Nifty Index Weekly Chart Analysis
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As can be seen in the Nifty weekly chart, the index, after registering an all-time high of 9,119.20 levels in the month of March 2015, has entered into a sharp correction mode and thereafter has been forming a sequence of lower top and lower bottom pattern for a long period of time. If we plot a trend line on the Nifty weekly chart from the all-time high level of 9,119.20, it’s clearly evident that as soon as the Nifty index re-tests the downward sloping trend line, it forms a bearish candlestick pattern and then enters into a sideways and corrective phase. The re-test levels are marked in the chart with a red small triangle. This suggests that the market has been facing strong supply at the higher levels and the pullbacks have been used either to book profits or create a fresh short position in the market.
On the other hand, the momentum oscillator RSI, after showing a negative divergence at an all-time high level of 9,119.20, has been forming a lower top and lower bottom for a long period of time. This suggests that the momentum on the upside is missing and the market participants are facing exhaustion at the higher levels. If we plot another trend line that connects the major low formed on the Nifty index since October 2015, we can observe that strong support is exhibited by the index around the levels of 7,550-7,490 and the index has formed a strong base around these levels, thereby managing a decent up-move from these support zones in the past.
Currently, the index on the weekly chart has been trading in the channel on the higher side levels of 8,350-8,430 and this will act as a strong resistance zone for the index, while on the lower end it will provide crucial support for the index at the levels of 7,450-7,500. A decisive breakout above the levels of 8,350-8,430 on the weekly chart will open up gates for higher targets up to levels of 8,650-8,800 in the medium term. On the other hand, if the index breaches its crucial support levels of 7,450-7,500, it may bring in panic sell-off and this may lead to levels of 7,100-6,900 in the medium term.Here are the key levels to watch out for in the medium term:
| Ideas | Nifty Levels | Action to be Initiated | Probable Targets |
| Resistance for medium term | 8,350-8,430 | Close above 8,350-8,430 on the weekly chart would give further momentum to the bulls. | 8,650-8,800 |
| Support for medium term | 7,450-7,500 | Close below 7,450-7,500 on the weekly chart would trigger panic sell-off. | 7,100-6,900 |
As can be seen in the Nifty daily chart, the index has formed a double top pattern around levels of 8,320-8,346 and this pattern is considered as a bearish pattern. The index, after registering double top around the level of 8,346 in the month of October, witnessed a sharp decline of about 600 points in just 14 trading sessions. Currently, the index is trading below its important short-medium-long term moving average i.e. 21-day EMA (7,925), 50-day EMA (8,008) and 200-day EMA (8,143). This suggests that the trend on the daily chart is in favour of the bears.
If we plot a Fibonacci retracement from the lower level of 7,539.50 to the swing high level of 8,336.30, we can observe that the index has been moving between the 50 per cent to 78.60 per cent retracement ranges i.e. in the range of 7,940-7,700. So this indicates that the index is consolidating in the range of 240 points and any fresh trigger would result in range expansion for the short term.
Short-term traders therefore need to keep a watch on the level of 7,690-7,720. If Nifty, in any case, fails to hold this support zone of 7,690-7,720, it could slide towards the levels of 7,580-7,450 in the short term. On the upside, the index is likely to face supply around the levels of 7,930-7,950. If the Nifty manages to close above this level, expect re-test of 200-day EMA i.e. 8,150.
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Here are the key levels to watch out for in the short term:
| Ideas | Nifty Levels | Action to be Initiated | Probable Targets |
| Resistance for short term | 7,930-7,950 | Close above 7,930-7,950 on the daily chart would give further momentum to the bulls. | 8,150-8,180 |
| Support for short term | 7,690-7,720 | Close below 7,690-7,720 on the daily chart would trigger panic sell-off. | 7,580-7,450 |
Conclusions
After putting all the studies together, we can arrive at the following conclusions:
Current trend is range-bound with the levels of 7,690-7,720 acting as a strong support and levels of 7,930-7,950 acting as a resistance level.
Intermediate trend is sideways to negative and will turn into favour of the bears if the index closes below the level of 7,690.
The long-term trend is down as the index has been forming lower top and lower bottom pattern on the weekly chart and has been trading below its 200-day EMA on the daily chart. The RSI is also forming a lower top and lower bottom pattern.