One of the important aspects of reading price action is to make observations, try to understand the navigation map and the market behavior. It gives you many reference points to think about and guess what the market can do in the future. Let us try to read Nifty rally over the last five months
Here’s the Nifty daily Chart
Source: Chartalert.com
- The Turnaround Point: Nifty broke out above 200 dma on 17th July on the back of strong earnings from frontline Tech stocks.
- Base Building at 200 dma: Nifty then spent two months building its base at 200 dma and finally bottomed out on Sep 24 2020 at 200 dma
- Nifty since then has rallied 27% over the last 3 month period.
- Every correction on the way up was met with equally strong buying. Nifty during the next week will have to prove that the trend is intact by closing at new high
- Nifty during this rally breached Jan 2020 high of 12431 and hence this should act the LINE OF SUPPORT during any panic sell off
The Real Fundamentals of the rally:
India is going to emerge stronger in post covid world.
Liquidity: FIIs have pumped in Rs. 121000 crores in the Indian stock market since Sep 2020
The Flood of money is changing the perception of even super bearish individuals and has made the market buy on dips. Once the sentiment starts changing, then everything changes as people start feeling positive about the economy and the markets.
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Disclaimer – The state of the market notes is Deepak’s perspective on the market. The column is purely for educational purposes. Nothing contained herein is a solicitation to trade or a recommendation of a specific trade. By reading this publication you agree to make no trade relying in whole or in part on the comments of the writers