Nifty - Weekly Breakout...
Nifty Indices has closed on the positive note on last day of the week. Despite of BREXIT, even the index fallen more than 200 points in a single day, the index has recovered smartly and that is also in a style. Let's see details...
Since budget day, the index has entered in the upward move and eventually converted to uptrend. The rally was of lalmost 1531 points from low of 6825.8 to high of 8356.75 on last Friday 1st July, 2016 and that is also within 4 months time. My blog of 1st March, 2016 was written with the hope of reversal and downtrend breakout of last 12 months. It happened and happened in style. 1500 points in just 4 months time is something tremendous. Single lot investment from this low to high would have generated 114,000 Rs. in this period.
I went on confirming the uptrend by writing on periodically about the Nifty Uptrend. At no point of time I felt the indices going in the negative side or bearish trend. Though lot of pandits and analysts keep on telling about downtrend and nifty touching 7700, 7400 and even less than 7000. Nothing has proven true yet.
Okay, till date whatever assumed proved true. Now what? What about next week nifty trend? Where the index is tend to move? Let us go back to the charts - the basics.
Nifty has closed with a positive note on Friday 1st July, 2016 at 8328.25 after hitting high of 8356.75 in intraday. Last time nifty was above this level only in August 2015. The level of 8350 was tried and tested by the index in October 2015 and touched high of 8336.3 in October, 2015. This has became a good resistance point at index has never broken it since the August 2015. This is the first time that index has broken 8350 level though not closed above that. Nifty closed on 8328. This is also another landmark as nifty never closed above 8300 level after August 2015. Nifty hit high of 8336 in August 2015 in intraday but failed to manage the close above 8300. This is the first time after August 2015 that the index has given close above 8300.
On daily charts, the index has shown smart up move and consistently given six green candles in a row. This also occurs very rarely on the daily charts. If we consider the previous day of BREXIT results, the number of constant green candles are 7. This is a great sign of bull power.
If we consider weekly charts, the week ended on 1st July 2016 has generated a big green candle on the charts forming a strong chart pattern on the weekly charts. There is a clear and considerable flag pattern formed on the charts. The flag pattern, as we all know, is a continuation pattern and this is the consistent 3rd breakout flag pattern on Nifty weekly charts after February. This means that Nifty will continue to move further in the upward direction. If we consider the theory of the flag pattern on weekly charts, the next target can be set at 8650 or 8700 and the stop loss can be 7927, which can be achieved in 7 to 10 weeks. Here, the target is about 350-375 points and stop loss is at 400 points. Traders have to take tough decision of entering the trade as the stop loss is very big. There is a Buy call of our SmartTrader+ software on weekly charts too.
Now, what to do? What will help us to enter in a trade in Nifty? What should be the strategy? Either I should trade naked with high risk or should I keep my trade hedging? These entire questions are valid and must be considered with utmost attention. One thing is very clear here, the market seems bullish and it will go northward that is for sure. But this is also true that market will either consolidate or retrace up to some extent. Though the stop loss we have considered is very big and cannot be entered in trade base on this stop loss, traders can take a smart and less risky way to enter the trade.
The smart trader can take entry based on the opening of Nifty on Monday 4th of July. If the index is opening with open is equal to high or open equal to low then the entry will become very easy. Trade accordingly. If not, then check the index for first 15 minutes. if the index, after opening, hitting high or low and reverting back to break the open of Monday, the intentions of index will be somewhat clear. It may go in the opposite direction. Trade accordingly. But do remember, the index will overall remain bullish.
The initial support of Nifty is at 8250, another support is at about 8145 and then the ultimate support is at 8020. If all the supports are broken, the Nifty may enter in downtrend, which seems very difficult. Check index for these support levels and good reversal from any of the support level will give another strong bull rally.
My observation is the target of Nifty is at 8550 to 8600 in next 2 months. Stay bullish keeping supports in mind.
Happy Trading..Trend is Friend...
- Anand Singh Gaur
- Sunil Kothari