IS MARKET HEADING FOR A CORRECTION
Technical Analysis of NIFTY and BANKNIFTY Daily Charts
Market is on a Bull run ever since aftermath of the fall in
Mar-2020 due to Covid Panic. The acceleration has even increased after Nov-2020
when NIFTY broke its all-time high of 12400 level and started upward journey.
The journey is still continuing as market is not showing any sign of fall.
Similarly, BABNKNIFY has also started its up move from Apr-2020, however, its pace was not as it was for NIFTY. BANKNIFTY had to struggle till Feb-2021 to break its all-time high of 35000 mark. The momentum is still continuing towards up and standing near the new all-time high at around 37700.
What is General View
Mixed responses are coming from the media houses as well as in the social network platforms, about the future of both these indexes. Both the indices as well as most of the blue-chip stocks are standing near their all-time highs. People start discussing about market correction each time the price reaches a new high. Each time experts predict market to correct, market makes a new high.
Prices do make retracements however for correction, there should be significant and noticeable reason. During pandemic when the entire world was in uncertainty, global sell-offs were registered, taking market down by around 40 percent causing a recession type situation. However, there is no such panic around now. Only because of Market is at all time high it is not prudent to say that it will fall.
Wait..... RSI Divergence Noticed !!!
RSI is a momentum indicator which is derived from the price action. When RSI reaches 70-80, it is said that, it is an overbought position, hence price falls. Similarly, when RSI is at lower side near 20-30, then it is called oversold and buyers take the control which makes price to move up. This is a general concept of RSI.
Like any other indicators, in RSI also there is divergence appears in rare occasions. Divergences are strong when it appears near the overbought or oversold regions. There is 3 Bar Divergence 5 Bar Divergence, sometimes even 9-12 bar divergence are also effective.
What is RSI Divergence
RSI Divergence at overbought zone is something which shows that Price makes new high, however RSI makes lower high. If the divergence appears in adjacent bars it is told to be more stronger. So 3 Bar Divergence is stronger than may be 5 Bar Divergence and 5 Bar Divergence is stronger than 7 Bar Divergence and so on.
NIFTY and BANKNIFTY Chart Analysis
If we look to the NIFTY and BANKNIFTY daily charts (which is also depicted in the below picture), a clear divergence
is noticed (Blue Arrow in the below charts), indicating prices will correct from
here.
In earlier occasions when market was making new highs, there was no such divergence recorded on charts and hence market was making new highs. Since the divergence is appearing now, we can certainly tell that price will correct from here. However the divergence will be confirmed only when the market will close below the previous immediate low (marked in Red Line in the charts).
Similar RSI Divergences are also observed in many NIFTY50 stocks like Reliance, Kotak Bank, HDFC Bank, Indusind Bank and Bajaj Finserve to name a few. Charts depicting divergence are placed here to make the readers understand the scenario.
Placed below are analysis from few of the NSE Charts in which divergence are marked for readers understanding.
BAJAJFINSV
INDUSIND BANK
In case you like this analysis, please comment and share with your acquaintances. We are here to produce such scenarios based analysis in this platform including discovering new stocks on behalf of the readers.
Readers are also invited to read our recent posts where we have tried to explain movement of few stocks, most of which are moving in the anticipated direction.
- Coal is next gold posted on 25-Sep-2021
- 2 Multi-Bagger Stocks - Post Covid Scenario posted on 11-Sep-2021
- Hospitality And Textile Sectors To Grow Multifold In 2021 posted on 11-Sep-2021
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2 Comments
Can we conclude that Market will fall from here.
Reply DeleteIf not then it will definitely consolidate in this region for some time now.
Reply DeleteIf you have any doubt, please let me know.