Quick Look at the Weekly NIFTY Structure

Apr 19, 2009: 6:53 PM CST

India’s “Nifty 50” stock market index is coming into potential key overhead resistance on the weekly chart after an impressive rally to levels not seen since October 2008.  Let’s see the structure and note prior bear market rallies.

Nifty Weekly Chart:

First, let’s note the technical structure.  Price has broken above a down-trend line (not drawn) that began from the 2007 highs.

Second, price has formed a new swing high, taking out the prior swing high made in January 2009, which is quite bullish.

Third, price has risen above the 20 week EMA but is finding resistance currently at the falling 50 week EMA.  Look closely to see the bearish candle that has formed at this level – it’s a ‘shooting star’ candle (notice the upper shadow or wick).  That’s bearish.

The trend may be changing back to up, but we’ve only completed the first step in a trend reversal process – the higher swing high.  It will take a higher low and then price swinging up to take out the 3,500 level to confirm a new uptrend.

Finally, let’s look at the prior two significant bear market rallies in the Nifty Index (highlighted in yellow).

The rally from March to May 2008 lasted 6 weeks (6 bars) as price increased 17%.

The rally from July to August 2008 also lasted 6 weeks (bars) as price increased 18%.

From the March lows to present, we have seen six-straight weeks of higher prices which have taken the index up almost 40%.

So, in the same time (6 weeks) of prior bear market rallies, we’ve increased twice what those rallies gave us in prices.  This could be a sign of impulse or new life in a new bull, but using classic technical methods, we have to classify this as a strong bear market rally until proven otherwise.

Let’s watch this week closely to see if the 3,500 level holds as resisatance, and if so, we would expect a minimum move down to 3,000 if not lower.

Corey Rosenbloom
Afraid to Trade.com

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11 Comments

11 Responses to “Quick Look at the Weekly NIFTY Structure”

  1. Vijay Says:

    elliot wave of this raph would suggest that the indian market should fall more?It still seems to be in wave 4 of bigger wave 3?.I haven’t gone back to whatevere was before what your graph showws

  2. Neil Says:

    Hi Corey, A few more things I would like to point out are like fib retracemnts … 38.2% of the highs of jan’08 to low of oct’ 08, 50% of the highs of may’08 to the low of 0ct’08, and 61.8% of highs of aug’08 to the low of oct’08 is at the levels of 3750-3820, so, what I mean is we have a pretty good fib confluence zone at those levels, and intrestingly we also have the 200 week SMA, in that zone too. Thats not all, we have mojor prior lows formed at 3790-3800 in the months of jun’08 and july’08, which had acted as supports at that time, but automatically will become overhead resistances. So the major levels to exit in cash or go short in the markets would be 3700-3800. Would love know your feedback on this.

    Cheers

  3. Neil Says:

    Corey … Oh yes, one last thing, on the daily charts Nifty is forming a “broadening and ascending wedge”, some people call it the rising wedge, but frankly its not the classic rising wedge, in which the trendlines converge, rather they are broadening. Anyways the implications of the broadening and ascending wedge is similar to that of a rising wedge, so the bottom trndline is the level to watch for a reversal. Any close below that trendline would confirm lower prices.

    Cheers

  4. Prithvi Singh Rathore Says:

    Dear Sir,
    I would like to invite ur kind attention towards some more technical aspects vide which nifty future has proved a strong resistance at 3515. While going through the structure of the chart of nifty future, 3515 was a bottom on 5th March, 07. This bottom has decisively boroken on 15th Oct. 08 by leaving a 20 point gap on daily chart (from 3510 to 3489.70)of nifty future. Interestingly, nifty future has filled this gap on 16th April, 09 by making high of 3514 and crashed to 3362 level on the same day. Sir, in addition to above, one more intersting aspect was there which has proved a strong resistance at 3515 level. This is a trendline on daily chart on nifty future starting from the high of 2618.75 on 6th March, 09 and 2780 high of 16th march, 09. The above points are extended to right, u will see that this trendline has acted a very strong resistance in this entire rally. I never seen such a strong trendline in such a shortest period. This trendlince has acted resistance on 24th march as 2959, again on 26th march as 3098, again on 27th march as 3071, again on 9th April as 3409.25 and finally on 15th April as 3507.80 and consequently filling the gap in spike as 3514 on 16th April opening and crashed to 3362 on the same day. Sir, am also using ur 3-10-16 tool. If u see this on nifty future on hourly chart, u will find a huge negative divergence on trending basis. So this has also proved a top of 3514. A confluence resistance was also there which has been discussed above by my other frined.

    With Regards
    (Prithvi Singh Rathore )

  5. Corey Rosenbloom Says:

    Vijay,

    That’s possible, yes, but it would have deeply bearish projections going forward (anticipating a big 4 up then a big 5 down to prices not seen on this chart).

    The debate “still in 3, finished 3” is still valid, but I lean now that we finished 3 and are in a 4 up.

  6. naveen jain Says:

    hey guys,
    its wonderful to see and learn through u guys !! wish and would be thankful if any one of u would care to teach me these lessons on elliot waves in person . i am in bangalore india. my email id is naveenkumar1977@gmail.com and ph.no. 09845011001.

  7. naveen jain Says:

    hey guys,
    its wonderful to see and learn through u guys !! wish and would be thankful if any one of u would care to teach me these lessons on elliot waves in person . i am in bangalore india. my email id is naveenkumar1977@gmail.com and ph.no. 09845011001.or atleast we could discuss on;line.

  8. Anonymous Says:

    Dear Sir Corey Rosenbloom,
    I am reading your material posted on this website is very elghtening & simplitics explainations are praise worthy
    i was experimenting NIFTY yahoo charts with 330 SMA & 90 SMA during a major trend change & first wave being formed.
    During the fall of January 2008 the 1st wave fall stopped at 330 SMA & then it could go up to touch 90 SMA for the second wave, I am not aware due to lack of free data on yahoo whether the same phenomenon would work for trend change from down to up this time around
    As on now the top achieved at 3512 is on the line joining Dec & Jan tops
    My experiment with the retracement would be to 90SMA that may cofluence with some fibonacci Retracment ratio from october low to the top ( asuming 3511 as top )as on now it works out to be around 2911 (61.8%) or 3140 (38.2%)But it is only the 50% retracment would achieve the perspective phenomenon I am experimenting since 61.8% retracement as on now top of 3511 doesnot meet the 330SMA Criteria that still hold out at around 4000 will slop down some more but if the upswing still go on then 90 SMA & 61.8% levels both will rise to cofluence -IN THIS CASE ONLY THE NEW BULL RUN MAY HAVE STARTED BY FORMING 3 WAVE IN 4TH WAVE (AS 3RD WAVE RETRACMENT )
    Hardev Singh

  9. Anonymous Says:

    hardev10@yahoo.com

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