Nifty 50 Analysis: Drawing a plan of action
With the festive season behind us and the elections ahead, the market is in a lull state. Many are talking about \’action\’ coming back as elections draw closer and given that, it is only prudent to have a plan of action ready.
I have presented the hourly chart of Nifty50 below for analysis, but before we begin I would like to draw your attention to the indicator I have primarily used for this analysis.
Over the past few months, I have figured a new moving average about which you will not have heard anywhere else. This exponential moving average is exceptionally long, but works beautifully on daily and hourly and even shorter time frame charts. The 600 EMA is 3x longer and 3x smoother than our favorite 200 EMA, and if you listen to me, this will soon be your 3x favourite too. You can use the 600EMA label to search my blog for other posts mentioning this magical moving average and deciding the effectiveness of this underrated moving average for yourself.
Coming to Nifty now. In the chart attached below, the red arrows are clearly marking the resistance which the 600EMA has posed for Nifty on every rally. The one instance when the 600 EMA was breached was apparently an instance of a fake breakout. The ascending triangle visible on the chart is capped by 600EMA and upward trendline is providing it support. This is a classic ascending triangle. Now this is a continuation pattern.
The market as I see it now is quite weak. The first support has been touched. A sustained breach of 10770 on closing basis would take the index to 10540 and also mean failure of the pattern which will lay the ground for deeper correction. I am betting on the failure.
However, if the pattern succeeds, then on the event of a strong upmove above the 10870 level , with a closing on the daily chart , a proper throw back and subsequent continuation should take Nifty up to 11750 again.
That is from my side on Nifty. Please do share your outlook on the index and the general direction of the market. I have been bearish since 11700 level. I was bearish at 10600 also and I will continue to be bearish till nifty does not break the 10000 level!
Disclaimer: I am holding a Nifty JAN 10300 Put.
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