Nifty: Price at Target Zones, Awaiting Clues

It has been a while since I posted my update on the Nifty. The reason is that there was no need to do an update as Nifty was cruising to the earlier mentioned target of 7,350-7,500. Here is the link to the prior post. Now that the index has reached this target zone and there are early signs of stability at this zone, I wanted to share a few observations. Have a look at the Point and Figure chart of the Nifty.

Nifty blogIn the earlier post, I used fibonacci clusters to project target zones. In the above Point & Figure chart, I have used the “Horizontal Count” based on Wyckoff methodology to arrive at the likely downside targets. As mentioned in the above Nifty chart, the price has halted, at least as of now, at the 7,100-7,375 zone.

The price has displayed early sign of strength after hitting the Point & Figure target zone, which is a positive sign. The positive divergence between the RSI and price action in the weekly chart is another factor that the bullish campers would have taken note of. Now, the key question is: “Is this good enough to conclude that the worst is over and a low is in place for the Nifty?” Definitely not !

Nifty bar chart

While there is a strong case for leaning towards the bullish camp, we need to wait for more clues before concluding that the worst is over. I wish to share a few observations that would strengthen the bullish case scenario. I would retain the bullish bias as long the the recent low of 7,241 is not violated and, more importantly, would like a see the high of this week at 7,600.45 to be taken out soon.

A breakout above 7,600.45 would not only initiate a sequence of higher highs and higher lows, it would also push the price back into the prior trading range of 7,539 – 8,336 zone. Recall that price got rejected near the low end of this range last week. Hence, it becomes all the more critical for the index to clear this high of 7,600.45 level.

In the above Nifty daily bar chart, it is apparent there are two sets of trend channels that are relevant. The immediate resistance for the Nifty is at the upper blue line at 7,680-ish, followed by the upper green line at 7,920-ish.

To conclude, while I have a bullish bias, I prefer to wait and watch what Nifty does at the crucial resistance zones. A breakout past 7,600.45 and more importantly, 7,680-ish would would bring more cheer and confidence to the bullish camp. I am already long in a few index heavyweights and would increase my allocation when Nifty clears a few resistance levels discussed in the post.

Let’s discuss potential upside targets IF Nifty clears the resistance level. Until then, the bullish view would be more of a wishful thinking.

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