India’s “Nifty 50″ Stock Market Index (symbol $CNXN in StockCharts.com) broke to a new 2009 high today, but before we get too bullish, let’s take a look at what bulls need to overcome to keep the rally going – hint… Fibonacci and a Rising Wedge.

Nifty Weekly Chart:

The weekly chart shows a very powerful uptrend, taking us from the 2,250 lows to the recent 4,800 index highs – an impressive doubling in price in just under a year’s time.

To keep the bullish party going, buyers in the index need to overcome potential overhead resistance in the form of the 61.8% Fibonacci level as drawn from the 2008 highs to the lows – the rally up has been a retracement of that steep price drop.

There’s also the potential break (up from here to dis-confirm the pattern or down beneath 4,400 to confirm it) of the Bearish Rising Wedge as seen best from the Daily chart… along with the negative momentum divergence which is showing up on both the weekly and daily frames.

Nifty Daily Chart:

The daily chart gives us a better perspective of the ‘bumpy’ ride investors have endured since the June 2009 highs… which almost resembles a “Three Push” negative momentum divergence (or price pattern).

The wedge formation and negative divergences into resistance are clearer from this frame.

If bulls can clear 4,800 and then 5,000, it would be a major victory against the backdrop of a Fibonacci resistance level, bearish rising wedge, and triple-swing negative momentum divergence pattern all as labeled above.

If history is any guide, it will teach that 2009 has been the year when bulls have trampled over any bearish resistance or divergences on technical (price) charts.  Will it happen again?  Just a few more days (or next week) and we’ll know for sure!

Corey Rosenbloom, CMT
Afraid to Trade.com

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