Nifty Hourly Chart

Nifty is forming reverse Cup and handle pattern. Early sign of the correction?

by Mitali Dutta on Market Analysis, Market Wrap

Nifty Chart
(Nifty Chart)

Nifty is in the process of making a reverse cup and handle pattern. Starting from May 20th and till today 28th June, the formation is near completion. However, the confirmation is not yet present in the index. Once the last swing low is breached, we can be ascertained about the formation.

So can this be treated as an early sign of the correction? Honestly, no one knows there will be any correction or not. But as an individual, we should rely on the price action and have to take our decision accordingly.

The question is – where will be the market heading based on the recent scenario?

Let’s analyze that.

Hourly Technical: On the Hourly chart, the index is trading within the 100 and 200MA. The 200Ma is above the price and the 100MA is trading below the price. This is why on the last trading Hours we witnessed choppiness.

Most of the Moving Averages are trading above the price except the 100MA and the price is standing just above this MA line.

As per the technical indicators, RSI is at 41, Stochastic is below 10, ADX is at its 15 level and the CCI indicator is below the -120.

So overall there is a weakness in the price. In case the price breaches below the 11775, there could be a fall up to 11650 level. 11650 is the latest support of the index. But in case the index bounces back from this level, 11900 would be its immediate resistance.

Nifty Hourly Chart
(Nifty Hourly Chart)

Daily Technical: As we mentioned earlier, there is a reverse Cup and Handle formation is building up in the index. The will be confirmed if the index starts trading below 11625. In case that happens, 11300 would be the support level of the index.

On the technical side, RSI is trading at its 50 level, Stochastic is at 43, ADX is at 20 and the CCI is below the 0 level.

The indicators positions are not so weak at this moment. There can be further consolidation until the index breaks the high (11911.15) or breaches the low (11625).

On the downside, we have the 100 (approx. 11441.63) and 200MA (approx..11098.90) for the support. The resistance would be at 11900 level if the index starts moving upward.

Nifty Daily Chart
(Nifty Daily Chart)

Weekly Technical: In the weekly chart, we had a negative divergence in the RSI indicator. So if the index starts trading below the mid-Bollinger (presently at approx. 11505), there will be the confirmation of the divergence.

In technical term, we call it M top formation. Divergence in the RSI indicator plus 1st swing high is outside the Bollinger band and the second high is within the Bollinger band.

If there is confirmation, we can expect a decent fall in the index despite multiple support of MAs and the price can fall fiercely.

On the technical side, RSI is at 60 level, Stochastic is at 68, ADX is hovering at 15 level and the CCI is above 50.

So as of now, there is no sign of correction or fall. If that happens, 11000 and 10500 level will be the important support level. On the upside, any gain in momentum will only occur when the index will break the lifetime high (12103.05).

(Nifty Weekly Chart)

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Nifty Technical Chart
(Nifty Technical Chart)

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