Weekend Views On Nifty!!!

In my last post I had mentioned that we should take step by step approach rather than jumping to fancy targets in Nifty. On Thursday it was written that 2920/50 was resistance number one, and we did make a high of 2922 and paused. The Price action had given a good buy last week but the indicators are yet to signal a buy, so if some one is waiting for a buy signal from the indicators, has already lost a significant part of the move. Now there are only two things the price can do, either it pauses (making some range bound moves) and try and make a base for itself, so the Indicators have enough time to come into buy mode and set the stage for the next up move. Secondly the price can keep on going high…in this case however the move will soon loose steam and once again we start from point number one. We all agree that Price action is supreme, at the same time I am not berating the indicators. In fact there is a way to look at this whole thing and I quote from a nice article I read once (sorry can’t remember the author) and here it goes; when an indicator or oscillator gives you a buy signal when price is also at an objective demand (support) level, that buy signal is likely to work. The key is to only take those buy signals and ignore the rest. In doing this, we are filtering an indicator through the laws of supply and demand and this is the key in using any indicator or oscillator.

Anyway moving on to the weekly chart of Nifty, we have a nice engulfing bar (impulse is blue, so removes the censure against buying). The RSI and Stochastics are both lining up for a bullish crossover, MACD though still hasn’t really got excited yet. 3025/50 is pit stop number one and above that 3200/3250 is another possibility. Any gravity defying targets can wait till we clear these two. However as for the supports I am of personal opinion that breaking 2500 will signal a fast and furious retest of the previous lows.

The Daily chart below also conveys the same picture, the closest MA (the 20 period; green line) is just above the channel resistance line. This what the price is going to test for now, let’s call this as area 3175/3200! The MACD lines are yet to give the bullish crossover, and thought the +DI and the –DI have started to move towards each other it’s the ADX that’s still above 50 which is cause of some concern! Any way before we come to this area the path looks like this 2950/3050! As for the down side I am once again betting everything on 2500 though hoping that 2650/2700 should also hold the fort.

I think it’s generally a good idea that when you put on a trade, it should be so small that it seems almost a waste of your time. Always trade a level that seems too small...Mark Ritchie