Nifty Analysis: A Bullish Scenario 🚀

26 нояб. 2022 г.

Hi 👋

There are always two potentially predominant scenarios possible in the stock market – Bullish and Bearish . Most people involved in the stock market like to read and appreciate the positive side of the market, that is bullish . This is because they always ‘Buy’ and never sell. They don't even sell to take profit 😉

This idea is representing the bullish scenario of the market. I have used minimal tools – Support and Resistance ; Fib Time Zones; Fib Extensions and a self-developed technique to weigh weaker and stronger sides (bulls & bears) of the market.

Let is discuss them one by one 👇

🚀 Fib Time Zones

Fib zones are helpful in analyzing market cycles but in my experience fib zones have always been a hit and miss experiment, as there is no concrete way in which fib zones can perfectly match the market cycles. Theoretically we match previous highs to project the next peek or we match previous lows to project the next trough in a market cycle.

On this chart I matched the highs of Feb 2021 and Oct 2021 and found that it perfectly projected June 2022 low (marked by Fib zone 3). If this projection is correct and continues then there could be a high (I am saying ‘high’ because we are discussing bullish scenario) near Mid Feb 2023 (Marked as Fib zone 4). This may hold true as long as market trades and sustains above all-time highs.


🚀 Support and Resistance

When I say all-time highs (ATH), it means 18600 ( ish ) levels. Normally these levels stand as strong resistance, because sellers get active taking profits or shorting near those levels. As of now those levels have not been tested by Nifty (spot).

Secondly, there was 18100 level which acted as strong resistance in Apr 2022 and Sep 2022. However, the reaction in Sep was much less compared to the reaction in Apr , which is good for bulls. In Nov, market breakout of this resistance and also tested it once in the later half of Nov.

The test was held, means buyers had an upper hand, and previous resistance (18100) acted as support. Eventually, market resumed the trend established from Jun 2022 lows.

I would personally like to see the market break and sustain above ATH (18600 or so) for it to achieve our projected targets.


🚀 Fib Extension

Fib extension is an effective tool to project markets next move or targets. There are different methods used by different traders or investors or mentioned by different authors in their writeups. Most popular ones being 1:1 extension, 1:2 extension and the ones that conform to the Elliot wave principles.

Measured move:
If I measure the move from Jun low to Sep high and project it for a 1:1 target, it gives us 19650 as the target. This can be taken as a medium-term bullish target for the market.

Elliot:
According to Elliot , 3rd wave can not be the smallest. If I take move from Jun to Sep 2022 as wave1 and late Sep correction as wave 2 then wave3 should be larger than wave1, that means beyond 19650.

Wave3 extension can go up to (1.618 x wave1) or higher. If I take 1.618 extension then wave 3 targets for 21450 (quite ambitious though). We can take it as a longer-term target for investors.

Cup & Handle
Thirdly, if you look carefully there is a cup and handle continuation pattern. This can be made by joining Apr high, Jun low, Sep high and Sep low. The blue Support and Resistance line shown on the chart would be the neckline for this pattern (and is breached positively). The target for this pattern comes out to be = 18114 + 15183 = 21045.

This gives us a zone from 21000 to 21500 as a target for long term investors.

Will the market hit the long-term target on Mid-Feb 2023 Fib zone? Or will it hit the short-term target 19650 at that time? This question should remain open for discussion in the comment section.


🚀 (Bravo) Momentum Technique

There is nothing much fancy in this technique than the Price and Time based analysis. I analyze price waves through the lens of time to measure momentum of the market.

Technical charts are drawn by taking Time on X-axis and Price on Y-axis and this helps in tracking the price moves. I take help of these price moves in identifying bullish and bearish trends.

As a general rule of thumb if the price is taking less time recovering a bearish move then there is bullish momentum. This means bulls are still stronger than bears. The opposite is also true. If price is taking more time to recover a corrective wave then bulls might soon lose ground.

To make it simple, I have drawn red and green rectangles. The red rectangles encase bearish waves and the green ones encase bullish waves. There are two important things that you need to observe – height and width of the rectangles.

Normally height of two adjacent rectangles ( bearish and bullish recovery waves) would be the same. So, it the width that is more important. The width represents the number of days the market takes to complete a wave.

As long as the width of green rectangles is less than red ones, the momentum would be bullish . Normally we see bullish momentum in an uptrend, so there are greater chances that the trend would stay on the upside.
The opposite is true in case of downtrend.

You can see in the chart that although the market was making lower lows from Oct2021 to Jun2022, the width of green rectangles is less compared to red ones. Or you can say that market had been taking lesser number of sessions to recover a down move. This means that bulls were more active and were interested in accumulation at the lower levels (see number of sessions/bars under each rectangle ).
This signals a positive momentum in an uptrend and hence higher chances of the trend to resume.

This method is useful for investors as well as traders. Investors can apply it on higher timeframes and traders on a lower-timeframes, for analyzing, confirming and riding trends.

I hope you learnt something new from this post.
Now do me a favor and hit 🚀 so that I can push myself to write more.

Your thoughts are welcomed in the comment section 👇
Have a great life 👍

📢 Disclaimer: The views are personal and for educational purpose only. It should not be considered as an investment or trading advice. Please apply your own due diligence before investing your hard earned money.