June Update on India’s Nifty 50 Index Recovery and Range

Jun 24, 2010: 10:43 AM CST

Thank you for your requests for updates on India’s “Nifty 50” Index.  There’s actually a very interesting turning point in the index coming up, and a sharp rally that has led to a recent outperformance (to the SP500) of the Nifty index.

Let’s see the daily chart and the recent strength:

The price structure of the Nifty (CNXN) mirrored the US S&P 500 almost exactly, though the ‘crash’ phase was not as severe in May – we did not see a retest of the February 2010 low.  The iShares ETF symbol for the Nifty Index above is INDY.

In addition to the sell-off not being as damaging, the recent recovery or rally phase has actually outperformed the S&P 500 – with the Nifty Index sitting just shy of a new 2010 high.  The S&P 500 remains about 10% below the April 2010 high.

The kick-off recovery was confirmed with a break back above 5,150 in mid-June as price took out the prior swing high and crossed strongly above the daily moving averages.

But, before you get too bullish on the index, notice the strong potential overhead resistance at the 5,350/5,400 level.

This level will mark the turning point between a continuation of bullish prices in a breakout phase… or a resumption of the larger consolidation/range pattern as seen on the weekly chart:

The weekly chart reveals the bigger picture.

The Nifty is caught in a “Rounded Arc” chart pattern that is forming negative momentum divergences as labeled with the red arrow.

From a chart perspective, the price is likely to continue to trade within the boundaries of the overhead resistance arc – currently at 5,300 – and the lower 50 week moving average support, currently at 4,800.

That places the index within a 500 index point trading range – which should be a caution sign where we are now – at the upper range of the boundary.

Again, a price breakout will signal a new price expansion phase, but until the index rises above 5,400, look for this weekly chart pattern to be the dominant technical structure for the index.

Corey Rosenbloom, CMT
Afraid to Trade.com

Follow Corey on Twitter:  http://twitter.com/afraidtotrade

5 Comments

5 Responses to “June Update on India’s Nifty 50 Index Recovery and Range”

  1. Tarique Anwar Says:

    Corey, I am a regular follower of yours from India. Can you please also mark the wave counts. Will be quite helpful in understanding the current situation.

  2. Vipul Says:

    tks corey. your comments on nifty is really very insightful.

  3. Theyenguy Says:

    India stocks INP, is maxed out relative to the India currency, INR, as seen in the chart of INP relative to INR. India stocks have risen about as high as they can on the Rupe, which is a relatively stable currency. When India, INP, is compared to Brazil, EWZ, and the emerging markets, EEM, the chart shows that India is truly is over-valued.

    Investors have been chasing the raging inflation in India. The Rupe, INR, will fall soon, as will investor enthusiasm for the India shares, INP. Then INDZ, which is 200% inverse of the India shares, will join TZA, which is 300% inverse of the Russell 2000, in going higher, which moved higher on failing financial shares, KBE and RWW.

    Institutional investors should be entering shorts by inesting in INDZ at the current time.

    http://theyenguy.wordpress.com/2010/06/25/the-e

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