Nifty Analysis: May2023

Let’s quickly start this analysis from June 22 lows.

Weekly Chart

There is a clear A-B-C type corrective pattern which tested into previous highs of Oct 2021. I was expecting some support build up near 18000 levels (for the trend to resume on the upside) in Dec 2022 but that did not happen, and the market just drifted lower and lower to previous support area around B.

Currently it is again bouncing hard towards the prior swing high A. From this structure it seems market is in a mood to trap more buyers on the upside before losing strength for new lows below B (continuing a potential H&S). But is that really true? Let’s get down to the daily time frame (left chart) and find out.

Daily Chart

We can see a corrective LH-LL structure which is still intact as per my understanding. I won’t consider Feb 2023 lows as a lower low (because of poor thrust below Jan 2023 lows). This is why the Feb swing high (18135 or so) would remain a LH in the trend channel.

Also visible in the chart is a sharp rally from Mar 2023 lows, an Inverted Head & Shoulder pattern and a break of its neckline above 17800 zone, good omen for the buyers. But remember that lower high is still intact.

Looking at the price behavior of this rally, it is totally agreeable that there is a potential for shift in structure (for uptrend) with a close above 18135 this week.

Now the question is that whether the higher timeframe weakness with an ABC corrective and a potential Head & Shoulder pattern would prevail over the strength on the lower timeframe chart?

The answer is that its difficult to predict with 100% accuracy. But one thing that can be done confidently is to manage your trades properly.

For short-term trading I would say that booking some profit (if bought near the lows) is definitely an option. Reaction from previous resistance areas is a time-tested behavior, so one can always trail and lock profits in case of doubt.

For this trend to continue on the upside, any test of 17800 has to hold. A failure of this level may put this trend in jeopardy. Similar lines can be seen in Oct2021 to June2022 correction.

So the conclusion is to book a little if you want and lock the rest with trail below 17800. Any new buying at this point would remain a question mark.

Thanks for reading.
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Disclaimer: All the views above are personal only and not an investment or trading advice. So you will have to apply your due diligence.

Comment:

Market closed above 18135 and there is now some dilly dallying with overlapping bars, some contraction going on. Generally, contractions lead to expansion. An expansion on the upside might take us near 18500 or higher while expansion on the downside might test back the BO zone of 17850 or so.

Comment:

Sustaining and closing above the overlap zone would only increase the probability for 18500.

Comment:

Closing is always more important than the intraday chaos. Market saw a gap down in the opening and then not much selling. Only buyers were active throughout the day. A strong close after gap down indicates that there is still strength in the market. And again, it closed above the overlap zone, which is a good omen.