The Nifty opened with a good positive gap on Friday and continued to reach higher levels throughout the day on Friday. In earlier posts it has been mentioned that the Nifty would should, find support at the lower end of the rectangle which happens to be at 4200. The low touched on Thursday was 4201. The 30 minutes chart had shown a breakdown through a symmetrical triangle, the target for which was 4160, which coincided with the most recent pivot low formed on the daily charts (4159). So, it was expected that the range between 4160 and 4200 would provide good support. And 4201 happens to be the level from where the Nifty turns back.
Seen above is the daily chart of the Nifty along with the Relative Strength Index (RSI). As seen in the chart above, the RSI has found support at 40 at the same time as the Nifty found support near the lower end of the trend channel at 4200. This seems to be a short term bullish for the markets and as mentioned in Thursday’s post, the outlook for the future remains the same since the Nifty is still locked between the range of 4200-4650. In short, in the very short term further downside may have been avoided for now but from a short to a medium term perspective, the trend remains sideways. A clear direction would be known only after one of these ranges. For now, we shall wait for the Nifty to reach 4650, or for the point where there is a return line failure. A failure to reach either the top or the bottom of a trend channel is known as a return line failure.Please do subscribe to my posts, so that all posts are delivered free to your inbox and you don't miss any useful analysis of the markets in the future.
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