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Nifty Technical Trend Analysis-1April13

, April 1, 2013, 2 Comments

Descending channel can be observed on the left hand side of the chart, Nifty made a high of 6330 and 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 22nd 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) which gives a break-out on the up-side into overbought zone(bullish zone).

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

Since last few weeks Nifty has been falling like pack of cards, without any sigh of relief  for bulls. Nifty did not even briefly linger around old tested support levels  & thus creating a panic in the financial market. Stocks are seen collapsing to new lows creating stock & sector specific panic.

Many market analysts have been almost screaming a hoarse cry for relief rally, but none seemed to be in near sight, with Nifty nose diving to more deeper levels by  each passing day.

Technically at 5980 level  Nifty tried thrice to break the resistance on up side on 13th February 2013, 2nd time on 20th February 2013 & then on 11th march 2013 and all were  unsuccessful. This lead to steep vertical fall  which halted  at 5612 on 26th march 2013. As can be observed from Nifty daily chart 13EMA (blue line) has been strongest resistance area for Nifty in daily time frame & strongest support area has been 200DMA (red line),   200DMA crossovers  calls for a great observation.

In Nifty daily chart, Nifty has taken a conclusive support on 200DMA at 5612. This 200dma is an important support level, which Nifty might respect. If Nifty stays above 200dma for 4 consecutive days, then a relief rally may be observed in Nifty daily time frame. On the upside Nifty may test recent resistance levels like 5760, 5790 & 5840.

Nifty gave a bearish belt hold line candle on 25th March 2013 followed by a small bullish candle on 26th March 2013 and then again followed by a an important technical signal as  big bullish hammer on the last trading day of March, 28th March 2013. Hammer indicates a change in bearish undertones of Nifty to bullish undertone.

On Monday the 1st April 2013  if  Nifty open in blue and gives bullish candle, bulls may rejoice & try to conquer  the bears. But if bears still are very strong and 200DMA breaks conclusively on down side then it may create mayhem in equity market and stocks may collapse to new lows again.

Another technical tool KST- momentum indicator has broken down from overbought zone through from zero line and traversed to over sold zone is indicative of heightened bearish activity. Rally could bring out tussle between the bulls and the bears to an intensifying level & aborsbing one.

Technical Conclusion: Technical finding indicate that if Nifty takes support at 200DMA, it may give bulls a temporary upper hand, but at various resistance levels on up side, bears might show strong upper hand again. If Nifty breaks down from 200DMA it has good support at various levels. KST Indicator being in over sold zone, hints at over all bears having an upper hand and more or less an intermediate down trend has been established.

Invest or not to invest: A positional Nifty long can be established at 5680, 5690 with stop loss at 5660. A positional short trade can be generated below at 5590 with stop loss at 5612. If relief rally takes Nifty price above 5800 on upside a positional short can be generated with adequate stop loss. 200DMA might spring a volatility surprise on positional Nifty traders so any short position/long position should be initiated strict stop loss.

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  • Bhaskar R,

    Well, support at 200DEMA may become a strong resistance zone for the Index. In such a scenario of Fight between B-B, support and resistance never work well. We have to find out the next development, which might be subjective and not a level oriented in the Market. Personally, I am looking for a Positive development in between 5580-5460 zone and if everything in fine tune then we may see Reversal in Indian Market. However, chances for 5250 shouldn’t be ruled out which suggest Wave – 4 support as per wave structure….

  • Suchita Ambardekar

    Bhaskar R,

    Currently Nifty has fallen below 200sma and today being the 4th day . As it is 200sma is a very important technical level, I will currently put my support & resistance scenario in context with 200sma only. On Nifty going upside 200sma will act as a tremendous resistance. If 200sma in Nifty is bridged then i shall look at 5500,5600 or any such levels. The current fall is not yet over but stalled till new downward move starts. This is indicated with KST indicator being in oversold zone. Unless if in future nifty conclusively goes above 200 sma & shows any technical indications then reversal can be looked into. I would refrain from being bullish as of now. Market operates in future time. Good news if any will be reflected in Nifty price gains.
    I do not follow Elliot wave,so would refrain from commenting on wave count. Today bears do have upper hand, and may try to take nifty down. Yet despite that, we are not in bear market, but this corrective in a vibrant bull market.

    I hope I have given full justification to you comment.