It has been a good three-months since I did my previous Nifty update. Nice that we have survived another quarter and more importantly a few high profile “exits” including Brexit, Rexit and for the football fans – Messi. Let’s take a look at the Nifty charts and as we did last time, let’s start off from the higher time frame and drill down to the lower ones. Off to the quarterly chart!
A look at the quarterly chart indicates that the Nifty is in a firm uptrend and there is little cause of concern. After the Hammer pattern highlighted last quarter, it is positive to note the strong white candle during the quarter gone by. The 14-period RSI is in the bull-market territory and has sufficient room to the upside before it gets stretched or overbought. The Bollinger Bandwidth has just turned from the lows suggesting that there is sufficient room to the upside before the bands gets too wide and a contraction sets in.
So, the key takeaway from the quarterly chart is that there is little cause of concern from a macro quarterly perspective for the Nifty. On this positive note, lets switch over to the monthly chart.
A few quick pointers from the above chart: Nifty last month managed to close above the middle Bollinger Band or the 20-month moving average, which is a bullish sign. The 14-period RSI (shown the top pane) has bounced off the bullish support level of 40. The Bollinger Bandwidth is not too stretched, suggesting there is scope for upside potential. Off to the weekly now.
In the weekly chart, the RSI has managed to close above 60 which is considered as upper threshold in a bear market. This corroborates with the positive undertone reflected in the higher time frames and hence a healthy sign. The Bollinger middle band or the 20-week moving average is sloping upwards and price is well above this band, which again is a positive signal. The MACD line (displayed in the bottom pane) is not only above zero but also above its signal line, suggesting bullish undertone. Let’s now take a quick look at the daily time frame.
The daily time frame too echoes a bullish undertone. The 14-day RSI has moved past the 60-mark and more importantly, it did not fall below the bull-mark support of 40 when the Brexit-crash happened. The MACD line is above zero and is on the verge of crossing over above its signal line.
It is imperative that the Nifty continues its upside march in the daily time frame to trigger a MACD buy signal. A sustained rally in the daily charts would also be helpful in translating into a MACD buy signal in the monthly time frame (not displayed in the chart). As of now there isn’t much of a difference between the MACD in the daily and Monthly time frames.
A failure here and a close below the swing low at 7,927 would be a cause of concern. This could open up downside extending upto 7,700-7,725. I would consider re-evaluating my bullish stance only on a breach of this support zone.
As far as the targets as concerned, I expect a rally to 8,750-8,800 in the short-term. The target is based off the Point & Figure chart using a box size of 0.5%. There are a few more bullish clues in Point & Figure chart but am not sharing the chart here as I sense the post is way too lengthy as it is. Those interested in the chart may drop a mail to me or share their mail id in the comments section below.