Nifty This Week: Technical Charts And More

The market struggled a bit during the week but finally hoisted itself above the weekly pivot by the end.

When the week started with a yawning gap, it seemed like the prices may tank. When we had follow-up action on Tuesday and the world markets were also getting pulled down a bit, it did seem like we may go lower. The prices, during the decline, managed to marginally break the last swing lows too, increasing the palpitations of long holders. The intermediate-term support trendline was also slightly broken. It all seemed dismaying. Bears, tasting blood, moved in for the kill. They piled on a huge amount of Call option shorts, driving the Put-Call Ratio down to a very low level of 0.49 on the Nifty. This was quite oversold by recent standards.

The holiday mid-week allowed the market to recoup. The market drop in the U.S. mended itself, the expected did not happen, and taking advantage of the break the bulls managed to yank the market higher over the next two sessions, bringing the index once again to the doorstep of the breakout that we have all been waiting for.

The question that was before us a week ago is once again posed – will the Nifty breakout above 16,000 occur now?

For cues on that, I went to my favourite Neotrader software to check the scenario.

First, I looked at the momentum status. Here is how it looked as of Friday.

The positional Momentum Dial was comfortably placed in the bullish zone. The Multiday reading was moving towards the stronger bullish zone. There were no indications that any time frame momentum reading was about to reverse in a hurry. Score one for the bulls.

Then I looked at the price move on the Nifty on Neotrader. It showed that the weekly and monthly changes were hardly enough to cause any misgivings. The yearly change is a solid 13%+ so the bigger trend is up and will exert its influence on the lower time frames. So no way that the rise is overdone in any manner. That is another positive score for the bulls.

After this, we look at the Ichimoku indicator for some trend status.

Everything continues to be comfortable here too. The Cloud is positive and comfortably beneath the prices. The Tenken (15,770) and Kijun (15,0706) lines too are comfortably beneath the prices, implying that the trend status is intact and in bull control. The Chikou span is over the cloud and the prices, so the momentum is not disturbed. Some price rise and that one is going to get clear. The future cloud is clearly bullish and thick.

So the uptrend is safe and well.

The Trend scores are pretty OKAY too.

In Neotrader, we compute Candlestick scores, Ichimoku scores, etc. over three different time frames. The bull scores are comfortable too. Note how the bear scores are at zero so bulls are dominant. It can also be noted that the prices are placed quite comfortably vis-à-vis the Pivot levels across all time frames.

So nothing overbought as yet.

Neotrader has built-in checks for Momentum, Swing, and Reversal setups. There too, the situation is not too difficult for the bulls.

Interesting to note that it is the Swing approach that has signals in all time frames. This is owing to the big range we are maintaining in the market as of now. Notably, there are no signals in the Reversal criteria so the market is still staying put in the bull trend.

And finally, a look at the Oscillator set up across time frames.

Nowhere is the Nifty into any kind of a trend stretch.

Summing up all of these, it is evident that the down moves that we have been witnessing periodically are just inducing a bit of scare among weak holders.

We had a call to lighten up a bit last week. That worked, but for a very limited time. Prices have pulled back again, mainly owing to the fact that the bullish signals in all time frames remain undisturbed. So it is only the very short-term signals that get disturbed with dips. That is a domain area for traders.

But for others, the bulls still remain in charge and trust has to be reposed in them to continue the show. No doubt, they are taking their time to stage a breakout higher. But it now seems like a matter of WHEN rather than IF.

We will simply have to wait for that to occur and then join the bandwagon if one is a trader. For the others, it is a ‘continue to hold’ situation and possibly also a ‘continue to buy the decline’. Patience is being rewarded. So is courage to set a distant stop and hold. And add at lower levels.

CK Narayan is an expert in technical analysis; founder of Growth Avenues, Chartadvise, and NeoTrader; and chief investment officer of Plus Delta Portfolios.

The views expressed here are those of the author, and do not necessarily represent the views of BloombergQuint or its editorial team.