Is Bank Nifty forming a Head and Shoulder Pattern?
Price Action Analysis:
Price action had formed a Bullish Single Key Reversal Price Bar at the end of last week. This week price surpassed the previous week high and made a high at 22440 and finally closed at 21679 below the previous week close at 21754. Currently price is trading below the Seasonality level of 21763. The current price action on a daily chart suggests a possible head and shoulder in formation. Instead of looking just at classical chart patterns, let’s analyze the price action to understand market psychology. The primary goal should always be to analyse sentiment of crowd and then look for Low Risk High Probability Trade Setups.
Weekly Price Action Analysis:
Weekly Price Bar Structure:
Price Action formed a Bearish Single Key Reversal Pin Bar. Price made a high at 22440 by breaking the previous week high and finally closed at 21679 which is below the previous week’s close 21754.
Why or How Price Action resulted into a Bearish Single Key Reversal Pin Bar?
To understand this let’s look at the story behind this bar. Price opened above the previous close then surpassed the previous week high, and made a new high indicating bulls were in control at the start of week. But then you can see that bears overtook the charge from bulls and pushed the price towards low and closed below the current open and also below the prior high and close. So at the end of the week bulls lost control to bears and finally bears emerged as the winners.
Price bar Range:
The range of the current week price bar is 981 compared to the previous week range of 905 which makes the current week price bar a wide ranged price bar. Wide ranged price bars represent bars represent active markets, where the price movement is more than the normal indicating increased volatility.
Position of Close:
The position of close is in the lower one third of the range indicating sellers have taken control over the buyers.
BORA:
The body to range ratio is 15 which suggests a possible turnaround of the existing price direction.
Body Size:
The size of body (146) is lesser than the wick ((835) both upper and lower wick combined). The current price bar is indeed a Bearish price bar but with a short body indicating weak bearishness as a result of lack of strength, due to reduced commitment from sellers. An alternate scenario with a smaller body also suggests a possible turnaround in the current direction of price. Since the body size is lesser than the wick a detailed analysis of wick, buying and selling pressure is required to determine who is in control? Buyers or sellers and to what extent?
Wick Size:
Analysis of wick is required only when the size of wick is greater than body. The size of upper wick is 615 and the size of lower wick is 220. The upper wick is 2.7 times the size of lower wick indicating selling pressure is 2.7 times that of buying pressure. The upper wick represents selling pressure and is of importance only when size of upper wick is minimum 2.5 times that of the lower wick. In the present scenario the size of upper wick is 2.7 times of the lower wick indicating Strong Selling Pressure.
Buying and Selling Pressure:
The current price action depicts that selling pressure (761) is greater than buying pressure (220). Selling pressure is 3.45 times of the buying pressure indicating sellers in total control. The strength is usually expressed in 3 degrees as Bearish, Strong Bearish, and Very Strong Bearish. The strength of the current price bar is Strong Bearish.
Expectation and Confirmation:
With the current price action analysis we form a Bearish Expectation for the upcoming week. The bearish expectation will be confirmed only when price breaks the low of the Bearish Single Key Reversal Pin Bar at 21459. The Bearish expectation will be invalidated on price surpassing the high of the Bearish Single Key Reversal Pin Bar price bar at 22440.
Daily Price Action Analysis:
Daily Price Bar Structure:
Price Action formed a Bearish Pivot Point Reversal price bar on Friday. The price action on Thursday formed a Bearish Single Key Reversal price bar. The price bar of Friday is also a Down Bar.
Price bar Range:
The range of the down bar is 876 compared and is a larger range when compared to the range of previous 5 bars which makes the current week price bar a wide ranged price bar. Wide ranged price bars represent active markets, where the price movement is more than the normal indicating increased volatility.
Position of Close:
The position of close is in the lower one third of the range indicating sellers have taken control over the buyers. The most important thing to observe is that the current close is below the prior 5 days close again indicating a strong action by sellers.
BORA:
The body to range ratio is 75 which suggests that the current price bar is a very strong bearish price bar which indicates a high probability of trend continuation.
Body Size:
The size of body (656) is greater than the size of wick (220) indicating active participation by sellers. Since the body size is greater than the wick size the analysis of wicks can be ignored and only the buying and selling pressure should be further analyzed for a confirmation.
Buying and Selling Pressure:
The current price action depicts that selling pressure (656) is greater than buying pressure (220). Selling pressure is 2.9 times of the buying pressure indicating sellers in total control. The strength is usually expressed in 3 degrees as Bearish, Strong Bearish, and Very Strong Bearish. The strength of the current price bar is Strong Bearish.
Expectation and Confirmation:
With the current price action analysis we form a Bearish Expectation. The Bearish expectation will be confirmed only when price breaks the low of the Down Bar at 21459. The Bearish expectation will be invalidated on price surpassing the high of the Bearish Single Key Reversal price bar at 22440.
Key Levels and Weekly Volatility:
The key level of the current trend is at 21034 and critical level at 21027. The current weekly volatility increased to 2.4 compared to previous weekly volatility of 1.1. The probable weekly returns is of 521 points from the weekly close, with a measured move in increments of 246 points.
Trade Plan
The point of control of Bank Nifty Spot for the upcoming week is in the zone of 21949. Price surpassing the point of control can find minor resistance in the zone of 22194 and major resistance in the zone of 22440. Price surpassing the major resistance at 22440 can further move towards the zone of 22685 and 22930.
Price staying below the point of control can find minor support in the zone of 21704 and major support in the zone of 21459. Price breaking below the major support can move much lower towards the zone of 21213 and 20968.
Disclaimer
All trade ideas published here are for educational purpose only. All investments involve risk, and the past performance of a security, industry, sector, market, financial product, trading strategy, or individual’s trading does not guarantee future results or returns. Investors are fully responsible for any investment decisions they make. Such decisions should be based solely on an evaluation of their financial circumstances, investment objectives, risk tolerance, and liquidity needs.
Price action had formed a Bullish Single Key Reversal Price Bar at the end of last week. This week price surpassed the previous week high and made a high at 22440 and finally closed at 21679 below the previous week close at 21754. Currently price is trading below the Seasonality level of 21763. The current price action on a daily chart suggests a possible head and shoulder in formation. Instead of looking just at classical chart patterns, let’s analyze the price action to understand market psychology. The primary goal should always be to analyse sentiment of crowd and then look for Low Risk High Probability Trade Setups.
Weekly Price Action Analysis:
Weekly Price Bar Structure:
Price Action formed a Bearish Single Key Reversal Pin Bar. Price made a high at 22440 by breaking the previous week high and finally closed at 21679 which is below the previous week’s close 21754.
Why or How Price Action resulted into a Bearish Single Key Reversal Pin Bar?
To understand this let’s look at the story behind this bar. Price opened above the previous close then surpassed the previous week high, and made a new high indicating bulls were in control at the start of week. But then you can see that bears overtook the charge from bulls and pushed the price towards low and closed below the current open and also below the prior high and close. So at the end of the week bulls lost control to bears and finally bears emerged as the winners.
Price bar Range:
The range of the current week price bar is 981 compared to the previous week range of 905 which makes the current week price bar a wide ranged price bar. Wide ranged price bars represent bars represent active markets, where the price movement is more than the normal indicating increased volatility.
Position of Close:
The position of close is in the lower one third of the range indicating sellers have taken control over the buyers.
BORA:
The body to range ratio is 15 which suggests a possible turnaround of the existing price direction.
Body Size:
The size of body (146) is lesser than the wick ((835) both upper and lower wick combined). The current price bar is indeed a Bearish price bar but with a short body indicating weak bearishness as a result of lack of strength, due to reduced commitment from sellers. An alternate scenario with a smaller body also suggests a possible turnaround in the current direction of price. Since the body size is lesser than the wick a detailed analysis of wick, buying and selling pressure is required to determine who is in control? Buyers or sellers and to what extent?
Wick Size:
Analysis of wick is required only when the size of wick is greater than body. The size of upper wick is 615 and the size of lower wick is 220. The upper wick is 2.7 times the size of lower wick indicating selling pressure is 2.7 times that of buying pressure. The upper wick represents selling pressure and is of importance only when size of upper wick is minimum 2.5 times that of the lower wick. In the present scenario the size of upper wick is 2.7 times of the lower wick indicating Strong Selling Pressure.
Buying and Selling Pressure:
The current price action depicts that selling pressure (761) is greater than buying pressure (220). Selling pressure is 3.45 times of the buying pressure indicating sellers in total control. The strength is usually expressed in 3 degrees as Bearish, Strong Bearish, and Very Strong Bearish. The strength of the current price bar is Strong Bearish.
Expectation and Confirmation:
With the current price action analysis we form a Bearish Expectation for the upcoming week. The bearish expectation will be confirmed only when price breaks the low of the Bearish Single Key Reversal Pin Bar at 21459. The Bearish expectation will be invalidated on price surpassing the high of the Bearish Single Key Reversal Pin Bar price bar at 22440.
Daily Price Action Analysis:
Daily Price Bar Structure:
Price Action formed a Bearish Pivot Point Reversal price bar on Friday. The price action on Thursday formed a Bearish Single Key Reversal price bar. The price bar of Friday is also a Down Bar.
Price bar Range:
The range of the down bar is 876 compared and is a larger range when compared to the range of previous 5 bars which makes the current week price bar a wide ranged price bar. Wide ranged price bars represent active markets, where the price movement is more than the normal indicating increased volatility.
Position of Close:
The position of close is in the lower one third of the range indicating sellers have taken control over the buyers. The most important thing to observe is that the current close is below the prior 5 days close again indicating a strong action by sellers.
BORA:
The body to range ratio is 75 which suggests that the current price bar is a very strong bearish price bar which indicates a high probability of trend continuation.
Body Size:
The size of body (656) is greater than the size of wick (220) indicating active participation by sellers. Since the body size is greater than the wick size the analysis of wicks can be ignored and only the buying and selling pressure should be further analyzed for a confirmation.
Buying and Selling Pressure:
The current price action depicts that selling pressure (656) is greater than buying pressure (220). Selling pressure is 2.9 times of the buying pressure indicating sellers in total control. The strength is usually expressed in 3 degrees as Bearish, Strong Bearish, and Very Strong Bearish. The strength of the current price bar is Strong Bearish.
Expectation and Confirmation:
With the current price action analysis we form a Bearish Expectation. The Bearish expectation will be confirmed only when price breaks the low of the Down Bar at 21459. The Bearish expectation will be invalidated on price surpassing the high of the Bearish Single Key Reversal price bar at 22440.
Key Levels and Weekly Volatility:
The key level of the current trend is at 21034 and critical level at 21027. The current weekly volatility increased to 2.4 compared to previous weekly volatility of 1.1. The probable weekly returns is of 521 points from the weekly close, with a measured move in increments of 246 points.
Trade Plan
The point of control of Bank Nifty Spot for the upcoming week is in the zone of 21949. Price surpassing the point of control can find minor resistance in the zone of 22194 and major resistance in the zone of 22440. Price surpassing the major resistance at 22440 can further move towards the zone of 22685 and 22930.
Price staying below the point of control can find minor support in the zone of 21704 and major support in the zone of 21459. Price breaking below the major support can move much lower towards the zone of 21213 and 20968.
Disclaimer
All trade ideas published here are for educational purpose only. All investments involve risk, and the past performance of a security, industry, sector, market, financial product, trading strategy, or individual’s trading does not guarantee future results or returns. Investors are fully responsible for any investment decisions they make. Such decisions should be based solely on an evaluation of their financial circumstances, investment objectives, risk tolerance, and liquidity needs.
Trade active:
Price action made a high at 21907 and formed a Reversal Price price bar in the zone of Point of Control at 2149.
Trade closed manually:
From the high of 21909 price reached made a low at 21403 and the major support zone is at 21459 where the trade is exited.
