01 October 2011

Nifty : From One Range to Another

For past few weeks of Nifty has been caught in a range between 4720-4750 to 5160-5180. This is a very classical case of contraction after an expansion, but the reverse is also true, that after contraction comes expansion.

Coming to the charts, I have marked the descending triangle, which got broken in August by a massive gap. The target of this triangle is, height of the triangle from the break point (5200 - 900 = 4300). I was expecting this target to be met pretty soon, but looks like 4700 to 4800 support area has other ideas in mind.

I have also marked the current rectangular area in which price in consolidating, the height of this is around 460 points and should target 5640 (considering break at 5180) region in case the break is on upside and 4260 on downside (considering break at 4720).

Note that a downward break will satisfy the descending triangle target as well, but in case of upward break the triangle pattern will be invalidated. (Actually any move back into the triangle, which means above 5200 will invalidate the target of 4300 through this observation).

With so many fundamental overhangs and trading so much news driven, its almost impossible to have conviction in any side of trade. And hence the trading range getting developed in all major markets of the world. One day all problems are solved.. the other world comes to an end.

In my opinion, I am still a bear, though my conviction is as well weakening. 5200, I guess is the line in the sand, above that 5600 is taken for granted and maybe a new high. On the downside there are a hell lot of targets that one can talk about starting from 4500 to 3600!


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