Nifty P&F analysis: ‘X’ is being rejected. ‘O’ eager to become a trend!!

‘X’ is being rejected. ‘O’ eager to become a trend!!
Date: 27^th January 2014

Nifty traded above 6330 during last week to trigger the stop of earlier trade. I thought my assumption is going wrong but another ‘O’ is formed on Friday near resistance levels to generate the sell signal again.

Chart analysis:

Figure 1 is 10 box value chart plotted with closing prices. Price touched the box value of 6350 during last week that generated the Double top buy signal above upper band and above bullish line. This was a bullish formation and triggered the stop for shorts. As discussed during earlier post, Long formations were to ignore for a while being Nifty trading at resistance. Column reversed to ‘O’ on Friday again from the band resistance levels. It would be a classical bull trap formation if Nifty closes below 6260 from here.

Figure 2 is 10 box value chart plotted with High Low prices. Price turned to negative column at upper band in this chart as well. Bearish Bull trap formation in this chart will be formed if price trades below 6240. Anchor support point levels are around 6180. I would like to monitor price at those levels. Support also gives opportunity to trade short when set up is negative. Double bottom sell signal below them is a delight.

Figure 3 is Weekly candlestick chart of Nifty. Bearish engulfing and shooting star formation in the weekly chart were discussed during the last post. The Doji formation of current week which is nearly a Gravestone Doji is formed at same levels. This indicates the consistent supply at higher levels and certainly not the good news for the bulls.

I have been discussing the bearish setup since last two weeks but it is my assumption based on the price behavior at resistance levels. Trend is more of sideways at the moment. Double bottom sell signal below 6200 will turn intermediate trend to down. Price trading below 6100 will be very bearish event and activate some more downside counts based on 1 box chart analysis. I shall present the chart explaining the setup if that happens.

‘X’ is being rejected consistently by the supply at higher levels. Current formation of ‘O’ has strengthened my bearish view. I am looking for 5800 but would not like to remain short above 6350 or any double top formation when it is trading above bullish line. Looking at current setup, I feel that ‘O’ has never been such a mouth watering.

P&F strategy for next week:

Remain short and trade ‘O’s unless price trading above 6350.

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

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

Figure 3: Nifty Weekly Candlestick Chart

                        

                                       

                                       

 -  Prashant Shah, CMT, CFTe

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