Bounce will struggle to sustain, Nifty to witness some price consolidation
Date: 25^th March 2013

I wrote last week that a tick of 5775 would be very dangerous signal for bulls. It proved indeed. Prices collapsed and saw levels around 5630.

The overall picture is very bearish for reasons explained in last week write up. Have a look at 10 boxes Point and Figure charts of Nifty pasted below. 10 box close only chart (Figure 1) achieved the target activated during last week only. A down side count is open but price is near important support levels. It shall respect the support levels atleast for a while.

10 box High low chart (Figure 2) suggests that a top is been formed with multiple anchor point resistance levels that makes it a strong supply area for any upside move from here. Price is near 45 degree trend and anchor point support levels which can stall the fall but overall formation has turned out to be very bearish due to multiple bearish formations in the set up.

Various momentum indicators in bar charts are signaling positive divergences and around 90% of Nifty components are trading below their 10 day moving average. It is signals that trend is reaching the stage of exhaustion and it may need some space to breath. And so I expect some consolidation.

Bounce from current levels cannot be ruled out but I suspect the sustenance. Immediate resistance is around 5740 – 5760 levels. I expect first bounce to be little weaker and I prefer trading double top buy signal in such cases. That assures me a formation of base before buying.

From trading point of view, wait for price to consolidate before buying. Nifty is expected to remain between 5760 and 5640.

For those who trade P&F charts, wait for formation of higher ‘O’ from here and then buy when column of X forms. That would provide you affordable buying opportunity.

Else, prefer to enjoy the truncated week. Wish you all a very Happy Holi.

     Figure 1: Nifty 10 x 3 Cl Point and Figure Chart

     Figure 2: Nifty 10 x 3 HL Point and Figure Chart

-         -          Prashant Shah

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