Nifty Futures: What Next?

For a change, I decided to post about Nifty Futures. Before getting any further, take a look at the recent string of messages posted in Twitter recently.

And here is the updated hourly chart of Nifty Futures mentioned in the third tweet above. The idea behind this post is to highlight how price moves from one zone to another and how Andrews Pitchfork gave the perfect trade location for the short-trade. Take a look at the chart below. NF hrly Those who have not figured out the reason behind the blue-ellipse in the chart above, it is nothing but price a landmine-zone that I talked about in the Monthly Nifty chart in an earlier post. The price has consumed demand on its way up which is a clear warning that price would collapse if it were to revisit it. And, that is what happened. Not surprising at all and this was clearly mentioned in the second tweet above. Have a look at the chart in that message and I mentioned clearly that price would fall sharply if it reverse from the upper parallel. It is not my intention to do a #AsToldBefore post but to emphasize that price and simple tools give you lots of information to trade. Nothing fancy. The immediate target for the Nifty Futures is the medianline at 7,620-7,630. This range is not too far off from the immediate demand zone at 7,560-7,630. Hence, it would not be outlandish to expect some respite at the 7,560-7,630 zone. A look at the daily chart indicates that the next significant support zone comes in at 7,230-7,260 zone. I would not be surprised if we eventually test this daily support zone. The swing high at 8,125 is the level to conquer as of now, to suggest the case for a meaningful recovery in the Nifty Futures. Disclosure: I have a long-term portfolio of stocks comprising of Nifty constituents. I also hold short positions in the Nifty Futures.


Nifty: A Follow-up

Over the past few weeks, I have read a lot of views on the Nifty from wide variety of observers that include Ellioticians, harmonic traders among others. The target dished out varies from 7,500 (best case scenario that I have read) to hold your breath 3,500 and even lower. Before we proceed any further, here is an extract from one of my earlier posts titled : Nifty: The Elusive Support, dated April 20, 2015.

Look at the move from July 2014 till this month. The rally has been overlapping in nature and pay attention to the “buying-tails” in most candles. This indicates that the residual buying interest has been absorbed on the way up and if the price were to retrace, it is going to be swift and nasty on the way down. Am not saying that this “expected” quick-fall will happen immediately, but this zone is a potential landmine. Whenever price dips into it, expect a big red wide-ranged candle in the monthly time-frame.

Wonder how many of you paid attention to the choice of words in the above extract. There were clear warning signs that things could turn ugly if things were to turn-around. And, the situation has indeed turned nasty and last month turned out to be a red wide-ranged-bar (WRB).

Ok, I get it, the question that most people want answer to is: Where is Nifty headed now? Let’s discuss a few key markers left behind by price and try to arrive at some logical conclusion or at least an informed guess. Let’s start off with a monthly chart of the Nifty.

Nifty Monthly

The most important observation, at least from my analytical perspective, is that the price is comfortably making lower swing highs and lower swing lows. It is also breaching prior swing lows with ease, suggesting that supports are not being respected. This is not surprising at all because of the nature of the prior rally. Most pockets of support have been consumed on the way up earlier and hence the path down is relatively easier for the bears.

The green zone at 6,638-6,839 marked in the above chart is the next logical support zone for me. This does not mean that price has to visit those areas. Not necessary at all and if you are in the bullish camp, you can definitely argue that price gives a damn to the zones that I mark. Perfectly valid argument and I have no complaints with that. The idea here is just to share my thoughts and observations.

Call this a worst case scenario view if you will. Am not placing all my bets based on this view but I will not be surprised or caught on the wrong-foot if we visit that area. So, just have this at the back of your mind and do not get perturbed by this view as of now. As an aside, notice how this overlapping stretch of rally in the Nifty resembles the monthly crude oil chart from August 2011 to June 2014.

Just to allay the fears of the already nervous bullish camp, let me present a more digestible view off the weekly chart.

Nifty Weekly

The dashed lines in the chart represent the retracement of the major rally from the swing low of 4,531 to the recent high of 9,119. Though I am not a big fan of these retracements but am just trying to communicate in a language that many of you are comfortable with. Also on the chart is the downside projection from the recent fall, captured by the solid lines.

Notice the confluence at 7,364-7,475 zone. So, if you believe in this stuff, there is reason to be relieved as the Nifty is not too far off from this projected confluence zone. Also note that there is another confluence zone just below which syncs with my worst case scenario as well. Let’s drill down to the daily time frame.

Nifty Daily

In the above daily chart, there is a support zone at 7,450-7,480 which also overlaps with the weekly support zone mentioned earlier. Hence, there is a strong case to expect a bounce if price falls to 7,350-7,500 zone.

But, to conclude that the downtrend is over, I would prefer price to clear recent significant swing high. The immediate swing high for reference is at 8,092. Until we get above 8,092, please do not entertain thoughts of new highs in the Nifty and be more objective and realistic with your upside expectations.

Wanted to post something with respect to the hourly chart and its resemblance with the gold daily chart, but refrained. The post, I feel, is already too lengthy and would rather hold back the hourly chart observations for another post.

To conclude, the best case scenario for the Nifty is broadly 7,350-7,500 zone and let’s not highlight the worst case scenario again. It is already detailed in this post 🙂


Nifty: Lower High or Higher Low, the Debate Continues..

Hope you found my earlier post on the Nifty informative. It is just a question of sorting out swings and putting them in perspective. Once this is done, you will soon realise that every other tool or indicator works like a charm. Here is the quote from my earlier post:

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.

After today’s fall, the needle of suspicion has moved more towards the lower-high-scenario. Have look at the Nifty daily chart featured below.

NIfty Daily

Price has not managed to clear the donwsloping upper parallel of the Magenta fork, which is not a positive sign. Going by Alan Andews’ rules, price has a strong probability of reaching the median line or the middle line. The intersection of the two forks at 8,060-8,070 is a likely area price might get attracted to. That is my favored scenario as long as price trades below 8,655.

Let’s drill down to the hourly chart and look for some clue.

Nifty hourly

If you can develop an eye to spot those “decision points” you will be way ahead of the crowd. I have marked a couple of decision points in the chart above. I do not want to labor over this any further.

As always, share your comments / suggestions and views in the “Comments” section below. Hope some day I get surprised by a flurry of comments.


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.