Lessons from the Pros

India Markets

Where Is The Top? – Follow Up

Last month in my article, “Where is the Top,” I discussed the probability of the markets doing a small correction before making another run at the old 2010 price highs. I wanted to look at the follow through and see how the Nifty and Sensex performed and where they may go in the future.

In my February article, I noted that the indexes were approaching supply and with a negative divergence on the RSI were showing signs of retracement possible.

2013 nifty weekly

Looking at the current chart, you can see that the retracement from the supply did indeed occur.  We pulled back toward a weekly demand and the RSI did hold above 40 so the bullish overall trend is still intact.

march 2013 nifty weekly

Though we did not have a lower low made on the Nifty or the Sensex, I am concerned with the price action that I did see.  On the daily chart of the Nifty, you can see that the last impulse was shorter than the preceding one.  This is a sign of weakness.  Additionally, when prices moved back upward, they stalled last week at a daily supply zone.

march 2013 nifty

If the Nifty breaks the 5650 level, price will have made lower highs AND lower lows on both the daily and weekly charts and that is the definition of a bearish trend.  Should this happen, 5200 could be the next stop for the index.

The Sensex is similar in its picture.  You can see the lower highs that have occurred after pulling away from the supply zone.  We need to hold the early March low to maintain the bullish trend or else a retreat to 17700 is likely.

march 2013 sensex weekly

So watch prices closely, they offer you the clues as to where the markets are most likely to move and tell you how you should be trading.  To learn more about reading price action, visit Online Trading Academy today and enroll in one of our Professional Trader courses.

DISCLAIMER This newsletter is written for educational purposes only. By no means do any of its contents recommend, advocate or urge the buying, selling or holding of any financial instrument whatsoever. Trading and Investing involves high levels of risk. The author expresses personal opinions and will not assume any responsibility whatsoever for the actions of the reader. The author may or may not have positions in Financial Instruments discussed in this newsletter. Future results can be dramatically different from the opinions expressed herein. Past performance does not guarantee future results. Reprints allowed for private reading only, for all else, please obtain permission.

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