Wednesday, August 24, 2011

The Appealing Chart

Dear Readers,

Here is one interesting chart which in my opinion is appealing as it incorporates some data important for all technical traders. This is the long term monthly chart of Nifty (NSE Nifty 50) since 2002.
Nifty Monthly Chart from 2002 to Aug 2011 Log Scale

The chart shows us following things which can be the deciding factor for serious traders:

  • The trendline from 2008 low to the recent low of June 2011 was violated this month and Nifty is below that line for all of this month so far. 
  • This low also broke down below 50 SMA (monthly) but is just above that now.
  • This low is also near the support level of the low of May 2010.
  • The RSI is trending down and has broken down the 50 level. This breach of 50 level was not seen anywhere since the 'recovery' started in late 2008.
  • The MACD on this monthly chart had already given sell signal in Feb-March this year. Kindly note that MACD signal on monthly charts is very reliable as seen in the past.
So, the market is at some important price point and case for bulls and bears is 40:60 respectively. The close of this month is going to be important for bulls as bears are having upper hand so far. The problem bears encounter is lack of volume at such an important point but then the month has several trading days ahead for one thing and for another thing, volume is not 'extremely' important for bears as stocks can fall off their own weight.

The long term trendline from late 2003 low, joining late 2008 low and extended, gives an idea that next support (if bears have an upper hand) is going to be near 3800 on Nifty which looks yummy to bears but scary to bulls.

There is one more thing that needs attention although some of you might discard it as trivial but in my opinion this is important. RIL (Reliance Industries Limited) has been the king of this market since the start. Note that RIL started going down first and then the rest of the market followed suit. Also, RIL lost its 'most valued firm' status last week (although briefly) which symbolically looks important.

The bottomline is:

At this point there may be people buying, but if Nifty continues going down from here, then there is the possibility that we may see even 3800 ish level on Nifty.

Happy Trading...


  1. Dear Friend,

    Believe me, I am as much in need of money as you are. Like you, I need funds for my studies, moreover, I need money to feed my family as well. But, I don't think asking people to click ads is going to be a good thing. In fact, Google may even blacklist you for this. My suggestion is - ask for 'donation' and not clicks.


If you have arrived here from a search result, please click here to see main page where you will find the latest post