Nifty: A New Life High?

Dalal Street is pessimistic with the lockdowns and rising cases covid cases.

In last few weeks, global equities have outperformed the Nifty.

With the fear of an economic slowdown, traders and investors are sceptical to enter the markets.

They prefer to stay in cash.

Global Equities Performance

 

Global equity indices have seen V-shaped recoveries from the lows of March 2020.

Nifty started outperforming against the Dow Jones and the DAX between November 2020 to March 2021.

But then the second wave hit us. The market had to factor in new lockdowns and a scarcity of vaccines.

This pulled back the Nifty while global indices continued to go up.

Can Nifty Outperform Against Global Indices?

The technical structure of the Nifty tells us that we are warming up for a mega rally to a new all-time high.

In today's video, I'll explain why...

The risk of lockdowns and rising cases will continue to hinder the markets for a few more weeks.

The technical structure on the weekly bar chart as well as the point & figure chart depicts a bullish scenario.

But before we analyse these charts, let's compare the Nifty chart with the dollar index. This comparison indicates the Nifty is getting ready for a stellar rally.

Nifty vs Dollar Index

 

In this daily chart, I've compared the Nifty (left) to the dollar index (right).

Since the Nifty low in March 2020 and the high in the dollar index, they are moving in opposite directions.

Historically, when the dollar index broke down, Nifty resumed it bullish stance with a time delay.

In last 12 months, this is the third time the dollar index has initiated a fresh breakdown whereas Nifty is on the verge of a fresh breakout.

This breakout will trigger fast and furious momentum but to what levels will it take the index?

Nifty Weekly Bar Chart

 

The candlestick weekly chart above has formed strong bullish candle last week. It ended near the day high.

An indecisive candle in previous three weeks formed a morning star bullish reversal and the follow-up bullish move confirms the short-term bottom is in place at the low of 14,151.

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This reversal candlesticks formed right at the support of 21 EMA (Exponential Moving Average) which was placed at 14,186.

The medium-term technical structure is bullish. Using the top-down approach, we analysed the daily point & figure (P&F) chart.

Nifty P&F Chart

 

In the point & figure chart above, 'X' denotes bullish moves while 'O' denotes bearish moves.

The index has been trading in a range for the past couple of months. The rectangle structure on the chart is an indication of consolidation after the stupendous rally from the low of 7,511 in March 2020.

The 45-degree triangle (in blue) has formed between 14,265-14,926 on the verge of a breakout. These 45-degree lines act as a major support and resistance in P&F charts.

Conclusion

The breakdown in the dollar index signals the bullish momentum might return to the Nifty.

The weekly chart has formed a major bottoming structure due to the morning star candlestick at the 21 WEMA.

The point & figure chart also indicates the index is on the verge of a breakout of the 45-degree line and rectangle formation.

A move above 15,000 will trigger a fast and furious move towards 15,489-16,000.

Investors and traders should not miss this opportunity.

Warm regards,

Brijesh Bhatia
Research Analyst, Fast Profit Report
Equitymaster Agora Research Private Limited (Research Analyst)