Fibonacci Retracement Levels of CNX Nifty-50
Over the period of time, CNX Nifty-50, the benchmark index of the Indian Stock Market, has grown in leaps and bounds. But on its way up, it has come across many bumps which have restored our faith in the fact that the market cannot simply trend in one direction. Every up-move or down-move is followed by a backtracking where the prices show time and price correction and attain some maturity.
Such is the state of CNX Nifty-50 Index at this given point of time. Post making 52 weeks high near the levels of 8968 on Sept 7, 2016, the index has shown a change in mood. The aggressive march of the index, which was expected to take it towards the levels of 9200 before the completion of financial year 2016-17, was interrupted and it took away all its lustre. Since then, the greater period trend of the index shifted from bullish to bearish.
In order to determine the crucial levels that CNX Nifty-50 may test on its way down and possibly show a reversal, we have applied Fibonacci Retracement Levels on the Daily chart of the Index. Fibonacci Retracement Levels are ratios that are used to identify potential reversal points, of which percentage levels are 61.8% and 38.2% are of great importance. Other than this, levels of 78.6%, 50% and 23.6% also act as hurdles to the ongoing price action. Considering the aforementioned chart, it can be observed that the index has been closing-in to the levels of 8511 where retracement level of 78.6% is placed. It can thus be said that CNX Nifty-50 may test these levels and may shown, if not a bounce back, some restraint before going down on these levels. What makes these levels more important than usual is that a cluster of candles have take support at this price level. A break below these levels may take the index further downhill towards 8150 which may mark 61.8% retracement of the prior up-move.
It is accordingly advisable to consider the aforementioned levels of 8500-8511 before making any positional trade in the market as working in sync with the market has always been a better option and it may mark the difference between a profitable trade and a loss making trade.
- Anand Singh Gaur
- Sunil Kothari