The markets have been racing to new yearly highs. There are a lot of people wondering how much longer this movement can last. Some of the bears are already crawling out of the woodwork stating that we are overbought and should be shorting the upcoming crash.
As I write this article, the German courts have approved the ECB’s planned rescue of the European bailout. We are still waiting for Ben Bernanke to announce the Federal Reserve’s plan for the United States Monetary Policy. The German news was bullish for the markets; we will have to see if Big Ben will also bolster the bullish move.
However, much of this news is irrelevant. As Online Trading Academy’s graduates have found, the news is more of an excuse or accelerant for moves that were already poised to happen. So let’s take a look at the charts and see what they are telling us about the future for the major equity indexes.
The NIFTY daily chart is very bullish. On the last retracement at the beginning of the month, the RSI did not break 40. This is a signal that the current impulse should reach new highs. We can see that we are approaching several supply zones and may start to see some profit taking.
The price action suggests only a small correction in the uptrend. To look for where the bullish trend may reverse, we need to look at the larger, weekly chart. The fast approaching supply zone on the weekly chart has already been tested and is therefore weaker. I would expect that the move may continue until price reaches the higher, fresh supply zone.
Looking at the Sensex, we see a similar picture. There are supply zones on the daily chart.
But these daily supply zones are part of an older weekly supply zone that has been tested. The former testing of that supply means it is weaker and may only offer smaller corrections, not reversal. Look for a test of the higher weekly supply before looking for bigger shorting positions.
Be sure to do your own analysis on the markets before putting your money at risk in the markets. You are ultimately responsible for your financial health. If you are not sure how to identify the trend or turning points, come join us in one of our classes. Trading is a skill that can be learned and enhanced.