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Monday, September 28, 2009

Reigning The Nifty - Weekly , 29th September, 2009

A Doji on weekly charts after crossing the 5000 mark and failing to sustain above it.

Weekly Chart 1

Weekly Chart 2

This Doji was consturcted by four days of  a  hesistant  fall  forming  a  flag , shown on daily charts.

Daily Chart

Magnified view on the half hourly charts tells us the previous low of 4932 has been broken and a lower bottom  at  4904 has been made. The pullback after this created a lower top at 5016 which will be confirmed if the lower bottom of 4904 is broken.

Half Hourly Chart


Weekly Oscillators have not changed much, being overbought and showing negative divergence.
Daily oscillators are working off the overbought condition after giving negative divergence.
Intraday oscillators reached oversold zone after the mild correction in the last few days. They have turned down again after making a weak  attempt to move up from oversold zone.

Moving Averages

Moving averages on Weekly and Daily charts are bullishly aligned. On half hourly charts the 5,10,20 & 50 period moving averages are bearishly aligned.

Sentiment Indicators

Market breadth was positive for the week.
Volumes were very low.
Put call ratio which was at  1.73  last week decreased to 1.26 this week.

Bullish Price Pattern

Inverse head and shoulders breakout has been maintained for the third week.Therefore, the neckline , shown in pink in Chart 1 , becomes strong support. The level for this week is at  4702 .

Bearish Price Pattern

Rising Wedge forming  since 26th June 2009 shown in Chart 2 in red dash line. This will be invalidated if Nifty breaks out above the uppertrendline which offers resistance for the week at 5210. Support at the lower trendline is at 4892.

My View

The Daily and Weekly charts are still showing a strong uptrend with moving averages  bullishly aligned and maintaining a higher top higher bottom scenario.Strong support  is at 4750,  being the lower trendline support of  upward channel shown on weekly chart 2.The uptrend is intact till the break of this trendline.

The decrease in put call ratio is considerable and  indicates confidence among market players of the upmove continuing. This is a negative as increase in positive sentiment works as a contrarian indicator, indicating a possible fall.The overbought position with negative divergences on daily and weekly charts make the Nifty vulnerable to a fall.

As mentioned earlier , on half  hourly charts,  support is at 4904 and resistance at 5016-5036. Break above the resistance will indicate futher labouring towards highs. Break below support would confirm a lower bottom lower top formation and so  a short trend downmove. 

Trade light and with protection.

Happy Trading !!

Lakshmi Ramachandran

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