Wednesday, August 27, 2008

Nifty Breaks Symmetrical Triangle On The Downside

The Nifty opened with a small upwards gap today and almost immediately started losing ground. It then went into a very narrow range of about 20 points and kept trading in those levels for the better part of the day. The bears, finally, took the index below that narrow range of 20 points when only an hour of trading was left and the index ended the day about 45 points in the red. The result is still the same, the Nifty locked inside a range of 4200-4650. As mentioned in earlier posts, a clear trend would come about if this range is broken on one of the sides. Or when the ADX indicator line starts rising again. This line was showing a value of 15 yesterday and today it has fallen further to 14. Such extremes are rare in the ADX and this clearly shows that a trending should now come about soon enough.

If we look at the charts in the posts written yesterday and the day before that, we would notice that the Nifty first made a gravestone doji (a bearish signal), and the next day it formed a dragonfly doji (a bullish sign) and today it fell down. A number of days before those dojis too it had been making red and blue candles on alternating days. A clear signal that the markets are confused and do not know which direction to take. That explains the narrow range that we are locked into.

Nifty 30 Minutes Chart - Symmetrical Triangle Broken, Target 4160

Seen above is the 30 minutes chart of the Nifty and shows the short term trend of the market. As seen above this narrow range that the Nifty was locked into during the last one week was in the form of a symmetrical triangle. The apex of the triangle was reached today and the Nifty saw a breakthrough on the downside. The target for this breakdown is close to 4160. It is quite possible that the Nifty may complete a pullback to 4370 again before falling further. That rise could be used to take short positions (or to exit longs) in the short term.

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