There was a lot of activity in the market today. Nifty nose-dived from 7580 . As we can see on the chart, this level has been recurring since the past 4 days and has taken up the status of a very important resistance level for this particular reason.
In-spite of registering a range of 165 points today, Nifty has closed exactly where it opened today forming the Doji pattern which we discussed earlier.
It is important to note the psychology behind today’s movement . Evidently, The selling pressure was present which dragged the market lower, however, as we had discussed yesterday also, a consistent movement in a certain direction requires the market to take a rest, and hence from the level of 7430, we saw the sharp upside move.
Adding strength to this observation is the positive divergence noted on the momentum indicator, RSI. The phenomenon of prices making lower lows with RSI plotting higher highs shows a ‘divergence’ between them and is an indicator of trend change.
What is remaining now is for Nifty to cross above 7580, and if that comes about, we can expect a bounce back atleast upto the level of 7700 due to presence of the Gap highlighted in yellow.
CHART OF THE DAY
COLGATE PALMOLIVE DAILY: A fantastic bounce back was witnessed today . It kept up the movement with the index and closed at 931. This move is expected to continue and the major resistance is present at 1000 as per the trendline. This bounce back is supported by RSI which has turned up from the level 30, which is the overbought level.