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Nifty: The short term trend remains up

HDFC Sec | 26 Jan, 2017  | Follow Author | Add to my Favourites 
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Current Observation:

- Nifty witnessed a sharp upside momentum today and closed the day with hefty gains of around 126 points.

- After opening with upside gap of around 25 points, Nifty shifted into gradual upmove for better part of session. The sharp upside momentum witnessed during afternoon to later part of session and Nifty closed the day near the highs. The opening upside gap remains unfilled.

- A long range bull candle has been formed today, which has broken above the key overhead resistance of around 8510 levels (gap of 11th Nov and previous swing lows as per the concept of change in polarity-green dashed line).

- Another hurdle of opening down gap of 2nd Nov and previous swing high around 8600-8615 has been just reached by leaving that gap partially filled with small margin.

- The formation of long range bull candle after a reasonable/decent upmove and significant rise in volume today are signaling a formation of buying euphoria. Normally, euphoric buying’s are occurred near the end of an important up moves (setting stage for crucial top reversal patterns). There is saying in technical study; ‘long candle formations at the beginning or at the end of imp swings are early signs of key reversals’. Hence this pattern needs to be viewed carefully.

- Daily RSI has turned up sharply and reached its important upper area of 72 levels. Previously over the last one year, the daily RSI has formed peak around 72-73 levels and that ultimately led to important top reversal patterns in Nifty (marked in X). Hence, this could possibly be an indication of overbought situation in the market.

Conclusion & Strategy:

- Nifty is witnessing a sharp upside momentum and the short term trend remains up. But the formation of chart, momentum and volume pattern are all suggesting a cautious approach towards the market ahead of key economic event of Union Budget, which is scheduled on 1st Feb.

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Disclaimer: The author has taken due care and caution to compile and analyse the data. The opinions expressed above are only the views of the author, and not a recommendation to buy or sell. Neither the author nor accept any liability whatsoever arising from the use of any of the above contents.

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