08 May 2011

Nifty : Cloudy Picture ?

Lets take a look into Nifty charts with Ichimoku Clouds overlays. It had been a good indicator atleast for Nifty in recent times. The chart below is on a daily time frame and lower to it you will find the weekly Nifty chart with Ichimoku clouds and 50 and 200 period moving averages. We will concentrate on the clouds for this post.

Without going into much details, I would like to point the key levels and times when these clouds did the trick. In the daily chart you can see how the clouds stopped the non stop fall since early Novr, later on it did not allow the reaction to go beyond the clouds. The mid Dec fall was as well protected by the clouds, and later on in early Jan though did not stop the reaction from going higher, changed colors to indicate the start of a new trend. You see how Nifty went into shambles when the cloud support broke.

Now interestingly if you see the Weekly chart, you will realize why Nifty stopped at 5200! It entered the cloud support of a higher time frame! Since then it climbed higher taking support at the clouds. Only to test the cloud once again last week. For next week the cloud support exists at 5500 and if we have a weekly close below that, we can surely expect another round of massacre of bulls.

Very cool observation would be to check this on the daily chart. Check the color of clouds around close of Dec, well it was green but changed its color to red! What happened to prices since that? A collapse.
Now see where are we in terms of color of clouds now. It was red few days back, but has now changed to green! Will it mean something again?

Given the fact, that we are close to cloud supports in both the time frame. The best trade would be to initiate longs. We all know that not much below from here are the triggers to get out in case the market keeps getting drubbed. So the risk reward is very much in favor of bulls. We all know Nifty is extremely oversold. And what I came to know, recently was that the 9 consecutive losing days in Nifty which ended on Friday was the longest in last decade, I am kind of getting more confident that going long now is the best trade one can think of!


manu said...

hi anwar..no updates man

Tarique Anwar said...

yes man, was out of station!

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