Important Fibonacci Level to Watch in India Nifty INDY

Feb 4, 2011: 11:37 AM CST

I received a request to take a look at India’s Nifty 50 index – along with ETF symbol INDY – and indeed the index is at a key defining point traders and investors should be watching.

Let’s start with the broader weekly view and then drill down to the daily chart to find the key Fibonacci Support level that may indeed be an important level to watch for a potential turn.

First, here’s the Weekly Structure:

The main idea I wanted to show is that India’s Nifty has respected the rising 50 week EMA and lower Bollinger Band levels on two important occasions during the rising market of 2010 – initially in February then in May’s low.

We’re at the same point now and slightly cracking under the rising 50 EMA’s possible support at 5,550.  

A breakdown under the weekly 50 EMA could signal a big turn in the market and suggest lower prices ahead.  It’s important to watch this chart closely if only for its simplicity.

Keep in mind that we’re also hitting a prior “pure price” resistance level at the 5,300 level from two swing highs in 2010 – a good reference.

Now let’s drop to the daily chart and note the short-term Fibonacci levels price appears to be respecting:

Starting with the May low at 4,800 and stretching to the November high above 6,300, we see that price bounced two times off the 5,750 level – the 38.2% Fibonacci zone.

In January, sellers broke this boundary and moved the index to the 200 day SMA and 50% Fibonacci… and cracked down through those as well.

At this moment the index is fighting to hold support at the final 61.8% Level at 5,400 which corresponds loosely with the 50 week EMA at 5,500.

A slight positive momentum divergence suggests a bounce is possible but by no means guaranteed. 

That’s why it’s important to watch chart-based inflection points – traders react to these levels but if the selling pressure from news/fundamental reasons is stronger than the buying from those reacting to charts, then price will break the key inflection point and thus cause those who purchased to then sell/liquidate as they take their stop-losses.  These often create short-term feedback loops.

Now, let’s see the similar structure and price level to watch in the low-volume but still tradable INDY ETF:

The level to watch here at the 61.8% Fibonacci retracement is roughly $26.75 – where we are right now.

We see a similar positive momentum divergence as price tests this support level, but again a strong sell-off here breaks the potential for support and suggests that if buyers weren’t able to turn price here, then lower prices will likely be realized.

Another note shows volume increasing during the sell-off phase which appears to present itself as a distribution pattern.

Still, at least in the short and intermediate term, it’s all down to what happens here at the 61.8% confluence support level – watch closely.

Corey Rosenbloom, CMT
Afraid to Trade.com

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5 Comments

5 Responses to “Important Fibonacci Level to Watch in India Nifty INDY”

  1. sandew Says:

    Could not have been more simpler, from so far off the action here at NSE.

  2. sandew Says:

    Could not have been more simpler, from so far off the action here at NSE.

  3. sandew Says:

    May we have an Elliott Wave count too, Thank you.

  4. Vmahambare Says:

    also EPI is better volume based etf although INDY says its true index etf. There are INP, PIN too.

  5. Vmahambare Says:

    So either it just stops here or goes to below calculations. above nifty chart is not updated for 4th Feb so it feels like there is bounce but all that was wiped out on 4th Feb. So my guess if last 5 of c is started then below calculations may come into picture. of course nothing is sure. you are best judge.