As predicted in the earlier post "Nifty set to open weaker on 12th August - Ichimoku analysis", the benchmark Nifty index opened weaker at open, traded in a narrow range between 5372.45 and 5431.10 and finally ended at 5416.45, well below the Tenkan Sen of 5420.75 of yesterday.
The Kinjun Sen at the end of yesterday was at 5362.8, and this might have acted as a support for the index protecting further downslide for the day.
Thus, the Ichimoku analysis can be considered a reliable tool for technical analysis that gives the broad picture of the underlying index at a single glance.
In my earlier post, I had laid more emphasis on Nifty and its movements for the day. Ironically, the BSE Sensex also gave a similar signal, with the closing price ending at 18,070.09, tad below the Tenkan Sen of 18,074.09 on 11th August 2010.
The BSE Sensex also opened predictably in the red, at 17,972.68, traded in a range between 17914.62 and 18,113.62 during the day and finally ended the session at 18,073.90, again below the Tenkan sen of 18,074.09.
Thus, it is clear from the technical analysis that the short term outlook for both the NIFTY and the SENSEX remains bearish, and any decisive break above the Tenkan Sen is a prerequisite for change of direction in the prices.
Let us try to study how the events unfold over the next few days.
The Kumo Cloud, or the area between the two spans, lies well below for both NIFTY and the SENSEX, and as such, the medium term outlook for the indices seems to be bullish as the closing prices are well above the Kumo Cloud, suggesting the downside is limited. Investors would be advised not to take any long positions in the present circumstances and wait for opportunities/
Thursday, 12 August 2010
Wednesday, 11 August 2010
Nifty set to open weaker on 12th August - Ichimoku analysis
The benchmark Nifty index in Indian market is set to open weaker on 12th August 2010. It is not rocket science to predict that the Nifty will open sharply lower tomorrow, possibly below the psychological 5,400-mark, given the fact that the US market is down by more than 200 points, as optimism about sustaining economic recovery in the US received a jolt when the US Federal Reserve not only acknowledged that the growth momentum has slowed down in the past few months, but also warned that the growth will be less than earlier projected for the near future. For its part, the Federal Reserve has retained the present low interest rate and hinted that low interest rate regime will continue to exist for some more time to come, possibly atleast till the end of this financial year, if not more.
What does the Ichimoku numbers say about the NIFTY?
Ichimoku analysis consists of five lines - the Tankan Sen, the Kijun Sen, the Chikou sen, Senkou Span-A and Senkou Span-B. The gap between the Span A and Span B is called as the Kumo cloud, and is a very important member of this innovative and often highly reliable indicator in technical analysis.
For novices in this type of technical analysis, details of ichimoku analysis and the importance of each line will be explained in detail in this blog at a later date.
The Nifty closed the trading for the day on 11th August at 5,460.20.
The Tenkan-sen, which is an indicator representing the average of highest high and lowest low in the past nine days, at the end of the day is at 5,460.75. In other words, the actual closing price for the day fell below the Tenkan Sen on this day, a sign of bearishness coming into the market.
Tenkan Sen is nothing but a modified version of 9-day moving average. In the case of moving averages, the closing price of the last nine days is added up and divided by 9, to arrive at the moving average number. In case of Tenkan Sen, the highest high in the past nine days and the lowest low in the same period is identified in the first case. Then the two numbers are added and divided by 2, to arrive at the mid point of modified 9-day moving average. As is the case with moving averages, when the current price cuts the 9-day moving average from above, it is viewed as a bearish sign, and so is the case with Tenkan Sen in Ichimoku analysis.
It is based on this technical aspect, I presume that the Nifty will open down and continue to move southward for the next few days till the closing price cuts the Tenkan Sen from below. The Nifty should decisively close above 5453 over the next 7 days to ensure that it gathers further momentum and move northward. Until then, the nifty is bound to trade in the negative territory or will be unable to surpass the psychological 5450-mark.
Let us wait and see how the next seven days unfold.
What does the Ichimoku numbers say about the NIFTY?
Ichimoku analysis consists of five lines - the Tankan Sen, the Kijun Sen, the Chikou sen, Senkou Span-A and Senkou Span-B. The gap between the Span A and Span B is called as the Kumo cloud, and is a very important member of this innovative and often highly reliable indicator in technical analysis.
For novices in this type of technical analysis, details of ichimoku analysis and the importance of each line will be explained in detail in this blog at a later date.
The Nifty closed the trading for the day on 11th August at 5,460.20.
The Tenkan-sen, which is an indicator representing the average of highest high and lowest low in the past nine days, at the end of the day is at 5,460.75. In other words, the actual closing price for the day fell below the Tenkan Sen on this day, a sign of bearishness coming into the market.
Tenkan Sen is nothing but a modified version of 9-day moving average. In the case of moving averages, the closing price of the last nine days is added up and divided by 9, to arrive at the moving average number. In case of Tenkan Sen, the highest high in the past nine days and the lowest low in the same period is identified in the first case. Then the two numbers are added and divided by 2, to arrive at the mid point of modified 9-day moving average. As is the case with moving averages, when the current price cuts the 9-day moving average from above, it is viewed as a bearish sign, and so is the case with Tenkan Sen in Ichimoku analysis.
It is based on this technical aspect, I presume that the Nifty will open down and continue to move southward for the next few days till the closing price cuts the Tenkan Sen from below. The Nifty should decisively close above 5453 over the next 7 days to ensure that it gathers further momentum and move northward. Until then, the nifty is bound to trade in the negative territory or will be unable to surpass the psychological 5450-mark.
Let us wait and see how the next seven days unfold.
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