Nifty 50 – A short analysis
Updated: Aug 29
Market is a house of mayhem as we know it right now. Even though today was a day to breath easy, I believe the worst is yet to come.
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An analysis of Nifty 50
Nifty has corrected nearly 880 points from the top of 11770, that is 7.5% so far and has recently forged a low of 10866 which is below the monumental psychological support of 11000. Yesterday, things got even worse as the index closed below the fatal 100 daily EMA. Today, despite the recovery it failed to cross back above the 100 EMA even on an intraday basis and this shows that the 100EMA is now working as a resistance area.
Highlighted on the chart, I expect the correction in Nifty to continue for another 500 points or so. The support thereby lies in the range of 10575-10500. There are multiple reasons for drawing this conclusion, along will a few conditions for the success of this analysis. Purely technical reasons for expecting continued correction: 1) Breach of the 100 day EMA on the daily chart 2) Breach of the level of 40 on daily RSI, which is a support zone for the indicator in a bullish market 3) Breach of 10880 on intraday basis which was a strong potential support zone due to several factors Some macro reasons for expecting continuation of this correction: 1) Continued weakness of Rupee 2) Bullish crude oil charts (analysis to be presented in a separate post) 3) Increasing tensions of tradewar plus the U.S. sanctions on Iran’s oil industry puts India under alot of pressure as the alternatives are costlier (Read more here) 4) State oil companies may reduce inventory in the face of rising oil price. But because they only hold 7-8 days of oil inventory, reducing that level will only control cost for a very short time period and will instead lead to increased cost in the face of further increasing oil prices (read more here). This will hurt the economy and naturally push up the oil prices and the cost of fuel further, aggravating the pain. Condition to this analysis: A close above the 35 EMA (11350) will be a potential continuation of the uptrend and end of correction as it is an important resistance zone, though very unlikely as per charts, but we have got to keep an open mind when it comes to the stock market. That’s a short and crisp analysis for you. I will be coming up with a more detailed analysis of Nifty soon. Here’s a teaser: It will include the Elliot Wave count and I believe the correctionary A-B-C wave is underway. So stay tuned! I also intend to come up with posts on the following:
1) Take a look at Britannia because your evening snack just got more attractive!
2) Follow-up on Balrampur Chini which continues to impress!
Thank you for taking out the time to read my articles.
As a disclaimer, this isn’t a recommendation but a mere observation of a great phenomenon unfolding on the chart. Another disclaimer: I am long on Balrampur Chini and REC Ltd (bought after the above article was posted). A warning: Anyone investing in Balrampur Chini, OR ANY OTHER STOCK/INDEX, based on this article is doing so at their own risk. Please be responsible.
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