Is this a part of 50-60% reversal?
Nifty 50 - rebranded indices of NSE, is in downtrend since it was known as CNX Nifty. The beginning of downtrend started in March 2015 when it formed, not exactly, but a double top type of pattern. It later also formed a long term bearish pattern - Head & Shoulders. Its a famous story.
What is new then?
As we know, now known Nifty 50 is in down trend and moving downwards in a perfect channel. Almost all the times it has been restricted with a resistance above its price range and support has been provided by a support, drawn as a downward slanting line joining majority of lows formed by variuos waves of the index.
Today, the index has once again reverted from just above the slanting support line, hitting low of 7177.75. This is a very close call. Nifty hits the low in intraday creating heavy unrest amongst the bulls. But the game is not completely over my dear bulls. It might be a completely different day for you and the bears may have turn to get a shock.
Most of the traders believes street talks and tips received through variuos sources. For example I saw a buy recommendation for L&T today. But charts does not support this at this very moment. We see the stock might going down yet for some time. Same thing is there with several other stocks like Maruti, BEL and so on. Bharatforge is also one of the most suitable example of this bearish trend. It came down almost 42 % after hitting high of 1363 in April 2015. Justdial also came down almost 72% after hitting high of 1894 in August 2014. Almost all banks are in downmove, so many PSU's have registered 40-50% decline in their stock prices.
This is a significant movement and was clearly visible on the charts if some one would have observed it and responded in time. So many stocks of Nifty 50 list and F&O list have recorded negative trend on the charts after March 2015.
Now, why I am saying all this today?
Simple. The reason behind giving all these details because it can be seen on the charts of the indices that it is about to breach all the supports and may hit low of 6900-6800 in this month itself. Yes, this month only. This can be said because we have seen a support for falling Nifty at about this levels on Monthly charts. If we see the monthly chart, we may find a support at this level. Slanting support line on current monthly downward channel was started in the month of March 2015.
There is another line coming in upward direction and created by joining the supports from October, 2008. The monthly charts indicates that whenever the nifty entered in down ward channel, It has get its best support at this cross junction of such a kind of upward and downward support lines. Current month's candle is forming above such crossing junction of two support lines. It shows value ranging from 6800 to 7000 broadly.
This has occured twice on the monthly charts of Nifty 50 in the year of 2008 and 2010. Similar pattern is about to form on the charts. February 2016 will be the decisive month for Nifty 50 that whether it is following the pattern created on the charts or not. If Nifty breaches this crosss of monthly chart, then it will continue to move on downward side in the current channel, which seems difficult but not impossible off course.
Now, both daily and monthly candles indicates that Nifty down movement has already got the support or it is going to take support in very near future. Traders are advised to trade keeping in mind, the support of 6900 on Nifty cash charts.
Happy Trading...Trend is Friend...
- Anand Singh Gaur
- Sunil Kothari