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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