NIFTY Weekly price action analysis – 07-October-2011

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Here is the Nifty weekly chart with trend lines, trend channel and swing points marked on it.

Nifty weekly price action analysis

Nifty weekly price action analysis

Let’s take a look at NIFTY’s weekly chart and do the analysis based on facts shown by price action-

Bullish reasons -
1) There was large pullback from the low of 4720 and bar closed marginally in green.

2) Hammer candle is formed, though not very strong as the weekly close is roughly 20% of range below the high. For strength of hammer, I would like to see the close being in top 10% range.

Bearish reasons -
1) This week has given lower high and lower low too. Hence down trend continues.

2) Volume this week has been lower then previous 4 weeks. The low volume gives me doubt on strength of hammer candle. Lets see what happens in next week.

Interpretation and possibilities for next week -
As a trader, we have to be prepared to face anything that market throws on us. So lets see what might come in next week.

1) Nearest supply zone of 4950/5170 level worked last week and it also hold as resistance during this week too. As anticipated last week that 5000 levels will act as new supply zone, it turned out to be true this week when price struggled to stay above 5000 and finally dropped and closed below this.

2) Possible support of 4720 level has worked in this week and gave us nice bounce. It resulted in Hammer candle. I would like to see higher volume and close in top 10% for a hammer. Hence would like to wait for next weeks action to tell me more about it.

3) Volume has been lowest of last 5 weeks. I would like to watch it closely during next week for break or support of 4720 level. Else my view of short term accumulation by smart-money will be supported. My tracking of FII flows also giving the sign of short term bottom formation.

4) This weeks lower high bar resulted in giving us lower swing low at 5200 level. As this level is below the long term bullish trend line from March-2009 low, it confirms that the trend line is broken. In other words the Bull market that started from March-2009 low is over. The long term direction of market is down and the deciding trend line for this is the down sloping line starting from 6300 high made in Oct-2010.

Important levels to watch for – For up-move – 4920, 5000, For down-move – 4720, 4675. For sideway – 4720, 4920.

Hope this analysis helps you in forming your own views on market. Feel free to drop your comments on the post. Let me know if you would like to see something more in the analysis.

Disclaimer These are my views on the market and I could be wrong in reading it. Please use your own judgment and make sensible trading decision based on your own analysis.

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