Support Bounce and Bear Traps for India NIFTY Index

Sep 3, 2013: 11:05 AM CST

India’s “Nifty 50” Stock Market Index recently bounced sharply from a critical weekly support level, but not before triggering a Bear Trap outcome beneath the support level.

Let’s start with the Weekly Chart critical planning level and move to the Daily Chart for additional analysis and planning.

India Nifty 50 Weekly Chart Technical Analysis Planning

From the weekly chart above, we can clearly see the critical inflection area between the simple 5,400 and 5,500 index levels.

In addition to being a “Polarity Level” which means price has reacted to this level both as support and resistance, we see the rising 200 week SMA intersecting the 5,550 area in this 100 point zone.

Despite the importance of the support area, the index spiked down to 5,200 and 5,100 during the last two weeks but closed above this level – in fact, above 5,500.

These can be considered violent spikes or even “Bear Traps” that trigger short sellers to enter, but as the index rises higher, it traps them and forces their stop-losses.

With this critical inflection area in mind, we’ll turn now to the Daily Chart for planning:

India Nifty 50 Daily Chart Trend Trap Divergence Technical Analysis Planning

The Daily Chart allows us to see the two weekly ‘spike’ candles or bars that resulted in closes above the 5,500 key index area.

Interestingly, this trendline intersects the falling 20 day EMA near 5,500 and we can also see reversal lows in place from April, June, and August 2013.

For objective planning purposes, as long as the index can hold – or continue trading – above 5,500, it suggests that we can see additional higher prices at least toward 5,700 or even to the midpoint of the larger consolidation pattern near 5,900.

A bearish case, and thus breakdown trades, would trigger on a return back under 5,500 and especially under the “Weekly Chart Rectangle” zone of 5,400.  A downward break suggests 5,200 could be achieved easily.

On an educational reference note, notice how well the index has responded to Daily Chart Momentum Divergences at key inflection or turning points in price.

Each major swing high and low on the chart occurred with a visual momentum divergence, similar to what we saw at the end of August.

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Corey Rosenbloom, CMT
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4 Responses to “Support Bounce and Bear Traps for India NIFTY Index”

  1. Gourav Says:

    Thanks Corey Rosenbloom for updating Nifty Chart.

  2. Corey Rosenbloom, CMT Says:

    Thank you Gourav for your support and I'm always up for requests.

  3. Ash Kumar Says:

    Corey, you give a refreshing perspective without the noise levels contributed by players attached to the Indian markets.. Markets running purely on technicals, local factors and, especially, international investor plays all pointing to exits, but movements so exaggerated that indices whipsaw and trigger all rational stop losses.. I keep reading your posts for a unbiased perspective.. Good job, and thanks..

  4. Triple Timeframe Charting India NIFTY and BSE into New Highs | Afraid to Blog Says:

    […] Note the minor “break” or Bear Trap that occurred in August 2013 which I covered in the prior update “Support Bounce and Bear Trap” post. […]