Nifty 50: At Make or Break Juncture
The Set-up in the daily chart of Nifty 50 has turned Neutral since May 4, 2020 and the Nifty 50 has since been confined to a trading range in the remaining 4-days of the week gone by.
But, a lot of interesting developments have taken place this week in the Nifty 50 chart. Have a look at the daily chart featured below.
For the first time since February, there is a lower mini-top pattern in the Nifty 50 chart. You may wonder why this is relevant or important?
For me, this is very important as I strongly believe that a breakout above a prior mini-top is an important indicator of a potential trend change. In this context, a breakout above 9,862 would be a strong bullish sign.
Using the same logic, a fall below the recent mini-bottom at 8,082 would be considered as a significant bearish event. A close below 8080 would be a sign of weakness and would indicate that the recent recovery is probably over.
But you may wonder that the Nifty 50 has to fall by little over 10% from the current levels to breach 8,080. This is where things get interesting in the Nifty 50.
Have a look at the Nifty 50 chart again. A close above 9,280 would trigger a double top buy in the Nifty and this would complete a mini-bottom at 9,195.
If this happens, we will have bullish and bearish reference levels that would be much closer to the current price action. It is in this context that the title of the post gets its relevance.
As always, let us wait for the price action to unfold. We need not second guess. If we get a breakout above 9,280, it will open up interesting scenario about a mini-bottom getting formed at a higher level.
If this is followed by a breakout past 9,862, it will then be an icing on the cake and would be a strong bullish sign. On the contrary, a fall below 8,080 would be a major sign of weakness and would make abandon bullish thoughts on Nifty 50.
The breadth indicator has gotten into a neutral zone across 1%, 3% and 5% box sizes. The conditions are ripe for resuming the next trending phase.
Which scenario will unfold? Your guess is as good as mine!!!
- : January 16, 2021
- : B. Krishnakumar