In the last week, Nifty has followed bullish breakout of the last leg of the Diamond formation, but it has failed to give successive move
Shrikant Chouhan
In our previous technical column, we were of the view that the Nifty was forming a Diamond consolidation, with bullish implications on the weekly charts.
We mentioned that the Nifty had formed a Hammer formation, followed by a bullish Harami, which was an indication of capitulations of long positions. Such type of formations gives buying opportunities in the market.
In the last week, Nifty has followed bullish breakout of the last leg of the Diamond formation, but it has failed to give successive move.
Rather, it has formed one more Diametric/Diamond formation on an intraday basis since January 16 and has managed to again close higher on January 18 at 10,906.
Weekly closing (10,906) is not only above the high of the previous week (10,870) but also is the highest closing since November 2018, when Nifty was at 10,877.
Technically, we are of the view that market is all set to move higher as it has completed one more leg of correction on the lower time frame.
However, we cannot forget that we are into the corrective upward move and on the completion of it, another round of trending sell-off is more likely. Based on our overall experience, if we wait for a specific pattern of movement in the stock market, then either it never comes, or it comes with unusual reason and at unimaginable levels.
The current upward corrective pattern may end at any level between 11,000 and 11,770, more likely to end between 11,200 and 11,400. The short-term pattern is progressing in such a way that Nifty would hit the level of 11,200/11,300.
The strategy should be to trade long above 10,940, keeping a final stop loss below 10,800. On the higher side, we can expect Nifty to touch 11,300 with a minor resistance at 11,050 and at 11,200.
Support has shifted to 10,800 from 10,670 and below 10,800, it would again retest the level of 10,600 or 10,550.
The author is a senior VP- Technical Research, Kotak Securities.
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