The Nifty has been slumping recently and I have been asked by many students where I think it will be headed. I have decided to turn to the price charts of the Nifty itself since the answers to where price is headed are usually on the charts themselves.
Students of Online Trading Academy know that we never want to do analysis from one time frame perspective only. Looking at multiple time frames will allow us to gain a better perspective and more accurate price forecasting.
As I write this article, the weekly chart of the Nifty appears to be bouncing from a demand zone at 5477-5550. This may only be a small bounce before a further decline. Prices have made a lower high and lower low which not only completed a head and shoulders formation but also fits the definition of a downtrend. The demand is also weak as it has been previously flirted with in June.
If the current level does not hold, we may see a drop to the 5350 demand. One of my criteria for how well a reversal pattern will work is whether it is occurring at a supply or demand from a larger timeframe. The saving factor for the bulls is that the current price movement is at a monthly supply zone, but an older weakened one.
So now turning to the smaller, daily chart to see what actions a trader may want to take, we are at a supply zone that if the larger market is to turn bearish, needs to hold. If the Nifty breaks 5808, then we are likely to see a return to bullish price movement. If the price level holds, then we should see a drop to the next demand zones at 5350 or even 5240.
Keep an eye on the charts. Price action gives you all you need to know about where the highest probability movement will occur.