Nifty Reversal Watch: Key Demand Zones & Moving Average in Focus

Feb 27

As a pure technical analyst, I rely solely on what the charts reveal, ignoring the noise of news and fundamentals. Charts tell the story in advance.

As a demand and supply zone trader, my primary focus is on identifying key areas where institutional activity is likely to drive price action. Today, we’ll analyze the Nifty 50 through the lens of demand zones and then complement it with traditional technical analysis using moving averages. This analysis aims to provide clarity on potential reversal zones and market behavior.

📊 Demand Zones: The Foundation of Analysis

• Monthly & Quarterly Demand Zones: On the monthly timeframe, I’ve identified a critical demand zone. When we zoom into the quarterly timeframe, this zone aligns perfectly, creating a high-confluence area. These zones represent institutional footprints (Banks, mutual funds, etc. [FII & DII]), indicating where smart money is likely to step in. These are not just traditional lines or boxes on the chart; they are the footprints of institutions that control the market.
  
• Significance of Demand Zones: Demand zones are areas where buyers are expected to dominate, often leading to price reversals. The confluence of monthly and quarterly demand zones increases the probability of a strong support level.
  
• Current Price Action: Nifty is currently hovering near these demand zones, suggesting a potential bottom formation.
  

📊 Traditional Technical Analysis: Moving Averages
Now, let’s analyze the market through the lens of traditional technical analysts who rely on moving averages.

• EMA 20 on Monthly Timeframe: The 20-period EMA on the monthly chart acts as a reliable support level historically. Since 2004, price reversals have consistently occurred near this moving average, marked by green circles on the chart.
  
• EMA 20 as a Magnet: The EMA 20 on the monthly timeframe is equivalent to the 400-period EMA on the daily timeframe, representing the average price of almost 400 days. In trending markets, price always reverts to its average, making this a critical level to watch.
  
• Historical Exceptions: While there are rare instances (marked by red circles) where Nifty has broken below the monthly EMA 20, the presence of demand zones adds an extra layer of support, reducing the likelihood of a significant breakdown.
  
• Current Price Action: Nifty is currently near the monthly EMA 20, which coincides with the monthly and quarterly demand zones.
  

📊 Combining Both Approaches

• High-Confluence Area: The alignment of monthly and quarterly demand zones with the monthly EMA 20 creates a high-confluence area. This increases the likelihood of a strong support level and a potential Bottom.
  
• Risk Management: While the setup appears promising, it’s crucial to manage risk effectively. Always use strict stop-loss orders and avoid over-leveraging. Even high-probability setups can fail, especially when market sentiment is overwhelmingly negative.
  

📊 Conclusion
The Nifty 50 is at a critical juncture, with multiple technical indicators pointing towards a potential reversal or consolidation. The confluence of demand zones and the monthly EMA 20 provides a high-probability setup. However, always remember that no setup is foolproof, and risk management is crucial, it’s essential to remain cautious as markets can sometimes defy all technical setups.

This analysis is purely for educational purposes and is not intended as trading or investment advice. I am not a SEBI-registered analyst.

Lastly, thank you for your support.
"The market is a master of patience; trade with discipline, not emotion." 🚀📊

Mar 20

Trade active

At the end of February, I shared an analysis where we identified the monthly and quarterly demand zones, expecting Nifty to form a bottom in this region. And that’s exactly what happened—Nifty found strong support at our identified levels and bounced back.

The supply and demand concept is a powerful tool for spotting market bottoms because it’s not based on mathematically calculated indicators but on actual institutional footprints. Today, Nifty has also broken the falling trendline, marking a key technical development.

The next hurdle is the daily supply zone, where the price may face rejection, as highlighted by our indicator. The overall structure is still in a downtrend, with lower highs and lower lows. However, if this supply zone is breached, it will confirm Nifty’s bottom, paving the way for a stronger rally, as the higher timeframe demand zone has already provided support.

Mar 26

Note

Five days ago, we highlighted that the next hurdle for Nifty was the daily supply zone, where the price could face rejection. And as expected, Nifty struggled at this level, with the upmove getting halted exactly at the supply zone.

If Nifty is to shift into an uptrend, it should avoid a deep fall from here. Instead, a small pullback followed by a new high would confirm that the trend has transitioned from bearish to bullish.

In my earlier analysis, I emphasized that demand and supply zones are not just random boxes on a chart—they represent the footprints of institutional players. And what happened? FIIs, who had been selling aggressively for months, suddenly started buying when the price reached the higher timeframe demand zone, leading to a strong move up.

When I first shared this analysis, many believed that predicting a market bottom was impossible. The general sentiment was bearish—people feared a bigger crash due to high PE ratios and continuous FII selling. But if you check my February 27th analysis, in the first line you’ll see "As a pure technical analyst, I rely solely on what the charts reveal, ignoring the noise of news and fundamentals. Charts tell the story in advance." and our analysis was spot on.

Trust your analysis, and never underestimate the power of demand and supply zones!