28 February 2015

Nifty Technical Report For 28-Feb-2015

While analyzing the Daily charts of “NIFTY”, we found that the Nifty is in “Bull Market”
~ A bull trend is identified by a series of rallies where each rally exceeds the highest point of the previous rally. The decline between rallies ends above the lowest point of the previous decline. As we can see from the chart below Nifty has been making Higher High’s and Higher Low’s. Each successive green arrow has been higher than the previous ones similarly each successive red arrow was higher than the previous ones.
~ Nifty is in a strong uptrend. An uptrend line has a positive slope and is formed by connecting two or more low points. The second low must be higher than the first for the line to have a positive slope. Uptrend lines act as support and indicate that net-demand (demand less supply) is increasing even as the price rises. A rising price combined with increasing demand is very bullish, and shows a strong determination on the part of the buyers. As long as prices remain above the trend line, the uptrend is considered solid and intact. The RSI of the Nifty is also in uptrend and is in sync with price which gives us further supportive Technical Analysis evidence.
~ Nifty is doing well as far as candlesticks are concerned. Candlesticks provide unique visual cues that make reading price action easier. Trading with Japanese Candle Charts allow speculators to better comprehend market sentiment. Traders who use candlesticks may more quickly identify different types of price action that tend to predict reversals or continuations in trends – one of the most difficult aspects of trading. Furthermore, combined with other technical analysis tools, candlestick pattern analysis can be a very useful way to select entry and exit points. We have seen “Bullish Kicker” Formation on the charts. The Bullish Kicker Candlestick Chart pattern is one of the most powerful candlestick reversal patterns. Its reliability is very high when it is formed at a possible support or formed in an oversold area. This pattern consists of 2 candlesticks or one can say it takes two days for this pattern to form. Day one candlestick is the continuation of the downtrend therefore bearish in nature and it has no significance by its own formed in a downtrend. On Day two a bullish candlestick is formed, which opens at the same open of the previous day (or a gap open, and then heads in the opposite direction of the Day 1 candle. Bullish Kicker Candlestick Pattern is an indication of massive change in the sentiments of the market/ investors and is basically based on sudden surprise news. The formation of bigger bullish candle size then the day 1 candle, further confirms this pattern reliability. 
~ Nifty Future’s November High was 8668 whereas Nifty Future’s February Low was 8671 which shows Nifty hasn’t moved anywhere in last 3 months.  Nifty traded choppy in last 3 months without adding any points which we believe represents “Time-wise” consolidation. Given the larger uptrend in the market we believe this consolidation may be over soon and we may again see a new swing high.
~ Moreover we have seen Smart Index management in such a way that either of the heavyweights comes to rescue of the Nifty whenever it is required to jack it up. We don’t know whether it’s been done deliberately or is happening by itself but what we know is it is happening for sure. Basically Nifty is a component of 50 stocks. Top 5 stocks in the Nifty constituents are ITC, Infosys, HDFC, HDFC Bank and ICICI Bank. The combined weight of these 5 stocks are 35% which means the movement of these stocks play a very crucial role in determining the overall direction of the Nifty.  We have seen whenever there is significant correction in one of these heavyweights, other heavyweight comes to its rescue. Recent example would include the fall in ICIC Bank from 393 levels to 316 levels roughly 20% correction along with simultaneous rise in ITC from 348 levels to above 402 levels

 We suggest a trader to trade with Bullish bias since we believe technically Nifty is very sound. Immediate Stoploss would be a closing below the recent swing low of 8670 whereas immediate target would be 9450.

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