NIFTY has given exceptional gains from the low of 15183 in June to the high of 17992 in August in this year of 2022. This rally seems to be the aftermath of the tensions easing over Putin’s war over Ukraine in Europe. We can hope for a steady recovery ahead but remain careful as the market is expensive.
Let us analyze the Weekly Candlestick Chart of NIFTY:
Our market has been in a strong uptrend since the month of July and by observing the downtrend line, NIFTY has brushed the line. As of 26th August 2022, it is very clear that NIFTY has failed for a breakout. This raises a concern over the shift of the current market downtrend, unless we observe a clear breakout over the downtrend line, market will continue the bearish movement.
Last week’s candle (19th August) on the weekly chart looks like a gravestone doji and the candle being formed for this week (26th August) looks like a hammer / dragonfly doji. The shift to uptrend will depend on the coming weeks whether NIFTY is able to have a breakout over the downtrend line. However, the weekly MFI is about 69 on 26th August 2022. Hence NIFTY is expensive and overbought, there will be selling pressure. It may be wise to book some percentage of profits.
The ADX of NIFTY on Daily Candlestick Chart was as high as 53 on 19th August 2022. Hence NIFTY is currently facing selling pressure as the trend becomes unsustainable when ADX is above 40.
Let us see the candlestick movements of the NIFTY back in 2020 during the recovery phase and then compare it with the recent recovery of 2022:
The candlestick movement pattern of recovery after the fall looks very similar in both the timeframes. We can hope for the market to rise further for good gains on the portfolio.
If we look at the option chain of NIFTY on 26th August 2022, the PCR is 1.49 for the contracts of expiry 29-Sep-2022. Therefore the Option Chain has a clear bullish indication for the upcoming month of September.
The recovery is very clear and strong in BANK NIFTY as banks have come with excellent quarterly results for the first quarter of this financial year. However the fate of NIFTY depends on the breakout over the downtrend line.
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