A bullish weekly, monthly, and quarterly closing. Have we reached the top of the wall of worry? Is this climb going to continue? How much strength does this unrelenting rally have? Questions which few can answer. I am going to try to get somewhere close to the answer.
Volume is an important factor as it tells us whether the closing price , on the chart of any period , has been the consensus of a large number of market participants or a lower number of participants. In simple terms , whether the price set was by a large number or smaller number of buyer and sellers. So if volumes are larger when prices rose, we know that more market participants are betting that the price will go higher, and so can conclude that in all probability, prices will move higher. Similarly if volumes rose when prices fell, more market participants are betting that prices will fall further and we may conclude that prices in all probability may fall further.Taking this premise into account I have analysed price movement during this rally on different time frames.
Yearly Nifty Chart with Volume
The yearly chart shows that the rise since March 2009 has been on heavier volumes than the fall in 2008.Of course we have three more months to complete, during which time the entire rise could be wiped out or we may rise more. But the point to be noted is that the rise till now has been supported by heavy volumes which definitely supports the view that India is in demand.
Quarterly Nifty Chart with Volumes
Q4 of year 2008 and Q1 of year 2009 which were "down" quarters had lower volumes than Q2 and Q3 of year 2009 which have been "up" quarters. .The rise therefore has been healthy.
Monthly Nifty Chart with Volumes
The monthly charts shows increasing volumes in the first three months of the 2009 rally, highest volumes clocked in the month of correction in June, and falling volumes in the subsequent three months of July, August & September,2009.
Weekly Nifty Chart with Volumes
The Weekly Chart Shows that the volumes have fallen during correction and increased when prices rose. Only the last 3 weeks in September has the rise come on falling volumes.
The higher time frames indicate that the rally has been healthy . The monthly and the weekly suggest a slight waning in buying especially in the month of September. I would thus conclude that when there is a correction use it to get into the market. Of course I will review when it happens. But as of now the rally is healthy.
Happy Trading !!