The nifty maintained the breakout above the downtrendline from January 2008 highs keeping in line with the past pattern discussed in earlier posts. The candle formed for the week shows profit booking from 5453.My reading is it was a reaction area --- the 161.8% fibo level of 5463 of the fall from 5367 to 5225--and thus profit booking .A higher high and higher low was maintained vindicating holding longs.
Weekly oscillators tell a cautionary story. The negative divergences persist. Macd which is also showing negative divergence shows a silver lining as it continues to be in buy mode for the second week.
The breakout above 5400 eluded the Nifty as it was a touch and go at the 5401 level. Today's candle was a bullish engulfing candle, though the range of both yesterday and today are extremely small , thus reducing the reliability on it's bullishness. However today's candle stalled the bearishness of the last two days encouraging my theory of the reaction from the high of 5453 as mere profit booking rather than a trend reversal.
The daily oscillators too are showing negatvie divergence forcing the longs to be cautious.The head and shoulders bearish pattern shown on half hourly charts yesterday seems to be forming the right shoulder . Neckline is at 5360.Break of the neckline can take the nifty to 5265 levels.
The supports are at 5360-5345-5310-5280. Resistance is at 5400-5453-5480.
Trade long with a strict stop at 5280.Those with a shorter term focus could watch the neckline break .
Happy Trading !!