Daily Line Chart Showing Support At Neckline Of Previous H & S Pattern
Weekly ChartLast week I concluded ,
As of now,
- The short term trend is down while the intermediate trend is still up.
- 4421 is the earlier low and the 38.2% retracement level of rise from 3918 is at 4423 which should be strong support.
- Below 4421, Nifty has strong support at 4325-4380 levels. 50 Dema is also around 4327 levels.
- The intraday charts show an oversold condition.
The Nifty made a U turn from 4359 as analysed and retraced 70% of the fall by end of the week, supporting the view of buying on the dip. Has the scenario changed in any way?
On weekly charts
- The negative divergence on Rsi 14 and stochastics is intact,
- Macd is flattening after reaching overbought levels but yet to give a sell.
- The Rsi 14 is above 50 but looking lethargic.
- Macd is in sell mode.
- Stochastics is moving up from oversold levels.
- All oscillators are once again moving down from overbought levels.
Moving Averages are bullishly aligned on all time frames and in favour of climbing the wall of worry.
- Volumes during the weak was on the lower side.
- Advance Decline line moved marginally up during the week but negative divergence intact.
- Put Call ratio is 1.1
- FII selling on the increase.
Bearish Price 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.
- Head & Shoulders pattern on half hourly charts. Break of neckline will give a down move of 300 points.
- An inverse head and shoulder pattern is seen forming with neckline at 4700 .Break out from the pattern could give a 2400 point move up.
- Recent action - selling at higher levels earlier at 4731 and now at 4620.
- Has not been able to close above the 61.8% retracement level of the recent fall from 4731 to 4359.
- Entire run up from March has been too fast and without meaningful corrections,
- Momentum indicators on weekly showing mild negative divergences after reaching overbought levels,
- Low volumes showing lack of participation due to indecisiveness reiterating the fact that fundamentals are not supportive of a further upmove .
At the moment being a chameleon will work the best. Since we have a bearish and bullish pattern in contention, it is difficult to be a bear or a bull. One must trade with strict stops as between 4350 and 4731 it is a ranging market whipsawing traders without mercy. Till the Nifty breaks out of this range or from one of the patterns discussed above , trading will be difficult as a diehard bear or bull.
Pssssst --- My vote goes in favour of the bears.
Happy Trading !!