Ah….you might be thinking that i have gone nuts…”how can a afternoon be a morning”???…But for Nifty Traders that can come true….Tomorrow being a weekly close, i just spotted a possible reversal pattern on Nifty Weekly charts which is known as Morning star pattern but the close tomorrow would be the game decider. Lets first look at the following weekly chart
I noticed few interesting things on Nifty weekly charts which supports short term view for covering recently lost ground. Lets first talk about Morning star pattern which has made my headline today. Though the formation is not the text book one but we may still get it too close. In the pattern first candle we need deep red (8288-8048), Second candle should be lower than the first candle and preferably it should be a Doji (8122-7916 and a Dragonfly Doji) and the third candle should trade above second one completely and close atleast 50% into the first red candle..(8080-8168 ?) . So for the pattern to be true we need a close above 8168 tomorrow which is quite possible. Secondly, Nifty has been taking closing support above 50 Weekly average (Pink line which is at 8088) since recent two close and close its intact as support since May 2016 which fuels are biased view for short covering. Thirdly, Looking at indicators such as Weekly RSI, we are oversold and healthy short covering would be better before moving towards last lag of profit booking on Index.
So the targets for short covering moves are 8450-8550!!! “why i still call it a short covering move???” Because my medium term is still of a bearish as i have been posting in my previous posts “500/1000 points to be sucked out of Nifty?”
Now let me take you to a tour of Nifty Daily charts which would give us more strong reason why its just a Short covering and not a rally?
Just one big reason which is supporting my view of a medium term bearish trend is ” Negative 50 day cross over 100 day average as circled” Moving average crossover is the most effective tool i have came across for medium term trend crossovers.
So the strategy is simple:
For traders: Go long on Nifty with stop loss at 8088 with short term targets of 8400/8500
For Investors/Medium term traders: Sell on rise as mentioned in all my previous posts with SL of 8700 with tgts 7800/7670/7450 for next two expiry
For Spread traders: Go long on stocks and short index for next two expiry
Anyways see you guys soon after we near the end of short covering move!! Trade with strict stop loss on both sides…..!!