there seems to be little chance for bulls to get over it. Even the secondary Downtrend line (Line 2 - in red colour) is looking too far away. Lot of things happened this month, the most important was the break of Jan low and break of trend line drawn from Jan low (Line 5). The fundamentals of our economy are weakening and to add to the chaos, there are political uncertainties.
If we see closely, there are three resistance areas for any upmove. The first is Line 3 which is around today's high. If Nifty fails to cross this line, then we can see a fresh selloff starting tomorrow itself !!!
The second resistance is at Line 5. The level comes around 4540 !!! This means if Nifty manages to go up from today's close, there are good chances for it to touch 4500 - 4550 levels.
The next and big resistance for Nifty is at the RED line - Line 2. One thing to notice is - the 34 EMA also falls nearby. The level comes at around 4600.
I deliberately did not speak about Line 1 - the main downtrend line. This is because it is too far away and I don't find any catalyst in the near term which can make Nifty move so far up side. However, for the sake of level, it comes at around 4800. Interestingly Nifty will face 50 DMA before facing Line 1, so chances are more than remote for that to happen.
By reading the above you can have the idea of how severe this Bear Trend is. Even by moving up to as much as 4800 will not end this Bear Market.
THE HOURLY CHART
As we see the hourly chart of Nifty, there is a rising channel or what some people call flag formation. This is bearish flag as it is in a larger downtrend. One more thing to note down is today's high that Nifty made is exactly 38.2% retracement of the latest downswing from 4680 to 4097 !!!
The big resistance in hourly chart is also surprisingly coinciding with that on the Daily chart !!! around 4500 - 4550 levels. However, we should note it that its not necessary to reach the biggest resistance and then fall, I am more inclined towards the break of the rising channel.
I hope my post will be useful for readers.
Thanks & Best Regards