30 April 2011

Nifty : Bull Trap Ahead ?

There has been practically no movement in Nifty for past 4 weeks. It has found stiff resistance around the trend line. At times it looked to clear it and give a breakout, at another it looks like it will break down. But interestingly it did neither. Fundamentals are also neither favoring the bulls or bears. The money printing in US is not stopping any time soon, but that bullish effect is negated by inflation fears of it. Though crude oil has not rallied heavily, it has crept higher, the headwinds of a explosive rally in it is keeping FIIs cautious. They have pulled out money in recent week gone past. So we are in kind of no man's land and people are waiting for triggers. In such times only price action can tell us what mood are people in.

Coming to the charts, the above weekly chart shows how the trend line resistance has kept Nifty in check though the cloud below looks to be the support. As per Ichimoku cloud the "Sell" signal generated in January is still intact, with last cloud support around 5500 for the month of May.

What I expect from a trader point of view is that, because the trend line resistance has been watched so closely, Nifty can break it apparently convincingly, sucking in a lot of buyers (a bull trap) and then head lower again. In medium term I also expect the lower parallel trend line to be tested before any signs of rally again.


alphabet1 said...

For me 5750 to 6000 ( the next possible resistance) is good enough to play.

Over 6050 it is upswing all the way.

Tarique Anwar said...

i would agree with 6050 area point. In case this is a bullish setup, we can see a rise to 6050.. maybe some more consolidation there.. in the region of 6000-6100 and then another rally to 6500.. in case its a bearish setup.. we may crawl higher to 6000-6050 and then a strong sell off..

alphabet1 said...

I would love and
your blog will gain in more credibility
if you post a study on what went different from your anticipated study ,
and important
what to do now.

Tarique Anwar said...

what went wrong..?? i went mildly bullish after announcing bear market coming for all these days!! on a serious note the fact that Nifty was unable to break the trendline resistance after many attempts, technicals (macd etc) becoming weak.. so it had to correct.. the correction did rip apart the bullish scenario. within 6 trading days nifty is down 400 points.. now things have gone extreme on negative side.. we should expect some rally.. will post more on what we can expect going forward..

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