Nifty Technical Trend Analysis-25Feb13

Nifty after making a yearly high of 6101 on 22^nd January 2013 started dropping like pack of cards, while briefly lingering around 5980 and then falling further by breaking important support trend lines. In nifty daily chart I have drawn many trend lines from left to right. On the left hand side of the nifty daily chart a descending channel can be observed, nifty prices made a high of 6330 an then on weakness made lower highs of 6189, 5941 while a subsequent lower lows of 4814, 4714, 4546 (within the descending channel). Technically Nifty bottomed out at 4546 around 22^nd December 2011 and heralded a new rally by breaking out of descending channel at 5124 & additional confirmation came with KST indicator  from oversold zone(bearish zone) give a  breakout on the up-side into the overbought zone(bullish zone).

Nifty on retesting crucial support at 4783, never looked back & started a forceful uptrend rally by making higher highs at 5300, 5450, 5813 now 6099 on 22^nd January 2013. The Nifty daily price journey has been shown with help of 2 uptrend lines. One uptrend line acting as resistance & other uptrend line acting as support. (On right side of the chart)

A well modulated uptrend rally within these 2 uptrend line consists of higher highs 5300, 5450, 5813 & 6099, lower lows 4783, 5033, 5216, 5560 & now 5980 on a support uptrend line. Moving averages 50 sma has been broken while 200sma is still lending support. Now 50sma & support line is acting as resistance for Nifty. Technique Nifty has good support around 5847 in the daily time frame. On breaking this support price of 5847 daily Nifty price action may give severe reaction, though Nifty price action has good support on various lower support levels.

Another technical tool KST- momentum indicator is near the zero line and has almost broken down into oversold zone. A sign that bear are very active and tussle between the bulls andthe bear is intensifying. Volumes are decreasing, but do not hint at anything as yet.

“The momentum indicator KST is showing negative divergence in the overbought zone, which indicate rally may slow down or is losing steam. The buying interest though still held by bulls. But bears may spring a surprise on unsuspecting bulls & could be waiting on the sidelines to hamper the rally.” Has come true!  

Technical Conclusion: Technical finding indicates that Nifty may break down but has good support at various levels. KST Indicator breaks down in over sold zone, over all bears will have the upper hand in down trend.

Invest or not to invest: A positional Nifty short trade can be generated  at 5890 with stop loss at 5900 and on down side if Nifty goes below 5835 new shorts can be added again with stop loss at 5850. 28^th February 2013 budget can spring surprise on positional Nifty traders so any short position should be initiated strict stop loss.

A new positional trade in Nifty future can be initiated on KST Indicator giving cross over in over bought zone and Nifty goes above 5900.