The Nifty, over the last few weeks, has witnessed sharp swings in both directions. The larger structure shows that oscillations are nothing but part of the distribution structure.
On the monthly chart, the index has formed a Doji pattern for May. This is a sign of exhaustion in the rally. Thus, the recent high of 10,929 becomes a crucial hurdle.
The daily chart shows that the Nifty has retraced little more than 61.8 percent of the fall from 10,929 to 10,417. In terms of price patterns, it has a potential to form a bearish wedge pattern near the key Fibonacci level.
In that case, the index can attempt one more push on the upside towards 10,800, which is close to the 78.6 percent retracement mark. That would be the terminal leg on the upside and is likely to be followed by a significant fall. Hence, sell on a rise would be the preferred strategy from a trading perspective.
The bounce towards 10,800 can be used as an opportunity to initiate fresh shorts. Reversal of the bearish view can be pegged above the recent high of 10,929.
On the downside, 10,558 and 10,417 will be key supports to watch out for. Overall the short term target on the downside is 10,325.
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The stock formed a channelized pullback over last few sessions. Overlapping structure in the pullback confirms that it was a countertrend move. Recently the stock has broken the lower trendline & has resumed the larger downtrend. The daily momentum indicator has given a fresh sell signal.
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The stock is showing a pullback after an Impulse on the downside on the daily chart. To end the pullback the stock is forming an Ending Diagonal pattern.
For last few sessions the stock is facing resistance near the key daily moving averages. Hence it looks poised for the next impulsive move on the downside.
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The stock looks poised for a recovery after the multi week decline. The daily momentum indicator has triggered a bullish crossover. Thus the stock can bounce back to test its crucial weekly moving averages.Disclaimer: The author is Senior Technical Analyst at Sharekhan. The views and investment tips expressed by investment expert on moneycontrol.com are her own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.