Friday, August 8, 2008
Nifty Analysis on Daily and Weekly
Here I am again with my views and analysis on Nifty today and this week. I am using Nifty Daily Chart and Weekly Chart to find out what could be the possible course of action going further.
The Daily Chart
As I have been maintaining for last few days that Nifty is at a point from where the trend can change and we may get some clear direction. My emphasis was on the Main Downtrend Line - Line 1, which was holding firm before this week but now Nifty is right at it (actually slightly above it) and in fact, it breached this line for three consecutive days on an intraday basis. Today, the close is just above the line and it signals a possible change of direction. However, the Previous Important Support Line - Line 3 is still acting as a resistance and so far Nifty has not been able to close above this line. The Secondary Downtrend Line - Line 2 has not maintained resistance and Nifty is well above it for the time being.
The Current Uptrend Line -Line 4 held firmly and Nifty did not breach this line even on an intraday basis. There is a channel forming on Nifty, if we join the highs of current uptrend, a parallel "target" line is forming. I will use this line as target for longs (if a confirmed upside is signaled properly).
Following are my views depending on above observation:
The upside potential
If the past two days can be called consolidation and If Nifty manages to go up further, it might be a breakout, which can lead to a test of 200 period SMA, which will be near the channel target line (Line 5). This way 5000 on Nifty can be a possibility in next few weeks.
The downside potential
Having said the above, I have my doubts on further upside for following reason - the volume of Nifty is not supporting price action.The second thing is the rising channel can be a continuation of prior downmove. In fact, even in the month of March, one such channel formed and when it broke down, there was a massive fall. If Nifty fails to sustain here (as falling volume and the Shooting Star on 6th Aug is suggesting) there can be big downside ahead.
The Weekly Chart
Looking at the Weekly chart, the Main downtrend line is still holding (although it was breached on intraweek basis. The 50 Period SMA on weekly Chart is almost where the 200 Period SMA on Daily Chart is. If there is a Breakout, we can see that level.
All throughout the week I "hoped" for some clear direction but still I can not see it. As for my own view, 4615.90, the high of 6th June (the Shooting Star Day) if taken out, then it can be all over for bears.
Disclaimer: My "analysis" here is analysis in letter and spirit and should not be taken as "trading advice". Trading in Stock Markets is full of risks and one should consult professional advice before initiating any trade.