Potential Head & Shoulders on Nifty

We were in an downtrend from March of last year and there was a clear downward trendlines which could be drawn forming a channel. We could also see a Head & Shoulders pattern on the daily and weekly charts of Nifty. Starting from budget day we have seen a consistent uptrend and a clear breakout of the down trend channel which is shown in the following image

varuntech

Now we have seen the retest of the trend channel which is now acting as support shown in the blue circle. I have tried to highlight with the curves a potential Head & Shoulders Pattern emerging which if successfully makes it will have a potential target of 9181 using conventional technical analysis which is close to the all time high of 9119. Although that is a very far target and should take some time before it reaches if at all medium term places of interest are also highlighted in the green areas. For now its a wait to see whether the red area is breached successfully with sufficient volumes to even think of medium term areas of interest.

Over Negativity Nifty

In my previous post I had highlighted how Nifty had formed a bearish engulfing pattern right at the bottom of the trend channel which was active since March of last year. While posting that I had given examples how earlier an bearish engulfing pattern actually cauight the exact lows and we rallied from that point onwards. I am no fortune teller and whether the low of Nifty which was formed stays as is or is broken in the near term I am not 100% sure but we did rally more than a 1000 points from that point onwards.

In this post I would like to share that context is king and we should not be following textbook patterns. The reason being among others that a bearish engulfing pattern is bearish and can be bullish at times. No pattern in the world is 100% accurate and no one can be 100% accurate in the markets. The view of Technical Analysis is to form a guideline and create a method or a process which suits you and are willing to take losses as part of business expenses.

I would like to reason out here why context is king.

Why did a bearish engulfing pattern become a positive trigger for the Markets?

  1. Nifty had a massive fall in the earlier months making the retail traders convinced that markets were finally in a down trend after having bought the dips last year for a continuation of an uptrend.
  2. Newbie traders would be looking at the bearish engulfing weekly candlestick pattern right at the lows of the trend channel and would be convinced the markets were going down.

Please share your views as well.

Bearish Engulfing On Channel Bottoms a Positive Clue?

Hi, yesterday we closed at 7029.75 on Nifty Spot creating a bearish engulfing pattern on the weekly charts. Now as we all know that Bearish Engulfing is a bearish candlestick pattern but my question is – At channel bottoms is it a bullish indication? Well to look at past history I identified two such occasions on Nifty Weekly Charts between the bear markets of 2010-2012. Here is the attached image

Nifty

As you can see at the top of the channels, it works great to identify the near term top whereas at the channel bottoms it does an equally good job to make as think that more downside is possible while Nifty reverses as a short term bottom. Have a look at this weeks chart

Nifty

Will be interesting to see whether we form a short term bottom out here as all the technical indicators are over extended and relief rally or a fresh bull run might be the case with the budget being announced this Monday.

Cheers!

Fortis Weekly

Hi,

Currently Fortis is trading at multi year highs and has broken the range bound movement after 3 years. With huge volumes it is a clear cut breakout thanks to the bulk deal by ace investor Mr. Rakesh Jhunjhunwala and we should look to buy at the first decline. This could be a excellent long term investment with more than 100% growth in the next 1-2 years. Targets would be atleast 300+

fortis

The next major test and resistance would be at the swing highs made in 2010. So if it manages to go above 185-190 it would very well go to price levels of 300+ and should be watched closely. I will post more updates incase there are developments.