IS IT GOOD TIME TO BUY?

IS IT GOOD TIME TO BUY?

A CONTRARIAN APPROACH TO STUDY OF NIFTY

22nd January we analysed that NIFTY has all probability to reach 55XX. Although it did not touch that level, yet it is closer to it.  

NIFTY is down by almost 470 points from recent top of 6112; and all important technical data are indicating bearish sentiment. So, if we follow the trend, it is evident that we should remain short. But a question comes to mind, is it good time to buy? Let me try to find the answer with support of some technical analysis based study, obviously a contrarian approach.

30 MINUTE CHART

A careful study of 30 min chart comes out with following observations:

1.     Descending wedge and NIFTY is trading above the wedge.

2.     After making a low on 14^th March, NIFTY paused for a day but to fall again; on 26^th March, NIFTY paused again. There are few differences between two pauses:-

a.     Earlier price could not break out of the falling wedge unlike this time.

b.     Earlier stochastic broke down immediately while price touched 21 EMA; but this time stochastic is holding up with possibility of breakout.

Only similarity is seen on Fast Fall setup. We need to wait for a (High Probable) crossover of 21 EMA by 5 EMA before taking buying decision.

DAILY CHART

A careful study of DAILY chart comes out with following observations:

1.     RSI: If we observe carefully at the RSI pattern it is seen that after making low (6.9%) on 14^th May 2012, there were three major correction and in each correction RSI made low around 15 % mark and from there NIFTY went for faster pullback rally. Now, on 8^th February RSI made low at 4.3 % which is lower than previous low of 6.9 % but with much higher price level. It is one sort of positive divergence. Now RSI stands again at 15 % mark which may act as reversal level.

2.     RSI & CCI Combination: Positive divergence is seen (marked by green line) at RSI with falling CCI. This combination has fair reliability on REVERSAL.

3.     STOCHASTIC: Stochastic is at low and positive cross is seen there.

4.     VOLUME: Rise from 5663 to 5971 was on lower volume which indicated correction from there. But fall in price from 5971 to 5724 (19/03/2013) was on increasing volume but after that volume is continuously decreasing. REVERSAL is nearby.

5.     CHART PATTERN: Inverted hammer on daily candle stick and similarity of pattern formation (marked with green line) is indicating REVERSAL is nearby.

WORD OF CAUTION: Price is trading below most of the Moving Averages and Larger HNS pattern may not be ruled out which may target 52XX after some retracement (upto 6070) from here. This view is presented for short to medium term trades (4 to 8 weeks).

TRADES: Please trade with small SL as per your convenience (5580) and part book at regular interval.

Nifty Analysis Ahead of Important RBI Policy Declaration on 19/03/2013

WEEKLY CHART:

Some of the observations based on weekly chart:

1. Upmove from 5548 to 6112 retraced upto 5663 which is 76.6 % retracement and channel breakout from there.
2. Positive crossover in Stochastic and CCI is clearly Visible.
3. RSI is moving up from oversold condition with positive divergence (shown in pink colour).

All the above mentioned observations indicate possibility of upmove in near term.

BUT

1. CCI is still in overbought zone and
2. Past two weeks volume are decreasing.

The above observations are pointing towards some negativity.

Conclusion:

Nifty took support at 34 WSMA and closed above 5 WSMA and 20 WSMA. A positive crossover can also be seen there between 5 & 20 WSMA. So we may buy the dips with proper SL but we need to be cautious at higher levels

DAILY CHART:

                                                                                                                                 

Some of the observations based on daily chart:

1. Recent price development shows inverse H&S pattern with neckline around 5970. So, above 5970, NIFTY may breakout.
2. Possible positive crossover in CCI
3. Upmove of stochastic is expected with RSI taking support around green line
4. Possible fast rise setup in moving averages.

All the above mentioned observations indicate possibility of upmove in near term.

BUT

1. Price is still below 5 SMA

Conclusion:

Nifty took support at 20 DSMA and if price closes above 5970 we may buy it safely with proper SL.

Nifty Analysis for 13-03-2013

NIFTY took support at blue line as expected. Now the possibilities for next course of movements given below:-

1. One may take long around 5820-5830 level with SL of 5795 for target of 5860/5880/5895 levels. Once nifty starts trading above 5895 it may move upto 5915. This trade possibility is limited to intraday only unless nifty closes above 5890.

2. Sell the rise should be the strategy of positional traders as NIFTY has given selling signals. Depending upon above mentioned intraday trade setup one may try to sell NIFTY near high (i.e 5880-5895) with SL around 5920 intraday basis and 5895 closing basis.

In my opinion we may see sub 5600 levels before seeing 5950 level. Rest market is supreme and I have every right to be wrong.