Update for 28th June 2011

   Now, the Moving Averages At Play !

After three days of strong gains, Nifty future contracts are taking a breather after encountering resistance offered by the daily moving averages. In fact the 50 and 100 day moving averages ( DMAs ) of the Nifty contracts are in convergence at the 5550 levels. ( Please see the DMAs Chart below for details. ) The 5550 to 5650 area has been an important reference point and has acted both as support and resistance for a long time. As such the it is natural for the Nifty contracts to spend some more time trading at the present range.  Since the present uptrend has started as a reversal after the break of an important support level, the trend may have to continue for some more time with some upside. A break above of the 5550 - 5560 area may help the Nifty futures to test the convergence of 200 DMA and the falling trend line at around the 5725 - 5750 levels.   

Nifty Futures - DMAs Chart

Nifty Futures - Daily Chart

Update for 27th June 2011

  Back in the Old Trading Channel, Now What ?

After the stupendous rally of last Friday, Nifty index and the futures contracts are already back in the old trading channel. Now, the important question is whether the present bounce is the start of new leg of medium term trend or not. Unfortunately, the answer to the million dollar question will remain unanswered until the market itself reveals it's hands. As the important question remains unanswered, let's examine the key takeaways from the recent market action. Firstly, the old trading channel was broken. Secondly, as the weekly close was inside the channel, let's give the benefit of doubt to the fact that the channel remains intact for the time being. Third, the 5175 - 5200 area has become more important support or reference area because of the double bottom pattern. Fourth, the falling trend line or supply area still remains above the market. Fifth, the horizontal support at 5175 - 5200 area and the falling trend line is showing a descending triangle pattern in the charts. Fifth, until the market closes above the medium term falling trend line and remains inside the channel, the chances of the market breaking the lower end of the channel remains. ( Please see the daily and weekly charts below. )