Nifty Daily and Weekly Update: Detailed Pure Price Action Analysis.
Market Sept 8th and Week ended Sept 8
Today's blog will look at pure price action, with out any indicators or oscillators. I hope at the end of the blog we will realise how much the price action reveals the market sentiment. The stories it tells, the patterns it creates to give a clue to what next. That is the big question, is it not ... what next ?
Commentary on Friday's price action
On Friday the market opened near the high and closed somewhere in the mid-range for the day. The market opened positively only to be dragged down by the selling pressure till 2:30 in the afternoon. Seeing a bargain at 9913 levels, buyers rushed in and the Nifty recovered to 9940 and finally close at 9934.80 - with a gain of about 5 points above Thursday's close.
Now a look at the story the daily candle narrates. The very small upper wick (or shadow) barely seen, indicates the inability of the bulls to take the price much higher than the open. The long lower wick (or shadow) indicates that the bears managed to drag the price to 9913, which brought in new buyers and the index closed at 9934 - below the open (red candle) and slightly above the prior day close.
Price Pattern on Daily Chart
The market touched a high of 10130 before loosing significant gains in the days that followed. However, since then, the daily pattern that has emerged is one of consolidation. The ascending triangle pattern that has emerged (flatish top and higher bottoms) and the price broke out on the upper side on last Friday. However, the geo political news swiftly tested the support at the top of the triangle and held. Then the top of the triangle was tested again mid week and the support continued to hold. The multiple testing of the support early in the rally indicates weaker than expected momentum.
What next ?
The ascending triangle pattern in a uptrend would indicate a continuation of the uptrend. This is where the price is again indicating very interesting levels. The range from A to B of the triangle is 200 points and adding that to the bottom of the break out candle (which also coincides with the top of the triangle) takes us to 10100 levels ... just shy of the all time high.
Will a double top be formed to signal the end of the current bull run or will the market break the all time high and rally to dizzier heights ? We have to go to higher time frame to see if that will provide us with any clues.
Weekly Price Action
The weekly price chart indicates a breaking of the trend line on the lower side. What this means is that the bottom trendline of the uptrend now becomes the resistance for the continuation of the uptrend i.e. a slow down of the momentum.
The width of the channel is about 650 to 700 points depending on the line we draw to include the wick that is currently above the channel I have drawn. The new channel could be formed 600 to 700 points below the current trend line.
So what this means is that if the Nifty takes it time to move higher, then it has a chance to go above the all time high as the resistance moves higher with every passing day. However, if the Bulls are in a hurry, then there could be a swift counter-attack pushing the Nifty down by 500 to 700 points from the highs.
In short, bulls in a hurry could create a double top resistance and a fall. It is indeed a slippery slope, so driving the market up slowly will help the bulls to give themselves a chance to take this rally to dizzier heights. After all, 10130 is just a number waiting to be conquered.
To predict or not to predict
We all love it when our prediction comes true. But in the heart of heart we know that it was our good fortune (rather than our intelligence) whenever our predictions come true. As a honest technician I have to constantly align my views to the market and price action rather than stubborn hold on to a projection that I have put my conviction behind.
I expect the market to move up to 10100 levels slowly ... so a sideways market that will painfully crawl up to 10100. Any quick jumps will be viewed with caution.
In fact, my Thursday blog with Bollinger band indicates a start of the squeeze.
I would watch the momentum at 10050 levels to check if there is strength to take it to 10100 and beyond or it is holding on to the last ounce of strength to regain the peak.
Finally if the market changes its mind, my risk management would kick in and save me from a disaster. So, be alert and happy trading :-)
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Disclaimer :
This blog is for educational and awareness purpose only. The views are intended for discussion and exchange of views rather than an expert opinion. This is not an recommendation to buy or sell or invest in the stock market and derivatives market. Kindly exercise caution and perform your own due diligence before investing in the market, after fully and clearly understanding the risks involved.
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