Thursday, August 23, 2012

Nifty moving up on slower momentum!

Bottom Line: Nifty continued to give a close above the previous day’s low, bias is positive as long as previous day’s low remains intact on closing basis.

Nifty Daily chart:

 Nifty 60 mins chart:

Wave Analysis:

We mentioned before, “…In short, as prices managed to move back above the 5400 levels we are cautiously positive as long as 5350 is intact on downside with strong resistance coming near 5500 levels.…”

Nifty has been constantly managing to close above the previous day’s low. As long as prices are managing to move this way our bias is cautiously positive.

As shown on 120 mins chart, prices are sticking on the lower end of the channel which was acting as very good support before. Now this channel is acting as resistance to prices. RSI is constantly giving negative divergence and so we remain cautious on the current up move. However indicators are always secondary and should not be acted upon unless there is price confirmation. Many of the traders commit a mistake of acting as soon as indicators give any signal. Trading based on indicator is not advisable as the negative divergence can lasts for months and prices can keep going higher. Case in point is if indicators are giving negative signals one should be cautious but should act as soon as confirmation is obtained from price.

From wave perspective it is difficult to say if this is only wave a of c or complete wave c. If the current rally extends towards 5500 chances will be high that the current up move is complete wave c.

In short, a break below 5400 will be first negative confirmation followed by move below 5350. As long as these levels are intact bias will continue to be cautiously positive.

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