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Continuing with yesterday’s trend, the benchmark index opened the session with a gap up, owing to positive global cues. The index is currently trading 118 points or 0.61% up at 19,252, by 9:22 AM IST and all sectoral indices are contributing to the gains.
As of the writing, today’s high is 19,258.75 which is higher than the previous peak of 19,233.7 and the low of 18,973.7, made 2 sessions ago was higher than the preceding low of 18,837.85. This combined price action has formed a higher high and higher low formation (HH & HL) on the daily chart which represents an uptrend, as per Dow theory.
Image Description: Daily chart of Nifty 50 with SuperTrend plotted on it
Image Source: Investing.com
Now, the index can be deemed to be finally in a short-term uptrend. However, there’s a catch here. The market has a fractal nature and therefore there are multiple trends that form in different time frames that might not adhere to each other’s direction. In short, the market forms trends within trends as we zoom in or out in terms of time horizon.
Simply, from a medium-term perspective, the trend is still negative. This trend can be reflected by using a SuperTrend of 10,3 (standard settings). This is a trend-following indicator that signaled a downtrend in Nifty from 19,740 and since then the trend has been negative. The current trend-change level is 19,468, above which both the short and medium-term trend will become positive.
Now you may ask, what if the index breaks the low of 1 November 2023? The trend will not turn negative, but sideways and a fresh short signal on weakness would be generated if the low of 26 October 2023 gets breached.
Disclosure: I have multiple positions in Nifty 50 options.
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X (formerly, Twitter) – aayushxkhanna
Read More on : Sensex: How Far the Rally Can Last?
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