Sunday, September 30, 2012

Weakness Still Visible on Nifty... Time to Remain Cautious

The Nifty on Friday opened with a gap up opening and never looked back. After opening at 5684 and went up to make a high of 5735 at around 10:30 and after that it was all a consistent slow and steady downtrend for the index. It finally closed at 5703 to close about 54 points in the green but about 30 points off its high. Considering that the opening itself was 35 points up, closing 54 points up does not show any significant strength.


Attached above is the daily chart of Nifty. As suggested on Thursday, the Nifty was waiting for a correction and weakness is already visible on the charts as a bearish divergence was there between the price and the RSI. But a correction was not what the market wanted. The market wanted to deceive some more buyers before going down again. While the Nifty has gone up today, it is still not showing strength. The divergence may continue one more time. But it is at these times that the buyers need to remain cautious. Every rise in the Nifty should be used as a selling opportunity.


Seen above is the daily chart of Nickel on MCX. As can be seen from the downward sloping yellow trendline, Nickel has never crossed 980 since March of this year completing 7 months now below that trendline. Notice that all this while the RSI has never gone past 60 except in the end of August which was really the first sign that Nickel is back in an uptrend. September finally saw Nickel prices go above the 7 month old trendline but overall it was a rangebound month for Nickel. The prices have remained above the trendline, yet finding significant resistance at 980. The RSI, however, is showing no signs of weakening and is showing a lot of strength till now. Looking at the pattern and the previous moves that Nickel has made, it seems that the moment 980 is broken through, Nickel is looking good for a target of 1030-1035. A stop loss of 930 should be maintained for this purpose. 

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