27 October 2014

NIFTY TECHNICAL REPORT & FORTH COMING STRATEGY

NIFTY TECHNICAL UPDATE
We have seen some technical parameters happening on the Charts which make us believe that we could be out of wood after weeks of uncertainty and random movements 
~ “Theory of Polarity” in Technical Analysis suggests that Previous Resistances act as a support on Downsides incase of dips. As can be seen from the charts, marked by red downward arrows, Nifty was not able to cross 7800 levels. Once the breakout came in 2nd half of August, Nifty rallied close to 350 points. After making a high of 8180, Nifty again corrected up to 7720-7730 levels, however these levels were not held and Nifty almost immediately bounced back. It shows rejection of prices at lower levels and prices bouncing back and support coming from previous resistance levels
~ We have seen “Spinning top” Candlestick pattern at mentioned support levels (7750-7800). When a spinning top forms after a run down on the market, it can be an indication of “Bullish reversal” and tells us that sellers are losing momentum after a down trend
~ We have seen in most of the occasions that Banking stocks are leading indicators. A reversal in banking stocks will mostly lead to reversal in Nifty itself
~ Bank Nifty is trading at all time highs whereas Nifty is still 200 points below its all time highs. We believe this catch-up could happen soon and we could see Nifty at 8400-8500 levels
~ The whole structure in last 5-6 months represents time-wise consolidation. Time-wise consolidation is nothing but prices taking a breather after running ahead of its time. Once this time-wise consolidation is over, Nifty resumes its prior trend.
~ As per monthly seasonality of last many years’ we have seen January to be turbulent and big corrections happening/ starting in the month of January. Incase the event repeats and we see a correction in Jan 2015, we will see a prior rally before that correction. As the logic says, A correction is a retracement/pull-back of the previous rally. Hence a prior rally before the correction could be in the offing
~ Hence as per Eastern Technical’s indicators namely “Candlesticks” and Western Technical’s like Support/ resistance, Confirmation and relationship between major indices and seasonality we believe Nifty Could rally from current spot levels of 7950-8000 to levels of 8500/8800 by year end.
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