Reigning The Nifty - 7th September, 2009

 Weekly Chart

 

Daily Chart 

 Half Hourly Chart

Series of falling wedges on half hourly charts

Thursday's candle was an inverted hammer and Friday's bullish candle was a confirmation to it's bullishness. This clearly signals that we may see more upside. The strong resistance of 4650 has also been scaled easily and the close of Friday at 4680 was just above the 61.8% retracement level of the fall from 4744 to 4576.
However doing the  health check of the Nifty is very necesssary.

Momentum

• Weekly oscillators have not shown any change having moved lower from the overbought region since mid June when the Nifty hit a high of 4693 thus negatively diverging fromthe Nifty which has made a higher high of 4744 in the last week of August. The Macd is still in a buy mode but narrowing the gap with it's signal line.This calls for caution as momentum is not in sync with price.
  
• Daily oscillators are yet showing negative divergence.Stochastics has given a buy in the oversold region. .Macd gave a whipsaw and is ready to give a buy again.
  
• Intraday oscillators  are all moving up once again .

Momentum is not all that rosy and the stance according to this would be neutral.  

Moving Averages

Moving averages on all time frames are bullishly aligned.

 

Sentiment Indicators

• Volumes were lower on the fall and was high on Friday when the market rose .
• Put Call ratio today was 1.22  indicating oversold markets.
• Advance declines did not fall much and improved since the inverted hammer day.
• OBV is in negative divergence  .
  

Bearish Pattern

• The action since May 14 low of 3537 has taken the shape of a rising wedge, which is a bearish pattern. Break down from the wedge could give a 1200 point move. Negating it would require the Nifty to break above the upper trendline of the wedge .

Bullish Pattern

• An inverse head and shoulder pattern is seen forming with neckline at 4750 .Break out from the pattern could give a 2400 point move up.
• Falling wedge pattern  on half hourly charts broken out on 17th July with a target of 5129.
  
• A falling wedge formation shown on intraday charts from which the Nifty has broken out on 21st August giving a target of 4934.
• A falling wedge from which Nifty borke out on friday 4th September, giving a target of 4770.
  

Nifty is labouring towards highs as health does not permit. As per articles I have read on Price to Equity ratio the Nifty is fully valued. Any further upside thus, should not be sustainable. However , technically,  the recent action shows more upside targets for the Nifty.  Scaling of the rally high of 4744 is necessary though.

Though momentum is playing hide and seek with Nifty , price tells us that the Nifty is up till the recent low of 4576 holds.I would prefer to hold  hedged  longs with a stop loss of 4576.

Happy Trading !!

Lakshmi Ramachandran
www.vipreetsafetrading.com