Reigning The Nifty - 26th October, 2009

Weekly Chart

Daily Fibonacci Chart

Daily Chart

We have an inverted hammer on the daily charts. Or is it a shooting star ?Also an "inside day"

An Inverted Hammer forms when the Upper Shadow is longer than the Real Body and the Lower Shadow is small or non-existant. The Inverted Hammer is the same as a Shooting Star, only the Inverted Hammer appears at the end of a  downtrend, whereas the Shooting Star appears at the end of an uptrend.We have a long term uptrend and a short term downtrend. So which one is about to end?


 This will be debatable till we see tomorrow's action. The inside day  pattern gives upward direction above 5064 and downward direction below 4968. We could however also try to queue up evidence to see whether they are favourable to the bears or the bulls.

Momentum

• Monthly oscillators strong. Stochastics in overbought region.

• Weekly Oscillators have started moving down from  the overbought region after showing negative divergence.

• Daily oscillators have moved down from the overbought region .RSI14 is yet above the 50 level, Macd in sell and stochastics in oversold region. All of them have moved below their respective September lows.
  

• Intraday oscillators have moved up weakly from oversold region.

Moving Averages
Weekly charts.moving averages are bullishly aligned
Daily charts the 5 and 10 ema are bearishly aligned
Intraday charts only the 50 and 200 remain bullishly aligned.
Nifty is trading below the 20dema.


Sentiment Indicators

Market breadth was  negative for the week

Volumes were very low.

Put call ratio which was at 1.50 last week has fallen to 1.29  supporting a further  fall.


Bullish Price Pattern

Inverse head and shoulders breakout has been maintained for the ninth week . Therefore, the neckline , shown in pink on weekly charts , becomes strong support. The level for this week is at 4655 .


Bearish Price Pattern
The channel break shown in my post for 23rd october , with a target of 4750. You may read the post here, http://vipreetinvestments.blogspot.com/2009/10/reigning-nifty-23rd-october-2009.html



My views

Bearish. pointers

1. The first sign of weakness was the break of support at 5077. 
2. The confirmation of weaksness came when the uptrendline from March lows was decisively broken.on 22nd , Thursday on Daily Charts.
   
3. Daily oscillators have broken their September lows which is 4580 on the Nifty and one of the tenets of technical analysis says"momentum precedes price". So the Nifty could test the next support level of  4921 .
4. Channel break gives a target of 4750.
5. Moving averages are not a rosy picture anymore.

Bullish pointers

1. The uptrendline from March lows on the Weekly charts is intact .
2. On daily charts, the  support of 4921-4904 is holding as of now. 
3. The inverse head and shoulders pattern breakout is still valid.
   

A lot of bearish pointers. But the bullish pointers which are on weekly charts are very significant.  The trend thus is still UP. The fall of the last few days may be an ongoing correction in the uptrend till proved otherwise.

So,  I declare my Verdict  as  "Caution. Remain on sidelines " rather than "Bearish" .


Happy Trading !!

Lakshmi Ramachandran
www.vipreetsafetrading.com