June 18, 2010

  • Dow jones is forming a broadening bottom formation in daily chart.
  • It is a bullish reversal pattern.

  • Dow jones despite the strong up move throughout this week has not able to close above this trend line.
  • If we take a look at the chart it has ended on a sideways note for the last two days.
  • So a close above this resistance line could give some strength to the bulls.

  • S&P 500 has given 2 doji's in a row. But the trend in daily chart is still up.
  • The price is above 200d moving average. And when the 50 day moving average goes below 200 day moving average that crossover is known as death cross.
  • Death cross it seems has to wait for some more time.
  • The daily chart is also showing S&P moving up my making a double bottom. And this pattern should push S&P 500 above 1150.
  • A close below 5251 will be negative for the short term.
  • Below that 5220 will give support

  • Tata steel made a recovery by breaking out of an inverted head and shoulders
  • The levels mentioned earlier has been working in order.
  • Now at 493 the stock got resisted and it is testing 476 again.
  • An up move from here will form another big inverted head and shoulder possibility.
  • But if it does not hold on to 472-476 it may go back to test its previous lows.
  • Euro made a reversal from the falling wedge.
  • The reversal is mostly due to short covering.
  • And right now trading near 1.24 and will have enough steam to reach 1.26 were it will face stiff resistance again. and may be selling pressure will return

  • The charts above shows reliance industries multi month trading range.
  • This consolidation has been going for nearly 13 months.
  • So this time it may break out. But i have checked many indicators like stochastic, and williams %R everything seems to be in overbought in daily time frame. 
  • But indicators can remain in overbought status for a long time if the price decides to march ahead.
  • Tata motors entered into a channel in the middle of november.
  • And the stock gave a good opportunity last month when it came to the bottom of the channel.
  • For those who had taken position near the bottom of the channel the stock has given good returns.

  • This is the daily chart of nifty with MACD crossover buy and sell signals.
  • For some one who believes in MACD daily time frame crossovers the last four signals would have given them four great trades.
  • And the current MACD signal which gave a buy from around 4800 is still going strong.
  • The current daily chart up trend which started from 4780 levels had a dip in the middle but see how the MACD did not give a sell.
  • But as we all know all indicators can fail and can give whipsaws it is important to fine tune these signals with moving averages and fibonacci levels.

  • Dow jones is now marching towards the 50% retracement of it fall from 11250 to 9757 
  • Dow had a small dip today after it broke its hourly trend line. And it went down till 10330.
  • 10330 being earlier resistance gave it support as expected. But on seeing the amount of negative divergence i thought that area will not hold. But dow jones took support there 
  • And one more important thing is that this is the third consecutive close above the 200 day moving average which is good news for the bulls.
  • But the 20 day moving average is still below the 200 day moving average which is the last hope for the bears for the short term.

  • Dow has also broken the trend line hour chart.
  • Now the same set up has worked for the bears in DOW jones as well.
  • It is very important to know the next support level which comes at 10330.
  • An hourly close below 10330 and the situation will become bad for the bulls.

  • If dow jones break 10330 as discussed in the hour chart this can bring the index down to 10250
  • And the hour chart will favour the bears then.
  • We already had a trend line break in the hourly chart.
  • This head and shoulders if works out correctly will be a setback for the bulls


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My Favourite Quote

"All through time, people have basically acted and reacted the same way in the market as a result of: greed, fear, ignorance, and hope. That is why the numerical formations and patterns recur on a constant basis."
—Jesse Livermore