Markets waiting for a trigger point

In the last week, Nifty started off in style as it had witnessed a gap-up opening and the bulls followed it by scaling to a fresh all-time high of 15257. However, soon after registering a fresh all-time high, the market participants looked hesitant after a relentless rally, which has been experienced since Budget Day, and preferred to take the profit off the table. As a result, on Wednesday, Nifty filled the opening gap of February 8, and thereafter, the bulls tried to pull back, but their attempt was half-hearted.  As a result, the index ended the week by forming an indecisive candle. However, on a weekly-basis, Nifty gained 1.60 per cent, extended its winning streak for the second successive week.   

The last week of trading was a very unique one as out of the five trading sessions, Nifty had formed an indecisive bar in three sessions. The index traded within a narrow range of 280 points throughout the week, but within this narrow range, tremors of volatility were witnessed. Further, on a weekly time scale, Nifty had formed an NR4 bar, which means that the last week's range is narrowest in the last four weeks. Hence, the high and low of the last week is going to be crucial levels for traders to watch out for. Sustaining above the high of previous week i.e., 15,257 would open gates for upmove towards the levels of 15,450, while, on the other hand, a close below 14,977 shall usher in a corrective downside with eventual targets placed towards 14,600 levels. 

On the lower timeframe, the Bollinger Band is narrowing as well, which indicates a contraction in the volatility. Meanwhile, a contraction in volatility is followed by an expansion in volatility. Hence, the index is positioned itself for the next leg of move in either direction, which can be sharp, based on the direction in which it breaks out.