Below article highlights Trading using technical analysis methods like RSI and Channels and its application on Nifty.
It has been many weeks since Nifty is trading in a range of 8500 and 8750 levels. It was more than a month back on 13th July when Nifty crossed 8500 levels in this rally and it has failed to show any strong trending move post that. Stock specific action has continued during this period. The structure looks like an expanding pattern with wave …….. currently ongoing. This pattern is very similar to that seen during the 2014 - 2015 rally in expansion before finally topping out in March 2015.
Now look at the below chart of Nifty that shows application of multiple channels along with RSI:
Nifty 60 mins chart:
Application of Relative Strength Index (RSI): measures the strength of an index or stock with respect to itself. Many confuses this simple indicator with that of relative comparative where we measure the strength of one asset or stock with that of other. RSI basically measures the momentum of the market and helps in providing earlier warning signal in case the ongoing trend is in danger. However, a lot of novice traders simply rely on overbought and oversold state of RSI to create positions which is a blunder if there is no price confirmation. Also overbought zone is not always defined at 80 but has to be derived from the earlier extreme levels seen on the chart for that time period.
During a range bound movement RSI works very well when combined with channeling technique. In the hourly chart, we can clearly see that RSI has been reversing from the zone of 30 and from 70 - 80 zone. At the same time prices are moving within the red channel and reverses exactly from its support and resistance. For now the trend is …… and the channel and RSI resistance is now near ………… levels. It will be important to see a decisive break above this channel for extending this rally further. Failure to see upside momentum above the zone might result into retest of the lower support line again.
The above research is picked up from the “The Financial Waves short term update” our main flagship product covering Nifty, Bank Nifty and stocks on rotational basis that shows application of various technical analysis methods along with Elliott wave. Indian markets are again reaching towards crucial juncture and we are expecting a strong trending move to emerge very soon. Know the key levels of support and resistance by subscribing to this research report NOW by simply visiting Pricing page