The BIG consolidation phase continues!

Nifty Daily

Nifty 240 mins

Nifty 60 mins

Nifty has been consolidating in the triangle formation longer than we had expected. We thought that a breakout has happened below 5400 but just to be surprised as Nifty entered the consolidation zone again. This makes it imperative to analyse what other indicators and sub- indices are telling us.

In today’s report we are showing Daily, 240 mins and 60 mins chart of Nifty. Let us now analyse what other indicators are trying to tell us.

As seen on daily chart, we have plotted Bollinger Bands® along with price. The lower Bollinger Bands is acting as a good support during the down fall. Please note the lower Bollinger Bands was also falling along with prices but still providing the support. Everytime this level was touched prices consolidated. This confirms prices have been following 2 std deviation band very well. Lately we can see that even the Bollinger Bands has started moving sideways. Both the upper and lower channel of the band is moving sideways without any direction and the distance between the bands is reducing confirming that volatility has reduced largely on “daily basis”. We will now wait for this band to take a direction which will confirm the sideways action is complete. If prices break the upper channel and the upper line changes direction to upside it will confirm that the breakout has happened above and if prices move below the lower channel with lower channel turning down it will confirm downside breakout. Let us not pre-empt the breakout and wait for these bands to give a directional confirmation.

ADX – Average directional index as shown on lower part of daily chart shows current move is trending or consolidation. ADX has been constantly falling and moved below 15 which is an extreme reading. We now expect a strong directional move to begin soon and ADX to start rising again. This will second our analysis that the consolidation is over. For now, along with Bollinger Bands this indicator is still projecting a consolidation phase is on.

On 240 mins chart, we have adjusted the triangle trendline to take care of false breakout. RSI has reached the upper resistance level from where it has generally reversed. A decisive move of RSI above this 60 level will indicate positivity but we will not pre-empt unless that happens.

On 60 mins chart, we can see lot of gapping action. The colorful candles make it very visible. A gapping move up convinces traders that the trend has started up and vice-versa for downward moves. But to only get caught when prices reverses suddenly again after a day or 2 with a gap. We are not convinced to buy in into current gapping rally but would wait for our supporting indicators to provide confirmation of a breakout. MACD on 60 mins is also moving in triangle formation and should give a breakout confirmation whenever it happens.

In short, we have shown some 4 to 5 indicators and none confirms a breakout yet. Let us wait for these confirmations along with prices, unless someone wants to play the range bound strategy but it might be too late for that now.

We are closely monitoring the pulse of market and key levels for us lie at 5600 on upside and 5360 on downside. We are monitoring these levels along with supporting indicators for strong directional confirmation.