How wonderful was it to see Nifty almost scale the legendary 9000 mark today! Nifty tumbled after marking a high of 8985.05 at 12:34 PM.
But of-course, public anticipations are more often met with disappointments than with fulfillment owning to the laws of crowd psychology which govern the game of the stock exchanges.
Are we expecting Nifty to bounce back and keep climbing, or is it time for Nifty to correct the straight 9 working days one-sided climb from a close of 8277 on 14th Jan to the current lifetime high of 8985.05, a whooping 708 points in 9 days!
Here are some charts with explanations as to why we should expect a correction now , and not be disheartened about it, because the best is yet to come.
There are two things which we need to take note of in the following chart,
Firstly, Nifty has touched the upper resistance trendline, which, can either lead us to a correction as in the instances marked A and B, or consolidate temporarily and then correct , as in the case C.
Secondly, the Relative Strength Indicator (RSI), at the bottom of the chart marked E, shows the index(Nifty) highly overbought , which is actually a good thing as it indicates the possibility of a short-term correction, but tells the story of long term bullishness and high expectation backed by ‘strength’.
DAILY NIFTY SPOT CHART SHOWING TRENDLINES WITH CORRESPONDING SUPPORTS AND RESISTANCES
Moving on to the intraday chart(s) of Nifty Spot with a time frame of 30 mins, we have two additional evidences which suggest that Nifty may have run its course for the time being.
Practitioners of Technical Analysis must be aware of the term’ Equality‘ used in the Elliot Theory. ‘Equality‘ is a guideline which tells us that two impulse waves may grow out to be of the same length.
In the below chart we look at the solid yellow lines marked LINE 1 and LINE 2. The picture approximates the move from the bottom of the respective lines to the top to 900 points where as it is exactly 899 in case of LINE 1 and 919.6 in case of LINE 2. Having achieved Equality with the previous impulse wave, Nifty appears to have taken resistance at the completion of the target set forth by the previous impulse.
Second: Fibonacci Ratio.
Lets zoom in at the above chart and focus only on LINE 2.
We can see that Line 2 is separated into two parts. The first part of the impulse is 288 points, followed by a mild correction, from where nifty bounced a magnificent 748 points to today’s high. The appearance of the white circle indicates the gap which appeared at the commencement of the second part of the impulse LINE 2, emphasizing strength in the upmove .
If we look at the relation between the numbers 288 and 748, we learn that 748 is almost 2.618 times 288 , short by only 6 points as 288 X 2.618 = 754~
Ratios like 2.618, 1.618, 0.618 are very important Fibonacci relations which have scientifically been proven to be the Design behind the Universe and its reflection in the stock market which it nothing but the collective manifestation of the human conscience in relation to the financial world, should not be a surprise to those who know about the wonders of the Golden Ratio.
Thus, i conclude here, by not indicating bearishness in Nifty, but by simply suggesting that its time for Nifty to take a breather and correct its course so that it may commence the rise with renewed vigor.
Thanks for Reading! I welcome your comment and criticism!