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.
Comments 13
Sir plz mail nifty chart and plz bank nifty target for July 2016
Pls email me. Thnx
Very nice explanation . Could u please similar view on Small & Midcaps as well as the way the stocks are moving up , Really scared . No one really wants to end up in similar 2008 situation.
Author
Hello Sridhara:
Thanks for taking time to read the post. Your concern wrt to mid and small caps is understandable. Stick to quality stocks and more importantly have a well defined plan of exit and write it down in a piece of paper.
The exit plan must include max loss where you will want to exit if you are wrong. Also, when you will exit if you are right about your investment decision. You can trail your stops or peel off positions as fixed percentage returns is met. It is a personal choice.
Technically, the Nifty Mid-Cap 100 index looks bullish and is outperforming the Nifty of late. I see noting to worry “as of now” based off this chart. But, please have a clear plan as outlined above and stick to that plan.
Regards
B.Krishnakumar
Very clear & succinctly explained. Would be great if you could post this every month post expiry.
Author
Hello Basheer:
Thanks for your feedback. Will try to get more regular and do a post after F&O expiry.
Regards
B.Krishnakumar
hariharanpandiyan@gmail.com, pl send me analysis of P&F charts
crisp summary of present day market and deep digging of market undertone. ur technical analysis is supported by present day events also. i.e 7th pay commission.
r1974g@gmail.com-for the charts ,sir
Thanks sir for the views . No shorting !
Hi B Krishnakumar,
It is an excellent post. Many times we get caught up in the lower time frames and miss out the build up happening on the higher TF’s. This post would certainly help in buying on dips rather then getting caught on the wrong foot trying to catch a top! That is indeed the way to trade in the current scenario.
I would surely be interested in the P&F chart and your reading of the same.
rgds
Many thnx for explaining the charts in simple and clear wordings, worth reading it and sharing. Would like to see regular updates here on. Cheers mate.
BK Sir Your explanation shows your experience. Very nice. Keep good work for retail traders. God bless you.
In my opinion you should start advisory also for retail traders. That will be very good help for those who end up by losing money in market due o lack of knowledge and patience.