Reversal from support aided by Morning Star pattern

 

The status quo remains unchanged. Nifty again bounced back from the support level of 10600 aided by the Morning Star candlestick formation.

Morning Star

A three-day bullish reversal pattern consisting of three candlesticks – a long-bodied black candle extending the current downtrend, a short middle candle that gapped down on the open, and a long-bodied white candle that gapped up on the open and closed above the midpoint of the body of the first day.

(Source: StockCharts.com)

 

Trend Momentum:

  • Nifty has broken down from the upward sloping blue trendline but bounced back above the line.
  • The basic characteristic of the market is trendless as reflected by ADX(14). That is why it is oscillating between the support /resistance levels. Notice the Aug-Sep-Oct period when the line is consistently above 20 and the kind of trendiness Nifty was exhibiting.

 

Trend Momentum (ADX)

Nifty Daily:

  • Bounce back from the 10600 support for the fourth time.
  • FULL STO and RSI reversing from the oversold levels.
  • I think it’s better to wait and watch this time rather than to again play the bounce back to 11000.

 

Nifty Daily

 

The Fear Factor:

  • VIX has fallen close to 8% today, but the negative crossover should go for the market to rally further.

 

Nifty & INDIAVIX

 

On the last weekend post, I have suggested that the market should be below 10700 on a closing basis for 3-4 days for a breakdown to happen. That possibility is negated with a close above 10700 today. The prudent thing is not to immediately get bullish but to watch the price action for the next few days.

 

 

Reversal from support aided by Morning Star pattern
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