India NIFTY Index Aug 12 – Two Fibonacci Grids

Aug 12, 2009: 11:28 AM CST

Thank you to all who request analysis on India’s “Nifty 50” stock index.  Here’s the latest quick update on both the weekly and daily frame.  Even for those who don’t follow the Nifty, you can learn insights from my presentation of two weekly and daily Fibonacci retracement examples.

Let’s start with the weekly chart:

India’s market has fared better than the US S&P 500, having formed its bottom in October (the S&P 500 formed two more bottoms in November and March) and also has rallied stronger than the S&P 500.

While the S&P 500 has rallied just shy of 50% off the March 2009 lows, the Nifty has almost doubled (up 100%) from its October lows – quite impressive.

In my former updates of the Nifty Index, I mentioned that if price could break above the 3,000 resistance level (or beneath the 2,500 support level), then a sustained or powerful trend move was likely to occur, according to the Price Expansion/Contraction Principle – that was absolutely the case in large measure!

Now, the Nifty structure is in a bullish posture, with price being sustained above the (positively sloped) 20 and 50 week EMAs.

However, price has failed to overcome resistance at the 61.8% Fibonacci retracement near 4,800 – crossing above this line would almost certainly shift the structure as totally bullish (having broken above the final ‘major’ Fibonacci level).  As such, we’ll need to watch this level closely to see if price continues to tread downwards off this level… or if bulls can gain the upper hand again and push price up through this level.

Failing to do so, the levels to watch for support would be the 3,800 to 4,000 index areas, which reflect confluence Fibonacci and EMA weekly support.  With the negative momentum divergence and failure to overcome the 61.8% resistance, a play down this area could be likely.

Now, let’s move down to the daily frame:

Now we see that the recent pullback in July retraced to the 38.2% Fibonacci level at 3,900 off the March ‘lows.’  Notice how price formed a small hammer-like candle off this level before rallying sharply higher.

The 3,900 level was also the price proejction of the mini-bear flag that formed off the June highs – that’s an interesting pattern.  Price projection targets of bear flags often become support zones.

Price has formed a negative momentum divergence – which you can see in May led to the downward action.  The same structure, though at an even lower momentum reading (as price makes new highs) has formed again into the August highs (notice the two bearish doji-like candles at the high that was followed by a bearish engulfing candle).

Let’s continue watching to see if bulls can bring us back and fight against these divergences, or if price will roll downwards to test lower support zones as shown in the charts above.

Also, for detailed analysis of broad markets (Gold, Crude Oil, 10-Year Treasury Note, S&P 500, and the US Dollar Index), please subscribe to our “Weekly Intermarket” Reports.

Corey Rosenbloom, CMT

4 Comments

4 Responses to “India NIFTY Index Aug 12 – Two Fibonacci Grids”

  1. sandew Says:

    Corey,
    Thank you for this lucid commentary on Nifty Fibonacci level supports and visible Momentum Divergences. In your next post can you give a perspective on the “Unfilled-Gaps” since March 2009 and the downward pressure these might exert on Nifty going forward.
    Sandew
    Delhi – India

  2. junaiddz Says:

    Thank you For This Analysis On Nifty.
    Junaid.
    J&K. INDIA.

  3. pankaj shah Says:

    Dear Corey,
    fantastic analysis.today we have tested 4840 in nifty and closed at 4805.
    i think we r poised at very interesting stage.if we move decisively from here it can become very bullish structure.in yr view will we move up or will start corrective wave C or 2 soon?

    thanks.

    Pankaj Shah
    INDIA

  4. pankaj shah Says:

    Dear Corey,
    fantastic analysis.today we have tested 4840 in nifty and closed at 4805.
    i think we r poised at very interesting stage.if we move decisively from here it can become very bullish structure.in yr view will we move up or will start corrective wave C or 2 soon?

    thanks.

    Pankaj Shah
    INDIA