Nifty - 05 May 2014 - Consolidation nearing end

After 5 consecutive red candles on the daily chart, expecting some green soon.

As discussed on Friday, we saw a volatile end of week on the bourses. The Bears continued their selling spree, albeit respecting the support line that is consistently rising. The Nifty opened with a positive gap up of 14 points at 6710 and immediately went up to 6738 within the first few minutes of trade, threatening a breakout. However, the Bears had different ideas and the Nifty then started to slide down. The Nifty not only breached the opening mark, but made three new intraday lows after that. The Nifty eventually made a low of 6690 before closing at 6695. We booked 45 points of profit in the overnight long positions.

1) The Elder Ray readings : Bull Power reduces from +36 to 0 Bear Power also reduces from -88 to -48 indicating that the trading range is compacting which makes us think that the consolidation may end soon. For today, the Bulls need to overcome the levels of 6740 to maintain their upwards momentum whereas the Bears need to breach the levels of 6680 to maintain their downwards momentum.

2) The stochastics are now hovering just above the oversold zone.

3) The Nifty has closed below all its key EMAs but has closed above all its key DMAs.

 

4) In the above chart, the volumes have remained low while the Nifty was falling indicating that the fall may get arrested. The MACD continues to point downwards with the histogram keeping growing in the negative. The ADX is favoring the Bears but is suggesting a loss of momentum for them. The Parabolic SAR continues with its Sell signal with the SL now brought down to 6866.

5) Considering the above, our trading plan for the day is as under.

a) Around 6735 we will open fresh short positions with a SL of 6750 and a target of 6670. We will add to these short positions only below 6635.

b) Around 6655 we will open fresh long positions with a SL of 6635 and a target of 6725. We will add to these long positions only above 6750.

Happy Trading !!! 

Also visit Just Nifty and the Nifty Range blogs.


For cash market recommendations see our Daily Pre Market calls on NSE