If you have been struggling with identifying the trend of the broad markets lately, you are not alone. Globally, there have been wild swings as economies and traders are trying to determine if equities are overbought or likely to continue to rise to new heights.
Through all of the noise of “experts” on television and in print, one thing will always tell the truth: the charts. We need to rely on our own analysis and use the core strategies of Online Trading Academy to find the best opportunities with the highest probability for success.
Focus on the basics of trend and start at the larger timeframe. Looking at the weekly Nifty chart, you can see that we have made lower highs and lower lows in price which suggests a downtrend beginning. The fact that price paused short of the demand of 5907 last week is not a good thing. Usually a pause before a supply or demand allows price to build momentum to break the level.
The daily chart is also bearish as we see the same trend shape. Additionally, the eight period exponential moving average (EMA) is acting as a bit of a trend line for the index. In bullish trends, price fails to close below the EMA. In down trends it fails to close above. Even in Friday’s bullish candle, we closed below that trendline.
As there is no strong demand on the daily chart until 5780, the focus should be on shorting opportunities when prices rally to supply. The moves upward seem to be corrective in nature rather than true buying pressure.
As always, protect yourself with stops when you take any trade. To learn more about trading like a professional, enroll in our courses at Online Trading Academy.