Tuesday, November 4, 2008

Nifty and Sensex Up

Today the benchmark BSE Sensex and NSE Nifty of India closed up almost 4%. The upside followed previous four days of upmove in a row and traders seem to be more on long side.

Looking at the Daily Chart of Nifty Future, following is my observation:

  • After 22nd Sept, this is the first time it managed to cross and close above 13 EMA on daily chart, which means how weak bulls were in those days but looks like bears have decided to give them some relief.
  • The EMA sequence is still negative (13 EMA below 34 EMA which is below 55 EMA ) but the worry for bears is the gap between these moving averages.
  • Bulls should be looking to square off their longs rather than to buy fresh positions as : 1. this is a vertical up move and a V-shape recovery, which almost always is typical of bear market rally rather than bottom formation. 2. Nifty Future is nearing key resistance areas:
  • The first resistance is from here (3175 ) to the highs of 21st and 22nd Oct (near 3250).
  • Next resistance comes at 34 EMA (near 3460) but that is still some distance away. However, I personally don't think that "price" will go to meet 34 EMA, it could rather be EMA coming down to meet price.
  • If there is a correction in this up move, then support comes at about 2800 to 2700 levels, the Fibonacci 38.2% and 50% retracement levels.

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