Nifty: A Higher Low Or A Lower High?

It has been a while since I posted anything on Nifty and felt like sharing my thoughts after looking at the price action today. If you recall, I had posted a question in Twitter last week which was:

Does this question sound confusing? It should not ! Let’s try to address this question by looking at the recent price action. I want to make it clear upfront that I am not trying to give out any view on the Nifty or making any projection via this post. The idea is to direct your attention to significant events in price action and not get influenced by day-to-day gyrations. Off to the daily chart.

NIfty Daily 1

As highlighted in the above chart, the Nifty progressed in a sequence of higher highs and higher lows (marked in red font) until it hit the all-time-high of 9,119.20 on March 4. The subsequent correction in the form of lower highs and lower lows ended at 7,940.30 on June 12.

The question now is whether this low at 7,940.30 is the next higher low in the broader scheme of things. If the answer to the question is YES, then the logical expectation would be that the Nifty would not breach this low and would go higher and eventually make new highs past 9,119.20.

On the contrary, the other question is: What if the high of 8,654.75, recorded on July 23, is the next lower high? If the answer to this question is YES, then it would mean that there is still some significant downside to the Nifty and the recent low of 7,940.30 would be under threat.

I can hear a few irate voice asking how on earth do we know which question will be answered in the affirmative. Honestly I don’t know. Rather than second-guessing which of the two outcomes is likely, let’s use some tools to be more objective in our analysis. Let’s incorporate Andrews Pitchfork into the chart and see what it throws up. Have a look at the daily chart featured below.

Nifty Daily 2

I have used the modified schiff fork in the chart and we now have some constructive reference points to decide which of the two outcomes is likely. If you notice, the recent rally from 7,940.30 was arrested right at the medianline of the red fork. This is a very very early sign that price “might” have made a lower high as it is unable to move past the medianline of the Red Schiff fork.

Unless price moves above the recent high of 8,654.75 and more importantly above the red medianline, there is a reason to be cautious and suspect that “probably” a lower high is in place.

This suspicion is slightly strengthened by the downward sloping Magenta Schiff Fork. Notice how price has been rejected from the upper parallel of this fork today. So, this upper parallel becomes a nice reference point too. As long as price trades below this upper parallel, it would be reasonable to work on the premise that price is more likely to drift lower, at least upto the medianline or the middle-line of the Magenta fork. A breach of the recent swing low of 8,315 would strengthen this scenario.

I had typed out a few more paragraphs but then decided to chop it off as the post would then get unduly lengthy. I have saved the chopped-off portion and would share them later this week after watching how price unfolds.

As I mentioned earlier, the intention of this post is not to dish out a forecast about where the Nifty is headed. The idea is to channelize your thought process towards key elements in the chart and not to get influenced by volatility.

Please feel free to share your thoughts on the Nifty in the comments section below. I would love to see the comments section getting more active as that would make the blog more informative to the readers.

Comments 4

  1. Dear KK,
    Nice article. Correct me if I am wrong. The chart in reference is Daily Chart. As such, June 12th low was LL. Why then the term “bigger scale” is coming is not clear. As per the time frame, the price on June 12 was LL only. Kindly enlighten me.
    Thanks & Regards

    1. Post

      Hello Thiru Sir:

      Nice and pertinent question that you have raised. Your point about June 12th low being a lower low is well taken and valid too. But this is where people sometimes lose track. If you notice, the rally from the June 12 pushed the price beyond a prior swing high at 8,490. Hence, this reference / possiblity of June 12th low assuming significance as a potential higher low. If it had failed to clear that swing high at 8,490, then the entire basis for the post would be non-existent. Price would then be making lower highs and lows and the question of ‘next higher low” will not arise at all.

      Hope this clarifies.



  2. Nifty on weekly chart is in zig-zag (5-3-5) corrective pattern, and the day it went up from 7940.30 this was confirmed. As it had completed 5 wave corrective pattern on that day. And we saw a B wave with 3 waves coming up to 8754.75. Finally we are now moving for a lower c wave

  3. Monthly MACD is showing negative momentum, I guess Nifty is still in a confused territory much like the voted Indian Public. Trend would turn decisively upside on a weekly close above 8640


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