Nifty 50, India's prime index, was in downmove, rather in downtrend since March 2015. A famous uptrend of 2012-13 was ended with a break by bearish engulfing on 4th March, 2015. The journey there after is another famous story that all knows.
As the analysts loves, the Nifty was moving in a disciplined downward channel since 4th March, the channel gave lot of ups and downs within the journey of almost 12 months. The channel meanwhile chalanged on few ocassions by the index. First one in the month of September, 2015. The second and decisive testing occured in the month of February, 2015. The Index clearly breaking the support line on 11th February 2016, creating a havoc in the investors and traders that is this the repeation of 2008? Some of the analysts started talking about it on channels and websites.
But...but...but...it's Nifty. The uncertainity is the magic of this index.
On the very next day, 12th February 2016, the good old hammer at bottom was formed on the daily chart and the nifty reversed on next day, opening gap up and ended up closing within the range of downtrend channel. Again testing the support between 16th to 22nd February 2016, the traders keep on watching this breathtaking movement of index around the support.
The index was testing the support very rigorously in these days. The index again break the support with force on 23rd February making all the traders and pundits restless. The street talking and murmering begun that this is the end. The index will touch the low of 6700, 6500 and even 6000. Again the index made us all fool and the reversal was confirmed on 29th February with the formation of a stromg hammer at bottom with dominating volume. Though both the hammers made were red, they provides decisive support and also considerable reversals. The last hammer proved decisive as it also formed a sort of double bottom pattern (though not exact) on the daily charts.
The upmove begin next day with normal opening at 7038.25, hiting nominal low of 7035.1 and closed at the end of the day making a decisive green candle on the charts. The index never looked back after that, giving two back to back gap up opening making continuous 3 green candle on the charts with rise of more than 600 points in the index.
After this considerable upmove, the index took a break, consolidating in narrow range for next few days. The traders get bored with a very narrow range and non productive movement of the index. There was no significant movement in any direction.
At last, on the last trading session, the index breaks suspence with giving significant upmove in a single day. The move was not so big but it is very much important because it also created an important milestone on the charts. The Index was struggling to break the resistance of 7585 on daily charts since last few trading sessions. It tried on various occassions to break but failed every time. The success ultimately achieved on the last trading session of the week.
This breakout has significant importance for Indian stock market as well as all the traders and pundits. Major points can be said about this breakout are,
1. Higher Tops and Higher Bottom has formed on the charts, indicating beginning of uptrend.
2. The last day candle has formed decisive breakout creating a flag pattern on the charts. Flag is a continuation pattern of a trend and this one is a bullish flag.
3. The index has broken an important resistance on the charts, giving a deep feeling of relaxation to the long term investors.
4. A kind of double bottom has seen on the charts. Though the values is not exact for both the bottoms.
5. Last but not the least, the charlts have confirmed another pattern already formed on the charts. A Inverted or Bullish Head & Shoulder. The necklline has been broken by the index on last trading session. Now the neckline itself has become the support line for the index.
6. The index had broken it's previous month's close and high both. If the index remains above this level, it will show the definite upmove as another strong bullish kicking pattern will be formed on the monthly charts of the index. This can be confirmed only at theend of the month.
The overall picture indicates that the index will not look back and it will continue the upmove provided macro micro parameters does not play a sinister roll.
Additionally, the positive rate cut by RBI, Passing GST bills in parliament and other such most important events can give further boost to the economy.
Traders can take long positions in Nifty keeping the stop loss of 7550 on closing basis in mind.
Happy Trading...Trend is Friend...
- Anand Singh Gaur
- Sunil Kothari