Wednesday, September 10, 2008

Nifty Forms Smaller Range Between 4350-4520

Hi readers, I had gone for a meeting today in Noida and came back home around midnight, so won't have much time to write the analysis. However, am sharing with you whatever little analysis I have managed to do today. Nifty opened weak today but then recovered during the day, even managed to cross yesterday's close but by closing time had dropped again to close in the red, thus forming a doji.

Nifty Daily Chart - Stochastics Showing Sell Signal

Attached above is the daily chart of the Nifty along with the trendlines and trend channel as shown in yesterday's chart. A new addition today is the stochastics oscillator at the bottom of the chart. As seen by the stochastics, it has given a sell signal 3-4 days back and is continuing to show that a short position should be maintained. The MACD (not shown on the chart), on the other hand, still hovers around the signal line and is generating whipsaws. Whipsaws are natural when the markets themselves are confused. Dojis and trading ranges are signs of confusion and decision. As has been mentioned in the past few newsletters, a tradeable move would come only if the Nifty were to go above or below the 4200-4650 range. Looking closely at the prices, one can find that a smaller trading range between 4350 and 4520 has formed in the last five days. Short term traders may like to trade a range breakout from 4350-4520, depending on which side it breaks out on. As can be seen by the trendline, the Nifty has yet again failed to cross this resistance line. This is proving to be quite a resistance.

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