Hi,
First of all I would like to thank you for reading my first post on Nifty TA, exactly what I'm trying to explain is forecasting nifty moves with combination of technical analysis tools in tandem with some fundamental reasoning and logic.
Here we go......
To begin with we shall start analysis with oct lows and oct high as they are the benchmark points
For beginners if you remove the tails of oct high low candle you will get the nifty range of 3150
on the upside and 2520 on the downside making it into a shape of rectangle. Any move above 3150 will trigger a massive rally that is why 3150 lvl is so important.
So connecting tops from the oct high and bottom from oct low we get a range. If you see earlier attempt in Jan where people bet heavily on this upside breakout from this triangle and gone long
and burnt their hands. A simple volume analysis could have saved their hands. Just see two green candles which are infact supported by some incrimental volume but see the volumes in the subsequent two red candles, they were massive which means market has denied this upmove and fallen heavily. A fundamental or pretty simple reason is that the move which was made after october low was a very quick move (6 sessions or 6 cnadle move) and that too without any strong reason or any prominent news flow. So point here is that move has to be sustainable or else it will always fall with voulmes. In TA we call it a pull back rally.
Now we come to current scenario where we are again on the verge of breakout or say testing the historical 3150 resistance. Situation seems same again coz no expectations of any great news from our corporates as their 3 quarter results were not up to expectations, gdp estimates are lowered down again n again, election is ahead so no major anouncement from govts side so a simple insight will compell you to go short or don't beleive in this rally which most of us are doing.
But but n but there are factors which we still havent counted so far in our analysis, and these are some game changer factor which can surprise many of us. Here are the positives of this rally:
First: There is a famous thumb rule of market which is repeated again and again in the bible of stock market books that if you dont know whats going on just rely on two things Price n Volume. And I dont need to say that this time indeed they are supporting(see charts).
Now you will question me that if there is no major happening they where does this volume comes from?
My Answer: Its a kind of market function where market discounts everything(means adds any positive happenings which are yet to be disclosed in market and negates or substracts negative impact in advance).
Second: In my view this rally can be attached to some events as recent market happenings are event driven. I mean to say global events are impacting heavily on our stock market. As per me first leg of this current rally was attributed to some technical pull back(which simply means when a market makes a new low people try take this opportunity to earn in pull back and start buying to make gains in pullback anticipation(which happens everytime) or a soothing logic is that long term investor or call them value investor see them as an opportunity to add stock in their portfolio.
Second leg can be attributed to the short covering phenominon which usually happens at the month ends where people usually cover their shorts. Means traders started shorting in future and they cover their shorts at lower levels. Well short covering has another implication or meaning that people who shorted at lower levels cover their positons by buying at higher levels to cut their loss(funny I read in ET that short covering happeinng at 2900-3000 lvls). Actually nobody can justify this that whether people cover their short in profits or in loss or both. But common sense says that every month end has seen short covering moving the market upward so a mass psychology works at month end that market has to go up no matter what and stocks start to surge, so I guess people book profit.
Third leg of this rally was due to events, first was Citi Bank(one of the company in dow jones) announced profit in its month end. actually it has also announced profit one month back but this was the second month it caught investors fancy!! amazing isnt it because it was not even a quarterly result, also crude spiked up too at the same time, then news broke out that U.S is planning to announce $1 trillion package, notice the word planning, its still undeclared and we got a massive rally from this anticipation, God knows the fate of bourses when it actually get anounced.
Fourth leg of this rally was triggred recently which actually convince me a bit is that two major sector of our economy started performing. We got news that all the steel sector companies are utilizing their full capacity means they are producing maximum they can, this triggred prices of all the steel companies including SAIL which broke out of the upper end of its rectangle quoting now @ 102 and also Infra sector started performing. Remember Steel and Infra are the major sector of any economys growth, if an economy has to grow it has to post good performance in these two sectors first(its a thumb rule) Now what history tells us is that this will lead to a chain effect means if both these sector start performing it also boost up demand of other sector and we might see overall spike say in auto, banking, cement and so on.....
Fifth Possible leg which is not so far can be elections, again its historical fact in our country that market will have one sided direction at election times either upwards or downwards. I'm just anticipating that a decisive govt either congress or bjp comes in power and can boost up our stock market.
Sixth Possible leg is crude, globally crude has broken its $50 range with good volumes indicating that operations in companies world wide are resuming and there is an actual increase in demand of crude. As our Nifty is concerned we have heavyweights like Reliance, ONGC and Reliance Petro ( Now soon to be counted in Reliance) depend heavily on oil. Also Reliance has broken out of its upper channel and taken out two support so things are building up positively for Nifty.
So conclusion is that market may have discounted all these future and current events which I have quoted above and there are probably some others too which are not out yet and that is why they are moving with volumes. It will be interesting to see if the momentum is maintained and how it breache the historical resistance. And finally my popular indicators Rsex which is exponential moving average of RSI is indicating a clear upside direction and there is divergence between two lines which indicated that rally will hold and williams r% 80 line has become support for this rally.
So all in all we are on a great heights of market, opportunities are there on either side. Just keep an eye on the price and volumes and let me know your views I'll honestly appreciate it.
First of all I would like to thank you for reading my first post on Nifty TA, exactly what I'm trying to explain is forecasting nifty moves with combination of technical analysis tools in tandem with some fundamental reasoning and logic.
Here we go......
To begin with we shall start analysis with oct lows and oct high as they are the benchmark points
For beginners if you remove the tails of oct high low candle you will get the nifty range of 3150
on the upside and 2520 on the downside making it into a shape of rectangle. Any move above 3150 will trigger a massive rally that is why 3150 lvl is so important.
So connecting tops from the oct high and bottom from oct low we get a range. If you see earlier attempt in Jan where people bet heavily on this upside breakout from this triangle and gone long
and burnt their hands. A simple volume analysis could have saved their hands. Just see two green candles which are infact supported by some incrimental volume but see the volumes in the subsequent two red candles, they were massive which means market has denied this upmove and fallen heavily. A fundamental or pretty simple reason is that the move which was made after october low was a very quick move (6 sessions or 6 cnadle move) and that too without any strong reason or any prominent news flow. So point here is that move has to be sustainable or else it will always fall with voulmes. In TA we call it a pull back rally.
Now we come to current scenario where we are again on the verge of breakout or say testing the historical 3150 resistance. Situation seems same again coz no expectations of any great news from our corporates as their 3 quarter results were not up to expectations, gdp estimates are lowered down again n again, election is ahead so no major anouncement from govts side so a simple insight will compell you to go short or don't beleive in this rally which most of us are doing.
But but n but there are factors which we still havent counted so far in our analysis, and these are some game changer factor which can surprise many of us. Here are the positives of this rally:
First: There is a famous thumb rule of market which is repeated again and again in the bible of stock market books that if you dont know whats going on just rely on two things Price n Volume. And I dont need to say that this time indeed they are supporting(see charts).
Now you will question me that if there is no major happening they where does this volume comes from?
My Answer: Its a kind of market function where market discounts everything(means adds any positive happenings which are yet to be disclosed in market and negates or substracts negative impact in advance).
Second: In my view this rally can be attached to some events as recent market happenings are event driven. I mean to say global events are impacting heavily on our stock market. As per me first leg of this current rally was attributed to some technical pull back(which simply means when a market makes a new low people try take this opportunity to earn in pull back and start buying to make gains in pullback anticipation(which happens everytime) or a soothing logic is that long term investor or call them value investor see them as an opportunity to add stock in their portfolio.
Second leg can be attributed to the short covering phenominon which usually happens at the month ends where people usually cover their shorts. Means traders started shorting in future and they cover their shorts at lower levels. Well short covering has another implication or meaning that people who shorted at lower levels cover their positons by buying at higher levels to cut their loss(funny I read in ET that short covering happeinng at 2900-3000 lvls). Actually nobody can justify this that whether people cover their short in profits or in loss or both. But common sense says that every month end has seen short covering moving the market upward so a mass psychology works at month end that market has to go up no matter what and stocks start to surge, so I guess people book profit.
Third leg of this rally was due to events, first was Citi Bank(one of the company in dow jones) announced profit in its month end. actually it has also announced profit one month back but this was the second month it caught investors fancy!! amazing isnt it because it was not even a quarterly result, also crude spiked up too at the same time, then news broke out that U.S is planning to announce $1 trillion package, notice the word planning, its still undeclared and we got a massive rally from this anticipation, God knows the fate of bourses when it actually get anounced.
Fourth leg of this rally was triggred recently which actually convince me a bit is that two major sector of our economy started performing. We got news that all the steel sector companies are utilizing their full capacity means they are producing maximum they can, this triggred prices of all the steel companies including SAIL which broke out of the upper end of its rectangle quoting now @ 102 and also Infra sector started performing. Remember Steel and Infra are the major sector of any economys growth, if an economy has to grow it has to post good performance in these two sectors first(its a thumb rule) Now what history tells us is that this will lead to a chain effect means if both these sector start performing it also boost up demand of other sector and we might see overall spike say in auto, banking, cement and so on.....
Fifth Possible leg which is not so far can be elections, again its historical fact in our country that market will have one sided direction at election times either upwards or downwards. I'm just anticipating that a decisive govt either congress or bjp comes in power and can boost up our stock market.
Sixth Possible leg is crude, globally crude has broken its $50 range with good volumes indicating that operations in companies world wide are resuming and there is an actual increase in demand of crude. As our Nifty is concerned we have heavyweights like Reliance, ONGC and Reliance Petro ( Now soon to be counted in Reliance) depend heavily on oil. Also Reliance has broken out of its upper channel and taken out two support so things are building up positively for Nifty.
So conclusion is that market may have discounted all these future and current events which I have quoted above and there are probably some others too which are not out yet and that is why they are moving with volumes. It will be interesting to see if the momentum is maintained and how it breache the historical resistance. And finally my popular indicators Rsex which is exponential moving average of RSI is indicating a clear upside direction and there is divergence between two lines which indicated that rally will hold and williams r% 80 line has become support for this rally.
So all in all we are on a great heights of market, opportunities are there on either side. Just keep an eye on the price and volumes and let me know your views I'll honestly appreciate it.
1 comment:
Thanks for the information. You provided food for thought. Thanks for sharing the information. All the best to you.
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