Sunday, July 13, 2008
Today I am analyzing Nifty - both EOD as well as Weekly. Let me come to the weekly chart first:
I have drawn only two trend lines and two Moving Averages (Simple) on the Long Term Chart of Nifty Weekly. The Line 1 is the major support line under formation (I say so because it has still not found the third point in order to qualify to be a "trend line" by definition). This Line 1 support comes at around 3100. But, before this line, there is the 200 SMA (Simple Moving Average) which is at around 3500 and is going up still. So, going by this, the first major support for Nifty, according to 200 SMA should come at 3500 - 3600 levels. If this support area is breached then the next logical support should be the Line 1, at around 3100 levels. If this Line 1 gives support, then it will become a Major Support line for a good time. Breaching this line decisively will mean Nifty is in a Long Term Bear Market.
If Nifty manages to move up from here, the major resistance should be at the Major Downtrend Line - Line 2. The level for this line resistance come at around 4500 - 4600.
For readers' convenience, I've put arrows and a red dot at the above mentioned support and resistance areas.
THE EOD CHART
Looking at the EOD (End of Day) or what we simply call it Daily chart, Nifty refused to breach either the support (Line 6) or the resistance (Line 4), as I had mentioned in my last post. However, one thing to be noticed here is that it closed below another resistance line - Line 5, which is indicative of how weak are bulls. The bulls can only have some relief as the Line 6 is still holding. Line 5 is very steep, so I will place my bet on Line 4, which is at almost 45 deg angle so should be more trusting.
I want to tell one very important thing to my readers. Did you notice a triangle is being formed (see Line 4 and Line 6)? Well, If it really does prove to be a symmetrical triangle, then it gives a target of near 3600 in coming days !!! Now remember what I said in Weekly analysis above? remember the 200 SMA on weekly Nifty chart? Its at around the same level - 3500 - 3600 !!!
So, If Nifty continues the previous downtrend then my advice is look for volumes as a triangle breakout will be confirmed if it goes down with big volumes.
If you are a Fibonacci follower, then taking the high of 18th June and the latest low, Nifty FAILED TO CLOSE ABOVE 38.2% RETRACEMENT FOR THREE CONSECUTIVE DAYS !!! Almost everything is pointing to more pain for bulls in the coming days.
I hope you find my analysis worth giving a serious thought. I would definitely like my readers to put their comments after reading.
Disclaimer: Trading in Stock Markets is full of risk and you should consult a professional before initiating any trade. My views and analysis expressed here should only be treated as a "view" and "analysis" and NOT a trading recommendation.