NIFTY spot has closed at 10831.40, and facing stiff
resistance near 10931 zones which is the high placed on Monday keeping this
index under pressure. Nifty has been witnessing a nice uptrend on weekly chart
from low 6825.80 which was placed during March 2016. A classic bearish head and
shoulder pattern is emerging on weekly chart and this pattern gets its confirmation
on break of the neckline which is near 10000 zones. If this pattern gets
confirmed then it will open the doors for a retest to flip support which stands
near 8900 zones. Price is struggling to hold above 50 weeks SMA which equals to
200 SMA on daily chart. Price resistance near 200 days SMA plays a significant
role. 10 weeks SMA has already given a bearish cross below 50 weeks SMA and this
SMA on weekly chart equals to 50 days SMA on daily chart. These developments on
SMAs suggests that a death cross has already happened in this index. Price has
also violated a rising trend line and recently it has experienced resistance
near the same while forming right shoulder. Top of current swing (right
shoulder) approximately equals to the left shoulder which also complies with
rule of symmetry. All these developments are hinting that longer term bullish
trend could shift in to a bearish trend. Upcoming general elections also suggest uncertainty
in the market.
14 Periods weekly RSI is now staying below its signal line
but current week is still in progress so bearish cross is not yet confirmed. But
RSI is hesitating to rise above 60 thus keeping it in bearish zone.
On price action front NIFTY has formed a candle on weekly
chart which is having long upper shadow and candle with long upper shadow hints
selling pressure. However, current week
is still holding above previous week’s low which was 10814 and any break below
this level will add more power to bears.
On daily chart immediate support is seen near 10814-10800
zones and any breach of these levels will result in to an attempt towards 10600
and 10500 zones. Areas of 10500 are very crucial to watch any failure and stability
below 10500 will put focus back on 10000 mark. Areas of 10931 can be seen as
crucial resistance on the upper side and any recovery above this level might
bring another attempt to11050-11080 zones. Key resistance will be at 11200 and
any cross and stability above 11200 will put emergence of bearish head and shoulder
pattern in doubts whereas failure of 10000 will result in to a neckline break
and it will open the doors for attempt towards 9200-8900 zones.
Conclusion: it’s time to stay cautious and one should avoid
creating huge long positions until market invalidates emergence of classic head
and shoulder pattern by crossing and holding above 11200 zones. Stability below
11200 remains supportive for this pattern and failure of 10500 will add more
power to the bearish momentum which is currently under development.
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