By VK Sharma
The Nifty has done well to close with a gain of 0.94% last week at 24,131. While the gains may not look that astounding considering the clean sweep by the NDA in Maharashtra, what is credible is that it has closed above an important trendline.
This trendline number 32 was drawn by joining the lower tops of 25,212 registered on October 15 and 24,537 on November 6. The benchmark index surged with a sharp upward gap on Monday (November 25), following the assembly election results announced on Saturday (November 23).
After trading within a narrow range during the first three days of the week, the benchmark plummeted on Thursday, losing 401 points, breaking trendline 32 in the process, and closing the gap created during Monday’s surge. However, on Friday, it rebounded strongly, gaining 217 points to close at 24,131, reclaiming its position above the critical trendline.
An important development that should not be missed is that the Nifty SmallCap Index rose 5.04% last week and has risen for six sessions on the trot. Students of technical analysis should note that while this index has made a series of lower lows on 8th October,15th October and 18th November, the RSI has made a higher low on each occasion! This positive divergence augurs well for the markets.
The story is similar for the Nifty Microcap Index which has closed higher for the past six sessions on the trot, gained 5.9% last week and demonstrated positive divergence since 25th October. Both indices have never closed below their respective 200-day exponential moving average in CY 2024.
The tail is clearly wagging the dog!
Better tidings seem to be in store for the Nifty. If you look closely at the lows of November 4, 21 and 28 you can visualise that an inverted head & shoulder pattern is in the making. The low of November 21 is the head.
Please remember that this is just a possibility which can become a reality if the Nifty closes above the neckline, which is currently placed at 24,270. This neckline (trendline no 34) is formed by joining the highs of November 6 and 25. However, there are multiple resistances in the vicinity. So, it will be better to wait for the Nifty to breach the level of 24,350,
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