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Thursday, April 19, 2012

Nifty - Breakout on the Cards!


Nifty has quietly, without telling anyone, has broken out of the wedge it was forming from past 2 months. However, it remains to be seen whether this breakout is credible and strong and give you another 1000 point move in Nifty, taking it to 6200?




We look at couple of charts of Nifty, one of which is simple highlighting our philosophy of drawing insightful results from simple charts and calculations. Other chart is a complicated with Pivot points, STS, DMI all superimposed on one chart, satisfying the readers who prefer a complicated Thali over a simple Meal!

Pls look at Nifty chart below, and the declining wedge which has been drawn. Today’s candle has decisively broken out of the wedge and is signaling the end of past 2 months of mayhem and indecision. Another point to note is that MACD is also showing signs of uptrend with blue signal line breaking out of red average line. 



However, one key point is that today’s candle is still unable to close above 50 SMA. This may reject in a huge red candle tomorrow morning and begin a new entry into the Wedge with more agonizing indecisive days for Nifty. Probability for this happening is low though.

Important point to note is that Technical Analysis does not claim to guarantee anything. This is a study of demand and supply through signals available on the charts. Thus probability is the language in which we talk about. Probability at this moment is a good breakout for Nifty on the upside with breakout from the Wedge being formed from past 2 months.

Another chart below talks of more signals and tries to make a complicated looking chart to provide more food for thought for some of our more inquisitive readers. Remember, complicated chart or analysis does not form a necessarily correct analysis. What insights you draw from these tools is the most important.



Coming back to the chart , first thing to note is that Nifty has closed above the pivot point, thus signaling some amount of confidence in heart of bulls. Another fact is that Stochastics – STS, is also breaking out of its wedge and signaling a probable upmove. However, DMI remains weak and does not signals that upmove may be strong to Nifty to take another 500 points in its stride. However, DMI being a lagging indicator of sorts, few good bullish days may force DMI to change its mind.

For now, things look positive and some action will definitely happen in next few days. Thank you so much for reading this article.

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