Nifty Weekly View from 7-Nov to 11-Nov

NIFTY after making an Euphoric jump in the Diwali week, remained subdued this entire last week. The week was flush with news from Greece about the Referendum. Locally the news of Petrol price hike by OMC (Oil Marketing Companies) did not help the markets in any way to remain bullish.

Moving to charts. NIFTY Current week Closing was at 5284. Open & High was at 5360 levels & low being 5200 levels. 

NIFTY Weekly Chart

The analysis of the Weekly Charts shows us that we are heading to a crucial resistance zone which we managed to touch last week. The zone of 5400-5450 has multiple resistances.

Observations:

1. Down Trendline (Also referred to as a Line that differentiates Bull or Bear Market) - If Price indeed manages to move above it at least technically the picture becomes bullish. 

2. 50 Week Exponential Moving Average is at 5460 levels. NIFTY moved below the 50 Week EMA in May'11 & since then has unable to close above it till now.

3. 5326 is the 61.8% Fibonacci Retracement levels of the fall from 6335 to 4728.

4. 200 Day Exponential Moving Average & Simple Moving Average are also at 5407 & 5397 levels.

5. Indicators: 

• MACD - MACD Line has gone above Signal Line (Bullish). 
• Stochastics - Watchout for the previous top on Stochastics (56% levels) When NIFTY was at similar situation of getting resisted by the Down Trendline. Currently Stochastic reading is at 49%.
• RSI - Flattish & reaching the resistance of 50.
• ADX - Indicates we are in a Trading zone with Positive Bias.

Trading Strategy:

1. Go Long if NIFTY manages to sustain above 5420 levels. 

2. Go Short if NIFTY moves below the Up Trendline - The levels would come around 5275-5250.
3. Supports are at 5170-5200, 5050, 5000. Resistances are as mentioned above.

Nuggets: 

• Up Trendline is a Trendline that is drawn by connecting atleast 2 bottoms (lows). This usually acts as a Support zone as long as the price is above it. If the price moves below it the same Support line will become Resistance line.
• Down Trendline is a Trendline that is drawn by connecting atleast 2 Tops (Highs). This usually acts as a Resistance zone as long as the price is below it. If the price moves above it, the same Resistance line will become Support line.
• A Trendline should not be too steep or too horizontal. A trendline that is drawn with 45 degree slope has more chances of providing the support & resistance for longer periods.

Bottom Line: A significant move is expected only if NIFTY manages to cross either the resistance line or the support line. Charts are indicating that crossing the Resistance trendline is unlikely & hence probability of breaking the support line is higher.
Point to Note: Next week would be a truncated week with 2 holidays. So keep this in mind before initiating any positional trades
Another important thing is that every Technical Analyst is aware of this Down Trendline. So it would be interesting to know how the Smart money would go about in negotiating this area. Keep a watch.