Nifty In Technical Charts: Time To Choose Between Action Or Rest

Though I had warned in the last week's letter for readers to stay alert, it appears that it was unwarranted. Market remained in decent form, which under the current circumstances, means it did not decline! We had to wait for Friday price action to put the index once again into new territories. But that’s okay, for no one was really complaining. The Friday move managed to set right the weekly candle as well and now the record shall show that the week belonged to bulls although it didn’t seem like it as the week was unfolding! But that’s okay too, as a market driven more by sentiment than valuations needs this kind of saviour actions and no one quite minds where it is coming from. Chart 1 shows the intraday action for the week. I have added the Ichimoku lines and highlighted the price action of 12th (circled) and how this day’s price moves righted things from the past as well as into the future. Meaning, the prices managed to overcome the bearish moves from the 10th (when the market threatened declines) and then righted its trend course with a Kumo cross positive signal. To spot these signals, follow the two arrows drawn to the past and the future. The Ichimoku is an amazing indicator when used to spot nuanced trend change signals..The Bank Nifty though was less enthusiastic and had a slight negative bias to the moves of the week. Just for contrast, I am also attaching an intraday chart of the Bank Nifty this week with the same Ichimoku lines. Note how the short-term trend remains clearly beneath the Cloud and even the rallies could not penetrate them. Note further that the CS line remains enmeshed within the prices and the TS/KS lines continue to remain under the cloud. Also, future Senkou B line is mostly flat, attesting to the ranging nature of the mild downtrend. Conclusion here is that the Bank Nifty has much to do before it can recover sufficiently to support the Nifty in its attempt to move higher.But given that the weekly candle for the Bank Nifty is still quite comfortably placed, we should be looking for revival to occur soon rather than declines. But for that expectation to come through, we may have to await some good numbers from private bank stocks. HDFC Bank Ltd. has been the main culprit, getting banged down after some hopeful rallies. But ICICI Bank Ltd. and Axis Bank Ltd. are still keeping the flat flying for the sector and if one or two more chip in, then banks will squeak through. But if they don’t, then dull banking stocks will continue to act as a drag on a rising Nifty..But IT (up 4.5% for the week) came to the rescue last week as Tata Consultancy Services Ltd. surprised with a slightly better number and HCL Technologies Ltd., too, doing a better job than anticipated. This ought to definitely increase the positive activity across the sector and help the cause of the Nifty to rise.Here is an interesting take from my software Neotrader, using the CPR page. See chart 3. This shows only the indices (it can also list all stocks). The CPR time frame used is Monthly..Here we find the CPR signals divided into different ‘Levels’ depending on how many criteria they fulfill. It is noted that Nifty is placed in Level 1, meaning that it satisfies all conditions for continued bullishness. Note also that the score for Nifty shows 7, meaning that the bullish signals for the index has been active for the past seven months! In contrast, notice that the Bank and Fin Nifty carry a score of three only and they are also placed at Level 3, meaning that the signals are meeting only some of the CPR system rules and those have been active for three months only. A closer inspection of the three circles (that are included with the index name) reveals the difference in the trend status of the three indices. Although all three of them are labelled green (implying that all are in a bullish mode), notice that the Bank Nifty and the FinNifty have the first circle (denoting the short-term trend) is coloured red, while the next two circles are coloured green. This implies that the near-term trend in these two indices is down, even as the higher time frame trends are yet bullish. Therefore, these two are in a pullback situation in a rise. In contrast, note that the Nifty has green circles for all three time frames (daily, weekly and monthly).At Neotrader, I have attempted to give most of the technical signals some kind of objective characteristics, making it easier to decipher as well as be comparable on the same factor. Practicing technical analysis studies becomes a breeze with the use of Neotrader.Now that the Nifty has recorded new all-time highs, the doubts have not vanished. I had addressed this same question in the last week's letter as well. To quote, “Another question in the minds of traders is: should we be buying at “such” levels at all? Fair enough. But just consider this. When Nifty reached 21k from 20k, did it not seem like being ‘high’? Same at 22k, 23k and now at 24K! At every new level it always looks like levels are ‘too high’!”Having now moved decisively higher, the Nifty has opened up room to targets of 24,900 levels ahead. During weekly dips, the support zones to monitor are 24,280 and 24,125. These can also be kept as stop-loss zones by active traders. Last big swing low is at 23,335, which can be used as a stop zone by swing traders.The budget date has been announced for July 23. Coincidentally, the big time change window for July is seen around 24-26. So, it would appear that the budget this time would provide some ammo for the prices to move larger? Let’s await the same. Since the time zone is identified in advance, any large moves in that zone would be a signal for the larger trend. Remember that.Earnings season has started this week and focus of the market would now shift to the stocks showing some surprise (either up or down) to expectations. Note that only a part of the market that has some coverage by way of brokers and media will get reported. We may be able to pick those up from these sources but for those without much coverage, we will have to rely on chart-based signals as that is where the footprints of fresh activity will be caught. This is one of the prime usages and advantages of using charts. My Neotrader software, in turn, is designed to capture the footprints left on the charts—and hence, it can help you get ahead of the curve too.Continue with the stock-specific game, which should probably last till the 22. After that, a mix of results in the context of the budget announcements shall prevail. Those with a keener eye for patterns and pattern resolution will perform better at such times. One of the choices you could exercise—in the event that you don’t possess skills of a keener eye—is to sit out this period from here till 23. You may lose out on some opportunities but you may save yourself from blowing out on intuitions and gut feels.In data we trust. The rest are all assumptions. The less you live on assumptions, the more your growth as a successful trader and investor shall be. Go for that..CK Narayan is an expert in technical analysis, the founder of Growth Avenues, Chartadvise, and NeoTrader, and the chief investment officer of Plus Delta Portfolios.Disclaimer: The views expressed here are those of the author and do not necessarily represent the views of NDTV Profit or its editorial team.

Nifty In Technical Charts: Time To Choose Between Action Or Rest

In data we trust. The rest are all assumptions. The less you live on assumptions, the more your growth as a successful trader and investor shall be.

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Nifty In Technical Charts: Time To Choose Between Action Or Rest

In data we trust. The rest are all assumptions. The less you live on assumptions, the more your growth as a successful trader and investor shall be.

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