In my last weekend view I had commented on a good weekly close, this week it’s rather bad, but not all hope for the bulls is lost yet. The weekly chart below shows the recent bearish engulfing bar, encased in a nice triangle of sorts. Speaking of triangles, they are not only notorious for false breakouts; they are also not tradeable till they give you a convincing breakout on either direction. I feel this one is going to penetrate on the downside and quickly reverse and still leave us in lurch as regards to the real direction of the price. Why I am saying this is because Nifty has a strong support at 2800/20 (2780 is one support to die for!). Anything below 2750 and we are surely going to be in lot of trouble coz then the talks of new lows gather momentum (personally I still feel the real trouble starts on breaking 2500!).
The Daily chart below(left) shows that the 20(green) and 50(blue) periods MA’s are converging(a 20 crossing the 50 to the upside would do good to the bulls confidence); this is likely to provide some support or resistance depending weather the price is above or below it. Another important thing is that price is at very important Fibonacci cluster as shown in the chart to you left (it’s the zoom of the shaded area on the daily chart on the right). The problem is that all supports when broken are becoming formidable resistances and all resistances when overcome have failed to become strong supports. I guess maybe this is the trait of bear markets.
The hourly chart below shows oversold, will it provide meaningful bounce? If we find support at 2780/2800 and reverse it would be prudent to go long with a stop at 2750. Nifty has good resistance on the hourly charts at 2910/15 first aggressive stop if you are already short and then at 2960/70(see all the MA’s converging there!), this should be the conservative stop for shorts.
"Genius is one percent inspiration and ninety-nine percent perspiration." Thomas Edison
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