Tuesday, June 3, 2008
Nifty Analysis on 3rd June 2008
I am posting here the latest Nifty chart and again will write something about what the EOD chart is saying.
The chart is just a continuation of my first chart, just in the sense that there are two trend lines that are still there.
Let me come to the point straight away. If we see the major downtrend line - Line 1, it proved to be a good resistance and for the time being, looks like it will be very difficult to break it. Let me introduce you another downtrend line - Line 2, that has been drawn joining the high of 4th Feb and the high of 27th Feb. This line extends to meet and cross the erstwhile uptrend line - Line 3 on 12th-13th May, showing it was also there standing as a "support" along with Line 3 on 13th may.
Now, let me come to the latest downtrend that in my view started on 20th may. If we connect the high of 20th May to next high on 29th May and draw a line, it looks a perfect short term downtrend line, I named it Line 5. This line when extended has proven good resistance in last few days.
The Line 4 is just a tentative "target line" of this ongoing downtrend.
Interestingly, yesterday Nifty broke Line 2, which was respected on 12th May. And... today Nifty even opened below Line 2 !!! and made a recent new low.
These all observations are pointing towards a bleak situation. However, as it looks oversold and showed some signs of pull-back towards today's closing, I am considering an upmove tomorrow if all goes well. Also, for Candlestick lovers, Nifty made a good hammer today, which also supports some upside.
So, considering there will be an upmove tomorrow, I find Nifty to face resistance first at about 4750 - 60 (the orange dot on Line 2). This is because, I think the Line 2 can act as a resistance now.
The second resistance in my view should be 4830 - 40 for tomorrow and 4815 - 20 (see orange dot on Line 5) for the day after. This is at recent downtrend line - Line 5.
There can be more resistance areas which can be calculated depending on other tools, but I'll look at these two as most important.
Nifty can be in buy mode only after it closes above the main downtrend line - Line 1 (see the green star on Line 1). The level for that is around 5000.
I conclude my analysis with the above and invite comments from readers.
Thanks & Best Wishes
Disclaimer: The above analysis is just an analysis and not a trading guide. Please consult a professional adviser before trading in stock markets.
PS: The Indicators are as following:
above - Volume
Middle - OBV
Bottom - RSI