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
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