Closer to a Breakout

The apex (end) of the triangle has been reached. Above 4800, the Nifty should have broken out of the triangle. And it did and stayed above 4800 for about an hour or so. But it did not give us the kind of ‘explosive’ move that we were looking for. If it does not then we shall consider this to be a false breakout. If it does go above 4800 tomorrow, which seems improbable at the moment, then we shall again be looking for that ‘explosive move’.

The world markets are in a bad shape. The Dow Jones was down about 2% while the Nasdaq was down about 3% on Friday. The Asian markets, which were all in the green on Friday, reacted sharply on Monday with the Nikkei (Japan) and Hang Seng (Hong Kong) down in excess of 3%, the Singapore Straits almost there, and the Indonesian markets down by 1.4%. The Chinese markets were the biggest losers and the Shanghai index lost almost 6% on Monday. The European markets, at 6pm IST on Monday, were down about a percent each.

The triangle remains valid between the levels of 4700 and 4770 now. Any move outside these boundaries, without any explosive move, will mean that the triangle is not valid. In all probability, unless the American markets do well on Monday night and the Asian markets do brilliantly on Tuesday morning, Nifty will open between 100-150 points down. This means that we shall be looking at an opening figure of around 4650. And that is already outside the limits of the triangle. So either an explosive down move may come which may take us all the way down to 4480 or we should find support near 4630. If we do find support at 4630 then that invalidates the triangle pattern.

But what is it if it is not a triangle. Let us look at some other scenarios as well. For that refer to the chart above. This is the daily chart of the Nifty. You can see two blue rectangles here. These are the two ranges that the Nifty is moving in. One is a broader range between 4480 and 4980 and the other is a range within this range between 4630 and 4830. One interesting point that comes to mind is this smaller range is exactly in the centre of the bigger range. The mid point of both these ranges happens to be at 4730. So, 4730 is a key pivotal point below which the markets remain bearish and above which they turn bullish. So, if the triangle is not valid then we are looking to move between these two ranges. A move outside the broader range only will signify a clear trend for the Nifty.

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