Support Planning and Level Targeting for India Bombay and NIFTY

Apr 29, 2015: 11:16 AM CST

India’s Bombay Sensex and “Nifty 50” Indexes are trading into critical support levels and could bounce powerfully from these key levels.

Let’s highlight the Weekly and Daily Chart support levels and plan the next action – which could just as easily be a shattering of support (we’ll plan for that as well).

We’ll start with the Weekly Chart of the “Nifty 50”

First, let’s highlight the 2013 and 2014 index breakouts above the 6,250 and 6,500 levels which began the strong bull-market phase that peaked recently into 9,000.

Note the surge (new high) in Momentum mid-2014 which confirmed the uptrend and suggested higher prices were likely yet to come as the trend expanded.

This was the case but each new index high from 2014 to present was met with a lower high in momentum, extending the negative divergence.

The index peaked into 9,000 recently and has traded down in an “ABC” (three wave) motion since March.

The focal point is the 8,100 level which is the confluence of the rising 50 week EMA (blue) and the lower Bollinger Band.

The chart is similar on the Bombay Sensex 30 Index:

We see the same bullish surge in momentum mid-2014 and an identical divergence as the index burst from the 22,000 level toward the recent peak into 30,000.

Our focal point for the Bombay Index is the 27,000 level which also is the convergence of the lower Bollinger Band and 50 week EMA.

We will look for a bounce or rally up off these confluence support levels as our dominant (logical) thesis but will be prepared for the alternate thesis bearish breakdown which would suggest a trend reversal lower occurred.

Let us view the Daily Chart for additional planning:

As highlighted on the Weekly Chart, the focal point for the index is the 8,000 to 8,200 wide support shelf where a failure and breakdown here suggests additional downside action.

The index rests on the support of the 200 day Simple Moving Average (red) in combination with the weekly indicators mentioned earlier.

The index did register two new momentum lows in the oscillator after a negative divergence above 9,000.

A minimum bounce target would be the 8,500 to 8,600 level which is the falling daily averages and prior high.

Finally, we chart the Bombay Sensex Daily Chart:

The pivot point or inflection support price (bullish above; bearish beneath) is the 27,000 level as highlighted.

A minimum upside bounce target would be the 28,250 level.

A breakdown under 27,000 and then 26,500 suggests the index would likely fall further, making us avoid buying the index under 27,000.

Continue watching these key levels and how price reacts to these confluence support zones.

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Corey Rosenbloom, CMT
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