Nifty has been on a trip to a mela or a fair ( as modern india would refer to a mela) - She, Ms. Nifty, has taken a fascination for the roller coaster ride. Last week, she just wanted to go down and when everyone thought that she is going to drop dead, there she goes up and up for two days and with what a smile on her face.
We - mere mortals and poor chasers of her - would like to follow her but feeling out of breadth trying to keep up with her.
Here is my attempt to regain myself from this dizzying spectacle by looking at the bigger picture.
What do I mean? Lets look at a standard daily chart.
It seems to me that we have begun a down turn in the last couple of weeks and have made at least ONE LOWER LOW.
In technical analysis this is a significant event.
However now we have strong up move. Does it mean that downward move is over? May be, may be not.
The 4500 level was the last swing high - So, we need to watch out whether Nifty crosses that or not. If it does not, then we will have a lower high as well and the downtrend might continue. If if does cross 4500 decisively, then the downtrend will stand neutralized.
My gut sense is that even if 4500 is breached, 4700 will be very tough. Even though in following price actions I should not ask for the reason, I cannot figure out what will support the price above 4700 other than sheer momentum , liquidity but certainly no rosy economic growth story.
Therefore I suspect we are now locked into a range 3900-4700. If 3900 breaks - and that probability is higher than 4700 breaking! - then we will find support hopefully around 3500 which is where the low of the 20EMA weekly chart is - the reason being if Ms. Nifty closed below the low of 20 EMA weekly average, that will be very bad not just for her but all of us.
In this analysis, I have not offered much for the day traders, but I hope the above analysis will help the positional traders.
If you have any comments please write to me at stockmarket.methods.in.madness@gmail.com
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Disclaimer: The above analysis is just that - my analysis. If you choose to trade on the basis of this analysis, you will be solely responsible for the outcome of the trade - profit or loss. Please keep in mind that trading and in particular day trading is not for the novice and there is significant risk of loss of capital in trading.
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