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Part I – NIFTY Technical Analysis: Past, Present and Future

The Beginning

People often ask me, “Arijit, where the market is heading?” Sometimes, they ask, “which sector should I invest for the long term?” The questions are simple but answering them needs quite a rigorous study and analysis for the past and the present days price action. When you have a clear view of the present and past, you can project the future with most accuracy. This article also proves that Technical Analysis is not only meant for the short term but works very well on the long timeframe too. More precisely, if you look at the monthly, weekly and daily chart and if your current position syncs altogether, your winning probability becomes very high.
So, I started writing down all the Nifty Indexes but found it challenging to club them just in one article. There are so many particulars that need to be emphasized. So, I split the article into several series and plan to publish each one index at the weekends in progression.
In this Part I, I’ll discuss the complete Nifty Technical Analysis using the price action method for the last 20 years, there are several charts appeared in this discussion which further focus on Nifty long term, medium term and short term view. Take a special note on Nifty key Support and Resistance, the entire model is built on that. 
Consult these charts for future reference. This analysis is valid as long as the Primary Trendlines (Support and Resistance) are intact.

Nifty Technical Analysis (1999 - 2003)

Nifty Price Chart (1999-2003)
Nifty Technical Analysis Price Chart (1999-2003)
  • The index formed well defined three Triangles in this period. Triangle tops are identified as pointer #1, #2 and #3
  • Jan 1999 – A sharp Upside breakout at the beginning of the year (pointer #4).
    Nifty started rallying higher high till it reached the alltime high 1818.15.
    A 200% points rally just over a year. 
  • Feb 2000 – Index started to fall and wipes out almost all the gains made during the earlier months. 
  • Sep 2001 – A false downside breakout (pointer #8) at the end of the downfall, but Nifty finally managed to closed above the Support.
    A new low had been found. The chartists now connected it with the earlier low and extended it to project the future support. As we are going forward, we’ll find this support truly holds the three top mountains.
  • Feb 2002 – Nifty made a false breakout by crossing above the downward sloping resistance (pointer #9).
    Year 2002 – The entire price retracement in this year had formed a Falling Wedges pattern as identified by pointer #A.
    December 2002 – An Upside breakout (pointer #6) from falling wedges pattern signals continution of Uptrend.
  • January 2003 – Price made a new lower top (Pointer #3) and started declining till it find its extended support as projected earlier.
    What the investors should do when Price is just above the multiyear suppot? They started accumulating at the low. The demand had grown up, price started rallying further and finally made a sharp breakout at Pointer #7.

Nifty Technical Analysis (2003 - 2008)

Nifty Price Chart (2003-2008)
Nifty Technical Analysis Price Chart (2003-2008)

The index was moving in an ideal uptrend in this entire period, where price was moving upwards by making series of higher high and higher lows.
Though, it is safe to make a buy decision anywhere in the uptrend, it gives best returns when bought near pullback or intermittent lows.

  • June 2003 – The rally was so strong that Nifty made 990 to 2000 in the next 6 months (June 2003 – December 2003)!!
  • Jan 2004 –  After hitting the high of 1951.7, the stock had fallen vertically, losing 35% within the next 4 months.
  • June 2004 – December 2007 – Nifty was moving in an upward sloping chanel in this period. 
    Buying index at the Primary / Extreme Primary support and selling at the Internal / Primary resistance would be a good trading idea as long as the Nifty primay trend is Up.
    The nifty rallied 6,300 points in this three and Half years.
  • Jan 2008 – Nifty was all time high at 6357.1 and had placed near the Upper bound of the chanel.  Based on historical price pattern trading short would be a good opportunity from here.

Nifty Technical Analysis (2008 - 2012)

Nifty Technical Analysis Price Chart (2008-2012)
Nifty Technical Analysis Price Chart (2008-2012)
  • May 2008 – Nifty had placed near the lower end of the upward sloping channel (2004-2007) discussed earlier and also in the process of showing downside breakout of multiple important supports around 4800 – 5000 levels.
    Oct 2008 – Consistent downtrend for the last ten months and the downfall exaggerated after a resolute breakout at pointer #1.
    The entire corrective price action after the breakout occurred in a well defined Symmetrical Triangle pattern as highlighted in the adjoining chart (pointer #A).
  • March 2009 – Nifty had made a breakout above the Symmetrical triangle pattern triggering a fresh bull trend (pointer #2)
    Pointer #3 – Breakout from the downward sloping channel in weekly charts. This turnaround of the price structure after an elongated price correction presents further buying opportunity in the Index.
  • May 2009 – Dec 2010 – Nifty rallied upwards in this period, made a near all-time high at 6338.5 which coincides with the earlier high in 2008.
  • Jan 2011 – May 2011 – Nifty started falling and retested the support near 5600 – 5900.
    Pointer #4 – Nifty had slipped into sharp decline and moved below the support.
    After the valid breakout, the Nifty 50 Index started moving in a downward sloping channel continued till the end of the year 2011.
  • Jan 2012 – Nifty had surpassed the hurdle of downward sloping resistance and started moving upwards.

Nifty Weekly Chart - Captures the Broader price movement Since 2009

Nifty Primary Support and Resistance (2009-2020)
Nifty Technical Analysis Price Chart (2009-2020)

The Primary Support & Resistance Line (Green in colour) has been introduced in this chart. The entire price action from 2009 till date, happened in between this rising range defined by the Nifty Primary Support and Resistance. Next on every chart, you will see the presence of this Green Line.

Now look at the chart, and you will find many possibilities to develop solid Nifty Buy Sell trading strategy – buy at the Key Support and Sell at the Key resistance! You’ll also find several valid breakouts there, which can be helpful to develop Nifty Breakout strategy. Identifying such opportunities and developing proper strategies will surely help you to delve further in Nifty long short trading.

Nifty Technical Analysis (2012 - 2016)

Nifty Technical Analysis Price Chart (2012-2016)
Nifty Technical Analysis Price Chart (2012-2016)
  • Jan 2012 – May 2014 –  Price movement was in a Upward rising range. Primary trend was clearly Up. 
    Go long at every dips near the support and sell near the upper boundary of the range which acts as a resistance.
  • May 2014 – A sharp upside breakout from the earlier price range showing further bullishness. (Pointer #1)
    The Nifty witnessed a strong rally during May 2014 – March 2015, rallying from 6860 to lifetime high of 9120.
  • March 2015 – Nifty was just near the resistance. Going short was a good trading opportunity with great Risk Reward ratio.
  • Aril 2015 – Nifty had broken out below the support triggering fresh bearish trend (pointer #2)
  • February 2016 – Price was just above the Nifty Key support. What should an investor do? Obviously, they would go Long from here.
    April 2016 – Nifty breakout from downward slopping channel in weekly chart (Pointer #3). This presents a fresh buying opportunity in the Index.

Nifty Technical Analysis (2016 - 2020)

Nifty Long Term, Medium Term and Short Term Support and Resistance
Nifty Technical Analysis Price Chart (2016 - 2020)
  • 2016 – September 2018 – The Nifty 50 had been trading in an upward rising range as highlighted green in the chart. 
    Two interesting observations: Once Nifty reached near the Primary Resistance, price started declining (Feb 2018 and September 2018). This further strengthens the validity of our Nifty Primary Resistance line.
  • Oct 2018 – Nifty closed below the channel support. This downside Nifty breakout pushed it to take the next support at 10,000 level.
  • October 2018 – February 2020 – Drawn the intermediate Support & Resistance by Orange Dots. This zone had confined the entire price movement in this period.

Nifty Long Term, Medium Term & Short Term View

Refer to the last chart, i.e. Nifty Technical Analysis price Chart (2016 – 2020)

  1. Nifty Long Term Movement – In the coming years, Nifty will move in between the Green lines which are reffered to as Nifty Primary Support and Resistance. Movement in between these trendlines can also be defined as Nifty Primary trend.
    Reliability – Highest. As this is the multi-year support and resistance (Since 2009), the reliability is very high.
  2. Nifty Medium Term Movement – In the coming months, Nifty movement will be restricted by the Orange Dotted Lines. The Orange Lines reffered as Nifty Intermediate Support & Resistance
    Reliability – Medium. This zone started developing since October 2018 and have only Two Supports and One Resistance points.
  3. Nifty Short Term Movement – In the coming weeks, Nifty short term movement will be confined by the Black Dotted Lines. These Black Dotted Lines referred to as Nifty Short Term Support & Resistance.
    Reliability – Low. A new trend will emerge as soon as the trendline breaks in the coming weeks.  

Do not complicate your trading with fancy indicators.

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UPDATE (March 13, 2020)

Nifty Technical Analysis Weekly Chart - (2009 - 2020) Updated With Extreme Primart Support

Nifty Technical Analysis Price Chart (2009-2020) - Updated
Nifty Technical Analysis Price Chart (2009-2020) - Updated
  • This chart is simply the updated version of the previous one Nifty Technical Analysis Price Chart (2009-2020). The Extreme Primary Support line (since 2009) has been added.

  • If the Primary Support breaks, Nifty will move further below to the Extreme Primary Support line around 7300-7500.
    Reliability – Highest. As the name suggests Extreme Primary Support, you can refer this as the ultimate one.

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MONEY MANAGEMENT AND TRADING RULES

1)  It’s advisable not to enter/exit beyond the recommended range.
2)  Strictly follow the StopLoss as mentioned. Honour it.
3)  Use trailing StopLoss to retain profits.
4)  Diversify trading capital into our other technical recommendations.
5)  Risk only the money what you can afford to lose. Hedge accordingly.

ANALYST SUMMARY

This research analysis is prepared by Arijit Banerjee, CMT, CFTe. An engineering graduate developed an early interest in Trading since the age of 20. He is a Chartered Market Technician (CMT) accredited by CMT Association USA, the leading global authority of Technical Analysis and also has been honoured by Certified Financial Technician (CFTe) from the International Federation of Technical Analysts (IFTA), USA. His contribution to the market research was recognized by SEBI, the Regulatory Body of Indian financial market and given him the registration number INH300006582 as a Research Analyst. Over the years, he has gained experience in Technical Analysis with a demonstrated history of working in different asset classes. Himself as a trader, he has trained and continues training novice and experienced traders to become successful, confident and profitable in the financial market.

Disclosure

The views expressed herein are based solely on information available publicly/internal data/other sources believed to be reliable, but is not necessarily all-inclusive and is not guaranteed as to accuracy. The recommendations provided herein is solely for informational purposes and are not intended to be and must not be taken alone as the basis for an investment/trading decision. Trading and investing are subject to market risk and the securities discussed and opinions expressed herein may not be suitable for all investors. To read the full disclosure, please click here.

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